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3. Opinions of Commentators
4. Jurisprudence
The contract of sales is an agreement whereby one of the parties (called the seller
or vendor) obligates himself to deliver something to the other (called the buyer or
purchaser or vendee) who, on his part, hinds himself to pay therefore a sum of
money or its equivalent (known as the price).
The transfer of title to property or the agreement to transfer title for a price
paid or promised, not mere physical transfer of the property, is the essence of
sale.
There may be a sale against the will of the owner in case of expropriation and the
three different kinds of sale under the law – ordinary execution sale, judicial
foreclosure sale, and extra-judicial foreclosure sale.
2. Object or subject matter – refers to the determinate thing which is the object
of the contract;
Even a future thing not existing at the time the contract is entered into may be
the object of sale, provided it has a potential or possible existence, that is, it
is reasonably certain to come into existence as the natural increment or usual
incident of something in existence already belonging to the seller, and the tile
will vest the buyer the moment the thing comes into existence (Art. 1461).
Emptio rei speratae
(sale of thing expected)
Rei spetae
– the sale of a thing not yet in existence, subject to the condition that the thing
will exist and on failure of the condition, the contract becomes ineffective and
hence, the buyer has not obligation to pay the price; – the sale of hope itself
that the thing will come into existence, where it is agreed that the buyer will pay
the price even if the thing does not eventually exist;
– the future thing is certain as to itself but uncertain as to its quantity and
quality; – like the sale of a sweepstake ticket, it is not certain that the
thing itself (winning a prize) will exist, much less it quantity and quality;
– contract deals with a future thing; – contract relates to a thing which
exists or is present – the hope or expectancy;
– sale is subject to the condition that the thing should exist, so that if it does
not, there will be no contract by reason of the absence of an essential element.
– produces effect even though the thing does not come into existence because
the object of the contract is the hope itself, unless it is a vain hope or
expectancy (like the sale of a falsified sweepstakes ticket which can never win).
3. Cause or consideration – refers to the price certain in money or its
equivalent.
Natural Elements – those which are deemed to exist in certain contracts, in the
absence of any contrary stipulations, like warranty against eviction;
Absolute – where the sale is not subject to any condition whatsoever and where the
title passes to the buyer upon delivery of the thing sold.
Conditional – where the sale contemplates a contingency and where the contract is
subject to certain conditions, usually in the case of the vendee, for the full
payment of the agreed purchase price.
2. Other kinds
Contract of Sale
Contract to Sell
Transfer of title:
– remains with the seller until full payment of the agreed price.
Payment of price:
Ownership of vendor:
– vendor loses and cannot recover ownership of the thing sold and delivered,
actually or constructively until and unless the contract of sale itself is resolved
and set aside.
Sale
Dation in Payment
– occurs where the purchaser has not seen the article sold and relies on the
description given him by the vendor, or has seen the goods but the want of identity
is not apparent on inspection.- If the bulk of the goods delivered does
not correspond with the description, the contract may be rescinded. (Art. 1481.)
– the parties contracted solely with reference to the sample, with the
understanding that the bulk was like it.- the vendor warrants that the thing sold
and to be delivered by him shall conform with the sample in kind, charater, and
quality.
However, in case the contract of sale should be covered by the Statute of Frauds,
the law requires that the agreement be in writing subscribed by the party charged,
or by his agent; otherwise, the contract cannot be enforced by action [see Art.
1403].
Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the
following contracts must be in writing to be enforceable:
(a) sale of personal property at a price not less than P500;
(c) sale of property not to be performed within a year from the date thereof
regardless of the nature of the property and the price involved.
The Statute Frauds specifies three (3) ways in which contracts of sales of goods
within its terms may be made binding:
(a) the giving of a memorandum;
(b) acceptance and receipt of part of the goods (or things in action) sold and
actual receipt of the same (Art. 1585); and
(c) payment or acceptance at the time some part of the purchase price.
(b) cancel the sale, if the vendee shall have failed to pay two or more
installments;
(c) foreclose the chattel mortgage, if one has been constituted, if the vendee
shall have failed to pay two or more installments.
(c) The buyer has the right to sell his right or assign the same before actual
cancellation of the contract and to pay in advance any unpaid installment anytime
without interest and to have such full payment of the purchase price annotated in
the certificate of title covering the property.
As a general rule, all persons, whether natural or juridical, who can bind
themselves, have the legal capacity to buy and sell.
(a) Minor
Contracts entered into by a minor and other incapacitated persons are voidable.
However, where the necessaries are sold and delivered to him (without the
intervention of the parent or guardian), he must pay a reasonable price therefor.
The contract is therefore valid, but the minor has the right to recover any excess
above a reasonable value paid by him.
Sale of real property 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, and they cannot be
permitted afterwards to excuse themselves from compliance with the obligations
assumed by them or to seek their annulment. This is in accord with the doctrine of
estoppel [Mercado and Mercado vs. Espiritu, 37 Phil. 265].
2. Relative Incapacity – where it exists only with reference to certain persons or
class of property (Art. 1490-1491). The prohibition extends to sales by virtue of
legal redemption, compromises, and renunciations.
(a) Husband and wife to each other – except when a separation of property was
agreed upon in the marriage settlements, or when there has been a judicial
separation of property
(c) Agents – as to the property whose administration or sale has been entrusted
to them, unless consent of the principal is given
(e) Public officers and employees – as to the property of the State or any
subdivision thereof, or of the government-owned or controlled corporations, the
administration of which is entrusted to them
(f) Judges and government experts who take part in the sale of the property and
rights under litigation
(h) Unpaid seller having a right of lien or having estopped the goods in transitu
III. EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST
Where the thing is entirely lost at the time of perfection, the contract is
inexistent and void because there is no object. There being no contract, there is
no necessity to bring an action for annulment.
Where the thing is only partially lost, the vendee may elect between withdrawing
from the contract and demanding the remaining part, paying its proportionate price.
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.
IV. OBLIGATIONS OF THE VENDOR
The vendor need not be the owner of the thing at the time of perfection of the
contract; it is sufficient that he has a right to transfer the ownership thereof at
the time it is delivered (Art. 1459).
If the seller promised to deliver at a stipulated period and such period is of the
essence of the contract but did not comply with his obligation on time, he has no
right to demand payment of the price. The vendee-buyer is fact may ask for the
rescission or resolution of the sale.
If the failure of the seller to deliver on time is not due to his fault, as when it
was the buyer who failed to supply the necessary credit for the transportation of
the goods, delay on the part of the seller may be said to be sufficiently excused.
to deliver the thing, with its accessions and accessories, if any, in the condition
in which they were upon the perfection of the contract (Art. 1537);
to warrant against eviction and against hidden defects (Arts. 1495, 1547);
to take care of the thing, pending delivery, with proper diligence (Art. 1163);
to pay for the expenses of the deed of sale, unless there is a stipulation to the
contrary (Art. 1487).
Delivery or Tradition
Traditio simbolica – to effect delivery, the parties make use of a token symbol to
represent the thing delivered;
Traditio brevi manu – the vendee already has the possession of the thing sold by
virtue of another title as when the lessor sells the thing leased to the lessee;
(c) There must be the intention to deliver the thing for purposes of ownership.
An Unpaid Seller is one who has not been pair or rendered the whole price or who
has received a bill of exchange or other negotiable instrument as conditional
payment and the condition on which it was received has been broken by reason of the
dishonor of the instrument.
1. A lien on the goods or right to retain them for the price while in his
possession
(d) the seller must either actually take possession of the goods sold or give
notice of his claim to the carrier or other person in possession;
(e) the seller must surrender the negotiable document of title, if any, issued
by the carrier or bailee; and
(f) the seller must bear the expenses of delivery of the goods after the
exercise of the right.
3. A right of resale
If the thing is lost without the fault of the debtor, the obligation shall be
extinguished.
If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages, if 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.
When the thing deteriorates without the fault of the debtor, the impairment is to
be borne by the creditor.
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.
If the thing is improved by its nature, or by time, the improvement shall inure to
the benefit of the creditor.
If it is improved at the expense of the debtor, he shall have no other right than
that granted to the usufructuary.
Rules as to preference of ownership in case of double sale
If the property sold is movable, the ownership shall be acquired by the vendee who
first takes possession in good faith [Villa Rey Transit, Inc. vs Ferrer, 25 SCRA
861].
If the property sold is immovable, the ownership shall belong to:
(a) the vendee who first registers the sale in good faith in the Registry of
Deeds has preferred right over another vendee who has not registered his title even
if the latter is in actual possession of the immovable property – governed by the
principle prius tempore, patior jure (first in time, stronger in right) – knowledge
by the first buyer of the second sale cannot defeat the first buyer’s right except
when the second first registers in good faith the second sale;
(b) in the absence of registration, the vendee who first takes possession in
good faith; and
(c) in the absence of both registration and possession, the vendee who presents
the oldest title (who first bought the property) in good faith.
Article 1544 has no application to lands not registered with the Torrens system.
V. CONDITION AND WARRANTIES
If the obligation of either party is subject to any condition and such condition is
not fulfilled, such party may either (1) refuse to proceed with the contract, or
(2) proceed with the contract, waiving the performance of the condition.
If the condition is in the nature of a promise that it should happen, the non-
performance of such condition may be treated by the other party as a breach of
warranty.
Implied warranty as to seller’s title (Art. 1548) – that the seller guarantees that
he has a right to sell the thing sold and to transfer ownership to the buyer who
shall not be disturbed in his legal and peaceful possession thereof.
Implied warranty against hidden defects or unknown encumbrance (Art. 1562) – that
the seller guarantees that the thing sold is reasonably fit for the known
particular purpose for which it was acquired by the buyer or, where it was bought
by description, that it is of merchantable quality.
Consciente – the waiver is voluntarily made by the vendee without the knowledge and
assumption of the risks of eviction. If the waiver was only conscious, the vendor
shall pay only the value which the thing sold had at the time of eviction – this is
a case of solution indebiti – the effect is to deprive the purchaser of the
benefits mentioned in Nos. 2, 3, 4 and 5 of Article 1555.
Intencionada – the waiver is made by the vendee with knowledge of the risks of
eviction and assumption of its consequence. The vendor is exempted from the
obligation to answer for eviction, provided he did not act in bad faith [Andaya vs.
Manansala, 107 Phil. 1151].
Rights of the vendee against the vendor in case eviction occurs (Art. 1555)
– the avoidance of a sale on account of some vice or defect in the thing sold,
which renders its use impossible, or so inconvenient and imperfect that it must be
supposed that the buyer would not have purchased it had he known of the vice.
Caveat venditor
Caveat emptor
– the vendor is liable to the vendee for any hidden faults or defects in the thing
sold, even though he was not aware thereof (Art. 1566).- Based on the principle
that a sound price warrants a sound article. – applies in sheriff’s sale, sales
of animals, and tax sales, for there is no warranty of title or quality on the part
of the seller in such sales.
– Also applies in double sales of property where the issue is who between two
vendees has a better right to the property .
– Requires the purchaser to be aware of the supposed title of the vendor and one
who buys without checking the vendor’s title takes all the risks and losses
consequent to such failure [Solvoso vs. Tanega, 87 SCRA 349].
If the vendor was aware of the hidden defects in consequence of which the thing
sold was lost, he shall bear the loss because he acted in bad faith. In such case,
the vendee has the right to recover:
(a) the expenses of the price paid
(c) damages.
If the vendor was not aware of them, he shall be obliged only to return:
(a) the price paid
(c) expenses of the contract if paid by the vendee. He is not made liable for
damages because he is not guilty of bad faith.
The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing
sold.
The following rules must be borne in mind:
1. In contract of sale, the vendor is not required to deliver the thing sold until
the price is paid nor the vendee pay the price before the thing is delivered in the
absence of an agreement to the contrary [La Font vs. Pascacio, 5 Phil. 591].
2. If stipulated, then the vendee is bound to accept delivery and to pay the price
at the time and place designated.
3. If there is no stipulation as to the time and place of payment and delivery, the
vendee is bound to pay at the time and place of delivery.
4. In the absence also of stipulation, as to the place of delivery, it shall be
made wherever the thing might be at the moment the contract was perfected (Art.
1251).
5. If only the time for delivery of the thing sold has been fixed in the contract,
the vendee is required to pay even before the thing is delivered to him; if only
the time for payment of the price has been fixed, the vendee is entitled to
delivery even before the price is paid by him (Art. 1524).
Instances when the vendee may suspend the payment of the price:
(b) should the vendor give security for the return of the price; or
(c) should the vendor have caused the disturbance or danger to cease; or
Goods – include all chattels personal but not things in action or money of legal
tender in the Philippines. The term includes growing fruits or crops.
Action by the seller for damages for non-acceptance of the goods (Art. 1596)
Action by the seller for rescission of the contract for breach thereof (Art. 1597)
Action by the buyer for rescission or damages for breach of warranty (Art. 1599)
Remedies allowed to the buyer when the seller has been guilty of a breach of
promise or warranty (Art. 1599):
1 Recoupment – accept the goods and set up the seller’s breach to reduce or
extinguish the price.The theory of recoupment is that the seller’s damages are cut
down to an amount which will compensate him for the value of what he has given.
2 Set-off or Counterclaim for damages – accept the goods and maintain an action
for damages for the breach of the warranty. Both sides of the contract are enforced
in the same litigation. The buyer (defendant) does not seek to avoid his
obligation under the contract but seeks to enforce the seller’s (plaintiff’s)
obligation and to deduct it from his liability for the price for breach of
warranty.
3 Action for damages – refuse to accept the goods and maintain an action for
damages for the breach of the warranty.
4 Rescission – rescind the contract of sale by returning or offering the return
of the goods, and recover the price or any part thereof which has been paid. This
remedy is not available in the following cases:
(a) if the buyer accepted the goods knowing of the breach of warranty without
protest;
(b) if he fails to notify the seller within a reasonable time of his election to
rescind; and
Common – those causes which are also the means of extinguishing all other contracts
like payment, loss of the thing, condonation, etc. (Art. 1231).
Special – those causes which are recognized by the law on sales (those covered by
Arts. 1484, 1532, 1539, 1540, 1542, 1556, 1560, 1567, and 1591).
Conventional Redemption
(Arts. 1601-1618)
Legal Redemption
(Arts. 1619-1623)
It is the right which the vendor reserves to himself, to reacquire the property
sold provided her returns to the vendee the price of the sale, the expenses of the
contract, any other legitimate payments made therefore and the necessary and useful
expenses made on the thing sold, and fulfills other stipulations which may have
been agreed upon. It is the right to be subrogated, upon the same terms and
conditions stipulated in the contract, in the place of one who acquires a thing by
purchase or dation in payment, or by any other transaction whereby ownership is
transmitted by onerous title.
Nature:
(a) it is purely contractual because it is a right created, not by mandate of
the law, but by virtue of an express contract [Ordoñez vs. Villaroman, 78 Phil.
116];
(c) it is a real right when registered, because it binds third persons [Mortera
vs. Martinez, 14 Phil. 541];
(f) it is a power or privilege, not an obligation, that the vendor has reserved
for himself [Ocampo vs. Potenciano, CA 48 OG 2230];
(g) it is reserved at the moment of the perfection of the contract for if the
right to repurchase is agreed upon afterwards, there is only a promise to sell
which produces different rights and effects and is governed by Art. 1479 [Diamante
vs. CA, 206 SCRA 52];
(h) the person entitled to exercise the right of redemption necessarily is the
owner of the property sold and not any third party [Gallar vs. Husain, 20 SCRA
186];
(i) it gives rise to reciprocal obligation that of returning the price of sale
and other expenses, on the part of the vendor, and that of delivering the property
and executing a deed of sale therefore, on the part of the vendee [Pandaquilla vs.
Gaza, 12 Phil. 663].
Nature: (a) identical with conventional redemption, except for the source of
the right – conventional redemption arises from the voluntary agreement of the
parties; legal redemption proceeds from law;
(b) it is not predicated on proprietary right but on a bare statutory privilege
to be exercised only by the person named in the statute – the statute does not make
actual ownership at the time of sale or redemption a condition precedent, the right
following the person and not the property [Magno vs. Viola and Sotto, 61 Phil. 80];
(c) it is in the nature of a mere privilege created partly for reason of public
policy and partly for the benefit and convenience of the redemptioner to afford him
a way out of what might be a disagreeable or inconvenient association into which he
has been thrust – it is intended to minimize co-ownership [Basa vs. Aguilar, 117
SCRA 128; Tan vs. CA, 172 SCRA 660].
(a) Under the Civil Code, those found in Arts. 1620-1622, 1634, and 1088;
(1) redemption by owner of real property sold for delinquent taxes – period is
within 1 year from date of sale;
(2) repurchase by homesteader of homestead sold under the Public Land Act –
period is 5 years [Tupas vs. Damasco, 132 SCRA 593];
An equitable mortgage is one which lacks the proper formalities, form of words, or
other requisites prescribed by law for a mortgage, but shows the intention of the
parties to make the property subject of the contract as security for a debt and
contains nothing impossible or contrary to law [Cachola vs. CA, 208 SCRA 496].
Dacion en pago is the transmission of the ownership of a thing by the debtor to the
creditor as the accepted equivalent of the performance of an obligation.
Pacto de retro
Mortgage
Ownership is transferred but the ownership is subject to the condition that the
seller might recover the ownership within a certain period of time. Ownership is
not transferred but the property is merely subject to a charge or lien as security
for the compliance of a principal obligation, usually a loan.
If the seller does not repurchase the property upon the very day named in the
contract, he loses all interest thereon. The mortgagor does not lose his interest
in the property if he fails to pay the debt at its maturity.
There is no obligation resting upon the purchaser to foreclose; neither does the
vendor have any right to redeem the property after the maturity of the debt. It is
the duty of the mortgagee to foreclose the mortgage if he wishes to secure a
perfect title thereto, and after the maturity of the debt secured by the mortgage
and before foreclosure, the mortgagor has a right to redeem [Basilio vs.
Encarnacion, 5 Phil. 360].
Instances when conventional redemption is presumed to be an equitable mortgage:
Redemption
Pre-emption
1 The sale to a third person has already been perfectedThe sale to a third
person has not yet been perfected
2 Has a much broader scope Narrower in scope – may be exercised only where
there is a prospective resale of a small piece of urban land originally bought by
the prospective vendor merely for speculation
3 Directed against the third person who bought the property Directed against
the prospective vendor who is about to resell the property
4 Effect is to extinguish a contract that has already been perfected or even
consummated Effect is to prevent the birth or perfection of a contract
IX. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
It may be done gratuitously, but if done onerously, it is really a sale. Thus, the
subject matter is the credit or right assigned; the consideration is the price paid
for the credit or right; and the consent is the agreement of the parties to the
assignment of the credit or right at the agreed price.
Agency – involves representation, not transmission wherein the agent acts for the
principal.
Substitution – the change of a new debtor for the previous debtor with the credit
remaining in the same creditor.
Subrogation – the change in the person of the creditor with the credit being
extinguished.
X. BARTER OR EXCHANGE
The contract is perfected from the moment there is a meeting of the minds upon the
things promised by each party in consideration of the other. It is consummated
from the time of mutual delivery by the contracting parties of things they
promised.
Effect where the giver is not the lawful owner of the thing delivered: the
aggrieved party cannot be compelled to deliver the thing he has promised. He is
entitled to claim damages (Art. 1639). [Biagtan vs. Viuda de Oller, 62 Phil. 933].
Remedy in case of eviction: the injured party is given the option to recover the
property he has given in exchange with damages or only claim an indemnity for
damages. The right to recover is, however, subject to the rights of innocent third
persons (Art. 1640).
Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by the
secret sale or disposal or mortgage in bulk of all or substantially all of a
merchant’s stock of goods.
The general scheme 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 and constructive notice to such creditors, by record or otherwise, and
the making of an inventory.
A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer,
mortgage, or assignment –
(c) of all or substantially all, of the fixtures and equipment used in the
business of the vendor, mortgagor transferor, or assignor.
Reference: