Sales and Lease Midterm Reviewer PDF

Sales and Lease Reviewer 1
Contract of Sale II. Legal Effects of Sale being Bilateral

a. Power to rescind is implied (Art.
Sale is a contract where one party (seller or 1191)
vendor) obligates himself to transfer the ownership b. Neither party incurs in delay if the
of and to deliver a determinate thing, while the other party does not comply (Art.
other party (buyer or vendee) obligates himself to 1169)
pay for said thing a price certain in money or its c. From the moment one of the
equivalent. A contract of sale may be absolute or parties fulfils his obligation,
conditional. (Art. 1458) default by the other begins
- Sale is a contract and is, therefore, a source without need of prior demand
of obligations. It has the force of law (Art. 1169)
between the contracting parties, which
should be complied with in good faith (Art. 5. Reciprocal – reciprocal because the
1159) obligations of both parties arise from the
same cause; each party is a debtor and a
Characteristics of a Contract of Sale creditor of the other.
1. Nominate – nominate because it was given a 6. Onerous – sale imposes a valuable

particular name by law “Sale” consideration as a prestation, which ideally
is a price certain in money or its equivalent.
2. Principal – principal because it can stand on
its own and does not depend on another 7. Commutative – commutative because a
contract for its validity or existence as thing of value is exchanged for a thing of
opposed to an accessory contract. equal value; the test for compliance is
subjective not objective.
3. Consensual – consensual because it is
perfected by mere consent. Subjective test – inadequacy of price does
not affect the validity of the contract of sale
A offered to sell a parcel of land to B for so long as the party believes that he is
P500,000. B accepted the offer, manifested to receiving good value for what he transferred
A. Is there a perfect contract of sale? then it complies with the commutative
Yes. There is meeting of minds (offer and character of sale.
acceptance)
Note: Inadequacy of price, while not a
4. Bilateral – bilateral because it imposes sufficient ground for the cancellation of a
obligations on both parties. voluntary contract of sale otherwise free
from invalidating effects, it may
I. Obligations of the parties nevertheless show vice in consent.
a. Obligations of the seller are to
transfer ownership of and to 8. Title, not mode – Sale is not a mode that
deliver the thing which is the transfers ownership but merely title that
object of the contract. creates the obligation to transfer ownership
b. Obligation of the buyer is to pay and deliver possession; delivery is the mode
the price. of transferring ownership.
Written and Edited by: APAYA, Edrian; ARIATE, Eunice; BARTOLATA, Edgar; BERNARDO, Jansen; LIM, Robert; and
MAGHIRANG, Ariel | REFERENCES: Casiño, De Leon, Jurado, Paras, Pineda, Tolentino, Villanueva. | Please notify the author/s
concerned for corrections, suggestions, and comments.
a. Mode – Mode is the legal means by

which dominion or ownership is created, I. From Conditional Sale
transferred or destroyed. Conditional Sale – there is conditional
b. Title – Title constitutes the legal basis by sale when the parties stipulate that
which to affect dominion or ownership. ownership on the thing sold shall not pass
to the purchaser until he has fully paid the
price (Art. 1478)
A offered to sell a parcel of land to B for P10
which has an actual value of P 500,000.00 Is Absolute Contract
Conditional Sale
there a valid contract of sale? Suggested of Sale
Answer: Yes. Under Article 1306 (Autonomy There is no There is a condition
of Contracts), the contracting parties may condition imposed imposed upon the
establish such stipulations as they may deem upon the contract seller’s obligation to
convenient, provided they are not contrary to or there is transfer ownership
law, morals, good customs, public order, or condition imposed of and to deliver a
public policy. Also, inadequacy of price does but only upon the determinate thing.
not affect the validity of the contract of sale so buyer’s obligation
long as the party believes that he is receiving to pay the price.
good value for what he transferred then it Transfer of Delivery does not
complies with the commutative character of ownership is transfer ownership
sale. vested upon until the condition is
Alternative Answer: No. Value of price is delivery fulfilled
grossly inadequate. It is way below the
market value of the thing sold.  A deed of sale is absolute in nature although
denominated as a "Deed of Conditional
Elements of Sale Sale" where nowhere in the contract in
question is a proviso or stipulation to the
I. Accidental Elements – those which may be effect that title to the property sold is
present or absent in the stipulation, such as reserved in the vendor until full payment of
the time or place of payment, or the the purchase price, nor is there a stipulation
presence of condition. giving the vendor the right to unilaterally
rescind the contract the moment the vendee
II. Natural Elements – those which are inherent fails to pay within a fixed period. (Dignos v.
in the contract and which in the absence of Court of Appeals)
any contrary provision are deemed to exist  As to the conditional nature of the sale, Article
in the contract. 1181 of the NCC states that ― in
1. Warranty against eviction conditional obligation, the acquisition of
2. Warranty against hidden defects rights, as well as the extinguishment or loss
of those already acquired, shall depend
III. Essential Elements – those without which upon the happening of the event which
there can be no valid sale. constitutes the condition. (People's
1. Consent Homesite & Housing Corp v. Court of
2. Subject Matter Appeals)
3. Price certain in money or its equivalent
Contract of Sale distinguished from Other

Contracts
“That in all things, God may be glorified!”

San Beda College of Law
2S 2011-2012 Sales and Lease Midterm Reviewer
A sold a parcel of land to B for P500,000. On January 1, 2011, A and B entered into a
Said land is to be delivered on July 30, 2011. contract of sale for the sale of a parcel of land
The payment is to be made on December 31, for P500k. A binds himself to deliver the land
2011. upon perfection, while B binds himself to pay
P 250,000.00 upon perfection, and the
As of July 15, 2011, who is the owner of the
remaining balance on Dec 31, 2011. Who
parcel of land? Suggested Answer: A is still
owns the land as of today (July 1, 2011)?
the owner of the said land.
Suggested Answer: B owns the land. The
On July 30, 2011, who is the owner of the ownership was transferred upon delivery of
parcel of land? Suggested Answer: B is the the land.
new owner of the land, unless the parties
stipulated that ownership in the thing shall not Will your answer be the same if the
pass to the purchaser until he has fully paid ownership be transferred upon payment? No.
the price (Art. 1478). A is still the owner of the land.
A will sell his land to B for P 500,000.00 once A offered to sell a lot to B. B accepted the
C dies. Is the sale absolute or conditional? offer on the condition that A must first eject
Suggested Answer: It is absolute, because informal settlers. Until now, A has not filed
death is a certain event. ejectment cases. Can B demand specific
performance? Suggested Answer: Yes. B
A binds himself to sell a parcel of land to B on may refuse to proceed or waive the condition.
the condition that B passes the 2011 Bar Is A entitled to rescind? No. A is not the
Exams. Is there an absolute contract of sale? aggrieved party.
Suggested Answer: No. The contract is
conditional. It is subject to an uncertain and II. From Contract to Sell
future event.
Absolute Contract
 Can a past event be a condition in a contract Contract to Sell
of Sale
of sale? No. An event, to constitute a Title passes to the Ownership is
condition, must be future and uncertain. It is vendee upon reserved in the
the knowledge of past event that may be delivery of the thing vendor and is not
considered as a condition and not the past sold. passed until full
event itself. payment of the
price.
 If there is a condition on the perfection of Failure to pay is a Failure to pay is a
contract, and the condition is not fulfilled, is negative resolutory positive
there a perfected contract? No. No condition which puts suspensive
perfection because condition was not an end to the condition; such
fulfilled. Condition was attached to the transaction. failure is not a
perfection of contract (People’s Homesite Remedies: breach of the
Case). 1. Specific obligation but it
performance prevents the
with damages; obligation of the
or vendor to convey
2. Rescission with title from arising.

damages (Art. freedom in the determining the price.

1191) determination of the
Seller loses Title over the thing price.
ownership over the remains in the Payment of the price Giving of the object in
thing upon delivery. vendor even after may generally end the lieu of the credit may
delivery. obligation of the buyer. extinguish completely or
partially the obligation.
 A contract to sell does not transfer ownership
ipso facto. The seller reserves the transfer Chitae bound himself to give B a chedeng
of title to the buyer until the happening of an car. Months after, the car was lost. Instead of
event, such as full payment of the purchase paying Tarzan a certain amount of money,
price. What the seller obliges himself to do Chitae transferred his parcel of land to
is to sell the subject property only when the Tarzan. Is there a dacion en pago?
entire amount of the purchase price has Suggested Answer: Yes, the property is
already been delivered to him. (Luzon alienated to the creditor in satisfaction of debt
Dev’t Bank v. Enriquez) in money (Art. 1245).
III. From Dation in Payment

Dation en pago – the transmission of the A owes P500k to B which is due and
ownership of a thing by the debtor to the demandable on June 1, 2011. Also, A owes
creditor as an accepted equivalent of the P7M to C which is due and demandable on
performance of the obligation. June 15, 2011. Both B and C demanded on
- Dation in payment, whereby property is June 15, 2011. A said that he does not have
alienated to the creditor in satisfaction money but he has a parcel of land worth 8M
of a debt in money, shall be governed to pay for his obligation. A asked whether he
by the law of sales (Art. 1245) may alienate his land in favor of his creditors.
Is it valid? Suggested Answer: Yes, there
Contract of Sale Dation in Payment can be a plurality of creditors in dation in
There is no pre-existing There is a pre-existing payment.
obligation. obligation.
Sale gives rise to Extinguishes
obligation. obligations. Mango entered into a contract of sale with
The cause orThe cause or Apple for the sale of a car. However, Mango
consideration is: consideration is: delivered parcel of land instead of the car
a. Price – from the a. Extinguishment agreed upon. Does this constitute dacion en
viewpoint of the seller. of his debt – from the pago? Suggested Answer: No, this is a
b. Acquisition of viewpoint of the novation, not dacion en pago.
the object – from the person offering dation
viewpoint of the buyer. in payment.
b. Acquisition of IV. From Payment by Cession
the object offered in Payment by cession – the abandonment
lieu of the original of the universality of the debtor for the
credit – from the benefit of his creditors, in order that from
viewpoint of the the proceeds thereof, the latter may obtain
creditor. payment of their credits.
There is greater There is less freedom in

- The debtor may cede or assign his thereof can be

property to his creditors in payment of applied to their
his debts. This cession, unless there is credit.
stipulation to the contrary, shall only The obligation is The obligation is
release the debtor from responsibility totally extinguished extinguished only
for the net proceeds of the thing unless there is up to the extent of
assigned. The agreements which, on agreement to the the net proceeds of
the effect of the cession, are made contrary. the properties.
between the debtor and his creditors
shall be governed by special laws  Can there be an involuntary payment by
(Art. 1255) cession? Yes, in bankrupt/ insolvency
proceedings
Note 1: Sale differs from cession in the
same way that sale differs from dation in V. From Contract of Agency to Sell
payment. Contract of Agency to Sell – by the
contract of agency, a person binds himself
Note 2: However, unlike in dation in to render some service or to do something
payment, the creditors in payment by in representation or on behalf of the
cession do not acquire ownership over the principal, with the consent or authority of
things assigned, but only the right to sell the latter (Art. 1868)
said things. - A contract of agency to sell is one that
essentially establishes a
Payment by representative capacity in the person
Dation in Payment
Cession of the agent on behalf of the principal,
Plurality of There must be two and one characterize as highly
creditors is not or more creditors. fiduciary.
required; one (DBP v. Cuba)
creditor is Contract of Agency
sufficient. Contract of Sale
to Sell
Not all of the All of the properties Buyer pays the Agent does not pay
properties of the of the debtor are price the price
debtor are conveyed. Buyer acquires Agent does not
conveyed. ownership over the acquire ownership.
Insolvency of the Debtor must be object of the
debtor is not insolvent. contract.
required. Seller warrants. Agent does not
warrant unless he
Creditor becomes The creditors do agrees.
the owner of the not acquire Generally, buyer Agent can return
thing conveyed. ownership over the cannot return the the goods in case
things conveyed. object sold. he is unable to sell
What the creditors the same to a third
acquire is the right person.
to sell the Buyer can deal Agent in dealing
properties so that with the thing sold with the thing
the proceeds as he pleases received must act

being the owner. according to the VI. From Contract for a Piece of Work
instructions of the Contract for a piece of work – by the
principal. contract of a piece of work the contractor
The essence of The essence of binds himself to execute a piece of work
sale is the transfer agency is the for the employer, in consideration of a
of title or delivery to the certain price or compensation. The
agreement to agent of the goods contractor may either employ only his labor
transfer it for the not as the agent’s or skill or also furnish the material (Art.
price paid or property but of the 1713)
promised. principal who  There is a contract for a piece of work if
remains the owner the goods are to be manufactured
and has the rights specially for the customer and upon
to control the sales his special order, and not for the
by the agent, fix the general market (Art. 1467)
price and terms,  BUT there can be no contract for a
demand and piece of work for past service resulting
receive the in the creation of the object; in such
proceeds of the case, there is a contract of sale.
sales less the  The contractor renders service in the
agent’s course of an independent occupation,
commission. representing the will of his employer
only as to the result of his work, and
 Where the price of the objects is paid within not as to the means by which it is
the terms fixed without any other accomplished.
consideration and regardless as to whether
the objects are sold, the contract is one of
sale. (In order to classify a contract, due Contract for a piece of
Contract of Sale
regard must be given to its essential work
clauses. A contract is what the law defines it Contract for delivery of Goods are to be
to be, and not what it is called by the an article, which the manufactured specially
contracting parties.) (Quiroga v. Parsons vendor in the ordinary for a customer and
Hardware) course of business upon special order and
manufactures or not for the general
 The transfer of title or agreement to transfer it procures for general market.
for a price paid is the essence of sale. If market (whether on
such transfer puts the transferee in the hand or not).
position of an owner and makes him liable Essence is object. Essence is service.
for the agreed price, the transaction is a Governable by the Not within the Statute of
sale. On the other hand, the essence of an Statute of Frauds Frauds
agency to sell is the delivery to an agent,
not as his property, but as the property of Tests:
his principal, who remains the owner and 1. Timing Test (under Art. 1467) – whether the
has the right to control sales, fix the price thing transferred would have never existed but
and terms, demand and receive the for the order.
proceeds less the agent's commission upon
sales made. (Kerr v. Lingad)

2. Habituality Test – if manufacturer engages Sale Barter

in activity with need to employ extraordinary Value of the Value of the
skills and equipment (Celestino Co. v. CIR) money is greater money is less
3. Nature of the Object Test – each product’s than or equal to than the value of
nature of execution differs from the others; the value of the the thing.
products are not ordinary products of the thing.
manufacturer.
Floyd delivered 100 pieces of one peso coins
 When a factory accepts a job that requires to Ryan in consideration of the latter’s One
the use of extraordinary or additional Hundred Peso Bill. Is it a sale or barter?
equipment, or involves services not Suggested Answer: It is Barter, which the
generally performed by it, it thereby law defines as one where one of the
contracts for a piece of work. (Celestino contracting parties binds himself to give one
Co. v. Collector of Internal Revenue) thing in consideration of other’s promise to
give another thing. (Art. 1638)
 If the article ordered by the purchaser is
exactly such as the plaintiff makes and Mimay delivered her IPAD worth 50K to Rea
keeps on hand for sale to anyone, and no in consideration of the latter’s laptop which
change or modification of it is made at costs 50k. Is it a sale or barter? Suggested
defendant's request, it is a contract of sale, Answer: Sale (Atty. Casiño’s answer), Barter
even though it may be entirely made after, (Art. 1638)
and in consequence of, the defendants
order for it. (Commissioner v. Engineering David delivered 500Php coins to Chong in
and Supply Company) consideration of Chong’s 500 Yuan. Is it
barter or a sale? Suggested Answer: Sale,
VII. From Barter the parties buy the currency at the rate of
Barter – by the contract of barter or exchange.
exchange, one of the parties binds himself
to give one thing in consideration of the
other’s promise to give another thing (Art. A and B are adjoining owners of land. A sold
1638) his parcel of land to C for 500K. May B
redeem the parcel of land? Suggested
Rules to determine whether contract is Answer: Yes. Under the law, B can redeem
sale or barter the parcel of land by cancelling the sale and
a. Manifest intention of the parties paying C the purchase price.
 If the consideration of the contract
consists partly in money and partly in
another thing, and the manifest
intention of the parties is to enter into Pen and Rye are adjoining owners of land.
a contract of sale, then the transaction Rye exchanged his parcel of land with Ina’s
is a contract of sale. Laptop. Pen wants to redeem the parcel of
 Manifest intention – judged by land. Is she allowed by law to do so?
the parties’ contemporaneous and Suggested Answer: No. The right of legal
subsequent acts. redemption has no application in barter.
b. When intention does not appear:

Essential Elements of a Contract of Sale as to the price is an essential element of a

binding agreement to sell personal property.
I. Consent – consent is the meeting of the offer (Toyota Shaw, Inc v. Court of Appeals)
and the acceptance upon the thing and the
cause which are to constitute the contract Offer and Acceptance
(Art. 1319) A. Offer – a unilateral proposition which one
party makes to the contracting parties for the
Elements: celebration of the contract.
1.1. Concurrence of the offer and
acceptance. Requisites:
1.2. Plurality of contracting parties. i. Definite – the offer must be definite, so
1.3. Legal capacity of the contracting that upon acceptance an agreement
parties. can be reached on the whole contract.
1.4. Consent must be intelligent, free, ii. Complete – the offer must be complete
spontaneous, and real. indicating with sufficient clearness the
kind of contract intended and definitely
 A person can sell only what he owns or is stating the essential conditions of the
authorized to sell; the buyer can as a proposed contract, as well as the non-
consequence acquire no more than what essential ones desired by the offeror.
the seller can legally transfer (Conchita iii. Intentional – an offer without
Nool v. Court of Appeals) seriousness made in such manner that
the other party would not fail to notice
Comment: The ruling in Nool has been such lack of seriousness, is absolutely
criticized as not being in cadence with without juridical effects and cannot give
Article 1459 of the Civil Code. Article 1459 rise to a contract.
states that “The thing must be licit and the
vendor must have a right to transfer the Withdrawal of the offer – the offeror may
ownership thereof at the time it is delivered”. still withdraw his offer or proposal so long
Hence, Article 1459 implies that the vendor as he still has no knowledge of the
need not be the owner of the thing sold at acceptance by the offeree.
the time of the perfection of the contract of
sale. To resolve this issue, some authorities B. Acceptance – the signification of the assent
believe that Article 1459 should be treated of the offeree to the proposition of the
as the general rule, and Nool its exception. offeror.
 The acceptance must not qualify the terms
 In order for a contract to be perfected by of the offer; a qualified acceptance
mere consent, such consent must be constitutes a counter-offer (Art. 1319)
absolute; otherwise, the same constitutes a
counter-offer and has the effect of rejecting Requisites:
the offer. (XYST Corp. v. DMC Urban i. Clear.
Properties) ii. Absolute.
iii. Directed to the offeror.
 A definite agreement on the manner of iv. Made known to the offeror within a
payment of the price is an essential element reasonable time.
in the formation of a binding and v. Communicated to the offeror and
enforceable contract of sale. Definiteness learned by him

Madame Sheila offered her IPAD2 for sale in Exception: Constructive knowledge.
the class. She said that whoever is interested When the offeror already has a
to buy it may simply leave a note and a down- constructive knowledge of the contents
payment worth P10k in her bag. Clau showed of the letter or telegram, it is but logical
her interest by doing exactly as per that he shall be bound by the
Madame’s instruction. After an hour, Utol Ella acceptance made by the offeree.
approached Madame personally and asked
the latter to sell her IPAD2 with her. When Goku offered to sell his dragon balls to
Madame Sheila sold it to Utol Ella, Clau Vegeta. Vegeta accepted the offer. However,
complained and insisted her right over the Goku died. So Vegeta communicated his
property of Madame. Does Clau have the acceptance to Goku’s son, Gohan. Is there a
right to demand? Suggested Answer: No. perfected contract of sale? Suggested
No knowledge of acceptance yet. Answer: No. Because acceptance did not
come to the knowledge of the offeror who
made the offer. The offer became ineffective
Ariel offered to sell his laptop to Anjojo for upon Goku’s death because acceptance was
P40k. Anjojo accepted the offer as signified not yet conveyed (Art. 1323)
by a small piece of paper indicating his
acceptance and a reminder from Ariel of their What if acceptance came to the knowledge of
friendship so as the latter to give him the offeror before he died? Suggested
discount. Is there a perfected contract of Answer: There is a perfected contract of
sale? Suggested Answer: No. Acceptance is sale. Thus, Gohan, as heir of Goku, shall be
not absolute. bound by the contract entered into by his
father, based on the principle of the relativity
Acceptance by correspondence of contracts (Art. 1311)
1. Manifestation theory – contract is
perfected from the moment the Forms of acceptance – acceptance may be
acceptance is declared or made expressed or implied.
(followed by the Code of Commerce) Implied acceptance – implied acceptance
2. Expedition theory – the contract is may arise from acts or facts which reveal
perfected from the moment the offeree the intent to accept, such as the
transmits the notification of acceptance consumption of the things sent to the
to the offeror, as when the letter of offeree.
acceptance is place in the mailbox.
3. Reception theory – the contract is Right of the offeror
perfected from the moment that the The offeror has the right to prescribe the
notification of acceptance is in the hands manner, conditions, and terms of sale, and
of the offeror in such a manner that he where these are reasonable and are and
can, under ordinary conditions, procure made known to the buyer, they are binding
the knowledge of its contents, even if he upon the latter; an acceptance which is not
is not able to actually acquire such made in the manner prescribed by the offeror
knowledge due to some reason. is not effective, but constitutes a counter-offer
4. Cognition theory – the contract is which the offeror may accept.
perfected from the moment the
acceptance comes to the knowledge of Withdrawal of the acceptance – acceptance
the offeror (followed by the Civil Code) may be revoked before it comes to the

knowledge of the offeror because in such perfected

case there is still no meeting of the minds. The would-be buyer The buyer who gives
Note: both the offer and acceptance can be who gives the option the earnest money is
revoked before the contract is perfected; a money is not bound to bound to pay the
contract is perfected only from the time the buy balance
acceptance is known to the offeror.
 Upon accepting the offer, a bilateral promise
Option Contract – a preparatory contract in to sell and to buy ensues; the buyer
which one party grants to the other, for a fixed assumes ipso facto the obligations of a
period and under specified conditions, the purchaser, and not merely the right
power to decide whether or not to enter into a subsequently to buy or not to buy. The
principal contract. It must be supported by an concurrence of both acts – the offer and the
independent consideration and the grant must acceptance – generates a binding contract
be exclusive (Tolentino) of sale. (Atkins Kroll and Co. v. Cua Hien
Option Contract in Sales – a contract by Tek)
virtue of which, the offeree, in
consideration of the payment of a certain  A consideration in an option to buy is
sum to the offeror, acquires the privilege of essential for a perfection of a contract.
buying from the latter certain properties (Navarro v. Sugar Producers, Inc.)
within a limited time at a specified price.
 If acceptance is made before withdrawal, it
Option contract and Right of First Refusal, constitutes a binding contract of sale
distinguished although the option is given without
Option Contract Right of First Refusal consideration. Before acceptance, the offer
Can stand on its own Cannot stand on its may be withdrawn as a matter of right
(principal contract) own (accessory provided that the offeror communicated
contract) such withdrawal to the offeree before
Requires a separate Does not require a acceptance. (Sanchez v. Rigos and Art.
consideration distinct separate consideration 1324)
from that of the
contract of sale in  The commitment by a bank to resell a
order to be valid property within a specified period, although
Not conditional Conditional accepted by the party in whose favour it
Not subject to specific Can be subjected to was made, was considered an option not
performance since specific performance supported by a consideration. (Rural Bank
there is no perfected of Paranaque v. Court of Appeals)
contract of sale yet
Rules where a period is given to the offeree within
Option money and Earnest money, which to accept:
distinguished
Option Money Earnest Money 1. If the period itself is not founded upon or
Money given as a Money which is part of supported by a separate consideration, the
distinct consideration the purchase price offeror is still free and has the right to
for an option contract withdraw the offer before its acceptance, or
Applies to contract of Applies to contract of if an acceptance has been made, before the
sales not yet perfected sales already offeror’s coming to know of such fact, by

communicating that withdrawal to the Naruto offered to sell his 10 boxes of instant
offeree. (This is in accordance with Sanchez ramen to Sasuke for 5,000 yen. He gave the
doctrine) latter five days to decide whether to buy it or
not which the Sasuke accepted. On the 3rd
2. The right to withdraw, however, must not be day, Sasuke went to Naruto to buy the ramen
exercised whimsically or arbitrarily; and consequently pay for it. However, Naruto
otherwise, it could give rise to a damage cooked and ate all the ramen already. Can
claim under Article 19 of the Civil Code. Sasuke claim for damages? Suggested
Answer: Yes. While it is true that there is
3. If the period has a separate consideration, a neither a perfected contract of sale nor a valid
contract of option is deemed perfected, and option contract for lack of a separate
it would be a breach of that contract to consideration, the option will constitute as a
withdraw the offer during the agreed period. continuing offer which the offeror may
withdraw only by communicating such
4. The option, however, is an independent withdrawal to the offeree before acceptance.
contract by itself, and it is to be In the case at bar, Naruto did not withdraw
distinguished from the projected main the offer before acceptance by Sasuke (Art.
agreement (subject matter of the option) 1324 and Sanchez v. Rigos)
which is obviously yet to be concluded. If, in
fact, the optioner-offeror withdraws the offer
before its acceptance (exercise of option) by On June 1, 2011 Jose offered to sell a parcel
the optionee-offeree, the latter may not sue of land to Angelo for 500k, Angelo asked
for specific performance on the proposed Jose a period of time to accept offer. The
contract (object of the option) since it has period given was until August 7, 2011. Can
failed to reach its own stage of perfection. Jose withdraw the offer before August 7,
The optioner-offeror, however, renders 2011? Suggested Answer: Yes, unless it is
himself liable for damages for breach of the supported by a consideration distinct and
option. separate from the purchase price.
Supposing, no option money was given, the
5. In these cases, care should be taken of the
offer was accepted on July 14, 2011. Can
real nature of the consideration given, for if
Angelo withdraw the offer after July 14, 2011?
in fact, it has been intended to be part of the
Suggested Answer: No, although the
consideration for the main contract with a
contract was not supported by a distinct and
right of withdrawal on the part of the
separate consideration, there is a subsisting
optionee, the main contract could be
valid offer.
deemed perfected; a similar instance would
be an earnest money in contract of sale that
 Villanueva: Offeror cannot withdraw if
can evidence its perfection. (Ang Yu
founded on consideration.
Asuncion v. Court of Appeals)
Atty. Casiño: Offeror may withdraw an offer
even though supported by an option money,
but the offeror will be liable for damages.
Different views
 Villanueva:
With an Independent Without an
Consideration Independent

Consideration of the right to the very right itself;

The offeror cannot The offeror may contract; the the disqualified
withdraw his offer withdraw his offer by incapacitated person person cannot enter
before the lapse of communicating such may still enter into a into a contract with
the period of the withdrawal to the contract but with respect to certain
option. offeree at any time consent of his parent types of properties.
before acceptance. or guardian.
Based upon Based upon public
 Casiño: in an option contract with or subjective policy and morality.
without an independent consideration, circumstances of
the offeror may still sell to another certain persons which
person the thing which is the subject compel the law to
of the supposed contract of sale, suspend for a definite
provided that the offeror sold the thing period, their right to
to another person before the contract.
acceptance by the offeree comes to Contract entered into Contract entered into
the knowledge of the offeror. This is by an incapacitated by a disqualified
because there is no perfected contract person is merely person is void.
of sale yet. voidable.
Incapacitated persons:
Parties to a contract of sale 1. Minors – a minor is without capacity to give
consent to a contract, and since consent is
 General rule: any person who has capacity to an essential requisite of every contract, the
contract or enter into obligations may enter absence thereof cannot give rise to a valid
into a contract of sale, whether as party- sale.
seller or as party-buyer.
Exceptions:
Kobe owns a parcel of land. Kidd, Kobe’s 1. Where the contract involves the sale
agent, sold such land to Pierce. Is there a and delivery of necessaries to the
valid contract of sale? Yes. What an agent minor.
can do, the principal can (Art. 1322).
Minors – minors are those who have not
Persons Incapacitated to give consent to a attained the age of majority. In this
contract jurisdiction, majority commences at the
a. Absolute incapacity – in the case of persons age of eighteen years (Art. 234, Family
who cannot bind themselves. Code).
b. Relative incapacity (disqualification) – where
the incapacity exists only with reference to Necessaries (in sales) – those things
certain persons or a certain class of which are indispensable for sustenance,
property; persons who are merely relatively dwelling, clothing and in some cases
incapacitated are enumerated in Articles medical attendance and education,
1490 and 1491. according to the financial capacity of the
family of the incapacitated person (Art.
Incapacity Disqualification 194, Family Code)
Impairs the exercise Prohibition to contract

Requisites: The husband and the wife cannot sell

i. Perfection of the contract of sale. property to each other (Art. 1490 (1))
ii. Delivery of the subject matter.
Exceptions:
2. Where a contract is entered into by a a. When a separation of property was
minor who misrepresents his age, agreed upon in the marriage
applying the doctrine of estoppels. settlements; or
b. When there has been a judicial decree
 The sale of real property made by minors who of separation of property (Art. 1490)
have already passed the ages of puberty
and adolescence and are near the adult age  Contracts entered into in violation of Article
when they pretend to have already reached 1490 of the Civil Code are null and void (not
their majority, while in fact they have not, is merely voidable). However, not anyone is
valid, and they cannot be permitted given the right to assail the validity of the
afterwards to excuse themselves from transaction.
compliance with the obligation assumed by
them or to seek their annulment. (Mercado W, wife of H, received a parcel of land as a
and Mercado v. Espiritu) donation from her grandfather. Can H buy
paraphernal property from W if the regime
3. Insane or demented persons – insane or governing their marriage is absolute
demented persons have no capacity to community of property? No. If Complete
contract, and are therefore disqualified from separation of property? Yes (Art. 1490).
being parties to a contract of sale.
Nevertheless, contracts entered into by Examples of persons who cannot assail the validity
such incapacitated persons are not void but of such contract:
merely voidable subject to annulment or a. The spouses themselves cannot assail
ratification. the validity of the contract since they are
 The action for annulment cannot be parties to an illegal act under the
instituted by the person who is principle of pari delicto, the courts will
capacitated since he is disqualified from generally leave them as they are.
alleging the incapacity of the person b. The creditors who became such only
whom he contracts. after the transaction (the illegal contract
of sale), for it cannot be said that they
4. Deaf-mutes who do not know how to write – have been prejudiced by the transaction.
same with insane or demented persons.
5. Married women in cases specified by law Persons who can assail the validity of contracts
6. Persons suffering from civil interdiction entered in violation of Article 1490:
7. Incompetents under guardianship a. The heirs of either of the spouses who
have been prejudiced
Disqualified Persons b. Creditors who became such prior to the
transaction
1. The spouses with respect to contract of sale c. The State when it comes to payment of
between them. the proper taxes due on the transaction.
Rationale for Prohibition:
Sales by and between spouses a. To prevent commission of fraud or prejudice
I.1 Sales between spouses to third persons;

b. To prevent one from unduly influencing the  Can a ward acquire properties of guardian?
other; Yes. However the transaction is Voidable
c. To avoid indirect donations under Article 133 (Art. 1390)
of the Civil Code (now Article 87, FC).
Article 87, FC seeks to prevent the first two  Can a guardian acquire properties of a ward?
rationales. In addition, Article 87, FC No. The transaction is Void (Art. 1491)
declares that the prohibition shall apply to
persons living together as husband and wife Jansen, 10 years old, sold his land to AC, his
without a valid marriage. guardian, for P500,000. The RTC granted
such transaction. Can there be a valid
 Prohibition applies to common-law spouses contract of sale? Suggested Answer: No.
(Calimlim-Canulas v. Fortun) the rule is absolute. Contract is void, despite
approval of court, as provided by the law.
1.2 Sales with third parties
The spouses may, without the consent of Gwy, a minor, owns a parcel of land worth 1
the other spouse, enter into a sale million pesos. Nice, his guardian, bought such
transaction in the regular or normal land for P10 million. Is there a valid contract
pursuit of their profession, vocation or of sale? Suggested Answer: No. the rule is
trade and the latter may object only on absolute. Even if it be highly beneficial to the
valid, serious and moral grounds (Art. 73, ward, the contract is void as provided by the
FC) law. Effect of contract is immaterial. What
matters is the relationship existing between
The administration and enjoyment of the the contracting parties.
community property shall belong to both
spouses jointly. In case of disagreement, A, 10 years old, owns a parcel of land under
the husband's decision shall prevail, the guardianship of G. A stabbed X. Can A be
subject to recourse to the court by the held civilly liable? Suggested Answer: Yes.
wife for proper remedy, which must be A has to pay the damages.
availed of within five years from the date
of the contract implementing such To compensate the victim, A’s land was sold
decision. (Art. 96, FC) at public auction. Writ of execution on
property. G was the highest bidder, property
2. Guardians with respect to the property of the was awarded to him. Is the sale at public
person under guardianship. auction of A’s land to G, the former’s
guardian, valid? Suggested Answer: No it is
Prohibition applies even if the guardian did not valid, as per subsection 1 of Article 1491.
not acquire the property of the ward from As A’s guardian, G cannot acquire by
the ward directly as when there was a third purchase even at a public or judicial auction,
person who bought the property from the either in person or through the mediation of
ward and that third person sold the property another, the property of the person or
in question to the guardian. persons under hid guardianship.
Proof that the third-party buyer was a mere 3. Agents with respect to property to whose
intermediary buyer is not necessary for the administration or sale may have been
prohibition to apply (Philippine Trust Co. v. entrusted to them.
Roldan)

Exception: when the consent of the principal  But an executor can acquire the hereditary
have been given. rights of an heir to the estate under his
administration (Naval v. Enriquez)
 “Brokers” do not come within the coverage of
the prohibition as their authority consist A owns a parcel of land. When A died, X and
merely in looking for a buyer or a seller, and Y were declared heirs of A’s estate. Y ceded
to bring the former and the latter together to all his interests to G, the administrator of the
consummate the transaction. land, for P500k. Is the contract valid?
Suggested Answer: Yes. Whatever right Y
 An agent of a principal is not automatically has does not form part of the estate.
disqualified from acquiring property from the
principal. For the prohibition to apply, the A owns two parcels of land. The first parcel of
property which is the subject of the contract land is under G’s administration, while the
must be the property entrusted to the second is under H’s administration. When A
principal. Hence if the principal owns two died, his heirs, X and Y, ceded the first parcel
parcels of land and the agent was entrusted of land to G. Is the sale valid? Suggested
with one these properties, the agent can Answer: Void. The administrator cannot
acquire from the principal the other acquire by purchase the property under his
property. administration.
Kris Aquino is an actress. Boy Abunda, a TV

host is Kris Aquino’s agent. Kris Aquino is the X and Y ceded the first parcel of land to H. Is
owner of two parcels of land, lots A and B. the sale valid? Suggested Answer: Yes. H is
Kris Aquino and Boy Abunda entered into a not the administrator of the first parcel of land.
contract of sale whereby the ownership of lot He is not prohibited to acquire the same.
A will be transferred to Boy Abunda in
consideration of 2 million pesos. Is the 5. Public officers and employees with respect
contract valid? Suggested Answer: Yes. The to the property of the State or any of its
contract is valid because Boy Abunda is not subdivisions, any Government-owned and
an agent entrusted with the administration or controlled corporations, or institution the
sale of the property which he acquired from administration of which has been entrusted
Kris Aquino. to them.
R is the owner of two parcels of land. R, prior  Intended not only to remove any occasion for
to obligating A, the agent of R, owed X one fraud but also to surround them with the
million pesos. X filed a motion for execution. prestige necessary to carry out their
Sheriff offered for sale at a public auction. A functions by freeing them from all suspicion
purchased the property. Is the sale valid? which although unfounded, tends to
Suggested Answer: Yes. The property’s discredit the institution by putting into
administration or sale has not been entrusted question the honor of said functionaries.
to A.
 It is a policy of the law that public officers who
4. Executors and administrators with respect hold positions of trust may not bid directly or
to the property of the estate under indirectly to acquire prop properties
administration. foreclosed by their offices and sold at public
auction. (Maharlika Pub. Co. v. Tagle)

The Mayor of the City of San Pablo wanted to  When is the object considered under litigation?
acquire the City Hall of Batangas. Batangas When subject of judicial action of judge. Upon
City Mayor, as authorized by the Sanggunian filing of answer, it is considered in litigation.
of said City, sold the City Hall to Mayor of San
Pablo City. Is the contract of sale valid? A and B both claim ownership over a single
Suggested Answer: No. The contract is void parcel of land. During pendency of the trial, A
for valid object is wanting. Object is for public sold the said land to S for P500k. Is there a
use and is thus property of public dominion of perfected contract of sale? Suggested
the local government. Properties of public Answer: Yes. There is meeting of minds. The
dominion are inalienable. contract is only rescissible.
City of Manila, through Mayor Lim, sold the A and B both claim ownership over a single
City’s patrimonial property to PNoy for parcel of land. A filed a case before RTC
P500,000. Is the contract of sale valid? branch 43 of Manila. During pendency of the
Suggested Answer: The contract of sale is trial, A sold the said land to X, RTC judge
void. PNoy, as the President of the Branch 150 of Laguna. Is the sale valid?
Philippines, is entrusted with the Suggested Answer: Yes. The land in
administration of the properties of the State litigation is not within the jurisdiction and
and is therefore included in the prohibition. territory of RTC of Laguna.
The sale is void notwithstanding the fact that
the property in question is the patrimonial A and B both claim ownership over a single
property of the City of Manila. parcel of land. A filed a case before RTC
branch 43 of Manila. During pendency of the
What if a senator buys the land? Suggested trial, A sold the said land to X, RTC judge
Answer: The sale is void. Under the branch 42 of Manila. Is the sale valid?
Constitution, members of Congress are Suggested Answer: No. The land in litigation
prohibited from being financially interested, is within the jurisdiction and territory of RTC
directly or indirectly, in any contract with the of Manila.
government (Sec. 14, Art. VI, 1987
Constitution)  Supposing the Sandiganbayan Justice bought
the land levied upon execution before RTC
6. Justices, judges, prosecuting attorneys branch 43 of Manila. Is there a valid contract of
and other court officers and employees sale? Yes. The case is not appealable before
connected with the administration of the Sandiganbayan. It is not under his
justice with respect to property and rights in jurisdiction or territory.
litigation or levied upon on execution before
the court within whose jurisdiction or  Supposing Justice Lopez of CA bought the land
territory they exercise their respective levied upon execution before RTC of Batangas.
functions. Is the sale valid? No. The case may be
appealed to the CA and is thus under his
 It is not required that some contest or jurisdiction and territory.
litigation over the property itself should have
been tried by the judge; such property is in 7. Lawyers
litigation from the moment it became subject Prohibition applies only to a sale to a lawyer
to the judicial action of the judge, such as of record, and does not cover assignment of
levy on execution. the property given in judgment made by a
client to an attorney, who has not taken part

in the case nor to a lawyer who acquired

property prior to the time he intervened as B filed a case against A’s lot no. 50 before
counsel in the suit involving such property. RTC of Marikina. During the pendency of the
case, atty. De, the lawyer of B bought the
Exceptions to prohibition: said lot. Is there a valid contract of sale?
a. To sale of a land acquired by a client to Suggested Answer: No. A lawyer who takes
satisfy a judgment in his favor, to his part by virtue of his profession in any litigation
attorney as long as the property was not is prohibited to acquire subject property.
the subject of the litigation; or
b. To a contingency fee arrangement B filed a case against A’s lot no. 50 before
which grants the lawyer of record RTC of Marikina. During the pendency of the
proprietary rights to the property in case, atty. Do, the lawyer of A bought his
litigation since the payment of said fee is client’s lot no. 49. Is there a valid contract of
not made during the pendency of sale? Suggested Answer: Yes. The property
litigation but only after judgment has bought is not in litigation.
been rendered.
 Aliens are disqualified to purchase
 The purchase by a lawyer of the property in agricultural lands (Secs. 3 and 7, Art. XII,
litigation from his client is categorically 1987 Consitution). (Krivenko v. Register
prohibited by Article 1491, paragraph (5) of of Deeds)
the Philippine Civil Code, and that
consequently, plaintiff's purchase of the  Where a land is sold to an alien who later
property in litigation from his client sold it to a naturalized Filipino, the sale to
(assuming that his client could sell the same the latter cannot be impugned. (Sarsosa
since his client's claim to the property was vda. de Barsobia v. Cuenco)
defeated and rejected) was void and could
produce no legal effect. (Rubias v. Batiller)  Prescription may never be invoked to defend
that which the Constitution prohibits.
 The fact that the property in question was first (Vicente Godinez v. Fong Pak Luen)
mortgaged by the client to his lawyer and
only subsequently acquired by the latter in a  Under Republic Act (R.A.) No. 4726,
foreclosure sale long after the termination of otherwise known as the Condominium Act,
the case will not remove it from the scope of foreign nationals can own Philippine real
the prohibition for at the time the mortgage estate through the purchase of
was executed the relationship of lawyer and condominium units or townhouses
client still existed, the very relation of trust constituted under the Condominium
and confidence sought to be protected. principle with Condominium Certificates of
(Fornilda v. RTC) Title. It expressly allows foreigners to
acquire condominium units and shares in
 A contract for a contingent fee is not covered condominium corporations up to not more
by Article 1491 because the transfer or than 40% of the total and outstanding
assignment of the property in litigation takes capital stock of a Filipino-owned or
effect only after the finality of a favorable controlled corporation. Under this set up,
judgment. (Director of Lands v. Abada) the ownership of the land is legally
separated from the unit itself. (Jacobus
Bernard Hulst v. PR Builders, Inc.)

H, an alien, married T, a Filipina, during their Ed and Honey Rose are college sweethearts.
marriage, they acquired land in the Phils. After graduation, Ed sold his most expensive
Upon dissolution of their marriage, H claims car to Honey Rose in consideration of his love
his share in the said land. Is he entitled to a to the latter. Is there a valid and perfected
share? Suggested Answer: No. An alien contract of sale? Suggested Answer: No.
cannot acquire land in the Phils. Love and affection is not a valid
consideration.
F, an alien, bought the building of J for 1
million pesos. Is the sale valid? Suggested Illicit objects:
Answer: Yes. There is meeting of minds. a. Future inheritance – no contract may be
Aliens are prohibited only to acquire lands in entered into upon future inheritance except
the Philippines. in cases expressly authorized by law (Art.
1347, par. 2)
Ryan, an Iranian, bought a condominium unit b. All services which are contrary to law,
at Mezza residences. Is there a valid contract morals,, good customs, public order, or
of sale? Suggested Answer: Yes, under the public policy cannot be the object of a
Condominium Act, aliens may acquire units in contract (Art. 1347, par. 3)
a condominium project for as long as it does
not exceed the 40% of the total number of 2. Existing, or future thing
shares.  Existing goods – goods owned or
possessed by the seller (Art. 1462)
A charitable institution wholly owned by aliens  Future goods – goods to be manufactured,
acquired by purchase a condo unit. Can it raised or acquired by the seller after the
acquire a condominium unit? Suggested perfection of the contract of sale (Art.
Answer: Yes, aliens are allowed by law to 1462)
own a condominium unit.  Future things – those which do not belong
to the obligor at the time the contract is
II. Subject Matter made.
Requisites:
1. It must be licit  Things having a potential existence (Emptio
2. It must be existing, or it may be future, rei speratae) may the object of the contract
or even contingent of sale. The efficacy of a mere hope or
3. It must be determinate or at least expectancy (Emptio spei) is deemed
determinable. subject to the condition that the thing will
come into existence. The sale of a vain
1. Licit – a thing is licit and may be the object of hope or expectancy is void (Art. 1461)
a contract when it is not outside the
commerce of men, and includes rights which  Emptio rei speratae – sale of a thing with
are not intransmissible (Art. 1347, par. 1). potential existence, subject to a
All services which are not contrary to law, suspensive condition that the thing will
morals, public order, or public policy may be come into existence. If the subject matter
the object of a contract (Art. 1347, par. 3). does not come into existence, the contract
is deemed extinguished as soon as the
The thing must be licit, and the vendor must time expires or if it has become indubitable
have the right to transfer the ownership that the event will not take place (Art.
thereof at the time it is delivered (Art. 1459) 1184).

Example: sale of pending crops which

have potential existence may be a valid 3. Determinate or determinable
object of sale (Sibal v. Valdez) The object of every contract must be
determinate as to its kind (Art. 1349)
 Emptio spei – sale of a mere hope or
expectancy.  Determinate – a thing is determinate when
it is particularly designated or physically
Example: sale of a sweepstake ticket for segregated from all others of the same
P100 where the buyer purchases the ticket class (Art. 1460)
with the hope that upon the draw the ticket  Determinable – a thing is determinable if at
would win him a million pesos. The object the time the contract is entered into, the
of sale here is not the prize, but rather the thing is capable of being made
ticket or the chance to win. determinate without the necessity of a new
contract or further agreement between the
 Sale of a thing subject to a resolutory parties (Art. 1460)
condition – things subject to a resolutory
condition may be the object of a contract of Quantity of subject matter not essential for
sale (Art. 1465). When the condition have perfection
for their purpose, the extinguishment of an The object of every contract must be
obligation to give, the parties, upon determinate as to its kind. The fact that the
fulfilment of said conditions, shall return to quantity is not determine shall not be an
each other what they have received (Art. obstacle to the existence of the contract,
1190) provided it is possible to determine the
same, without the need of a new contract
 Future things may be the object of a contract between the parties (Art. 1349)
of sale, exception:
However, the quantity of the subject matter
Sale of future inheritance is not important only when it is still possible
Future inheritance – inheritance includes all to determine the quantity without the need
the properties, rights, and obligations of a of a new contract between the parties
person which are not extinguished by his (National Grains Authority v.
death (Art. 776). The inheritance of a Intermediate Appellate Court)
person includes not only the property and
transmissible rights and obligations existing  The requirement of the law that a sale must
at the time of his death, but also those have for its object a determinate thing, is
which have accrued thereto since the fulfilled as long as, at the time the contract
opening of the succession (Art. 781) is entered into, the object of the sale is
capable of being made determinate without
Requisites for the exception the necessity of a new or further agreement
1. The succession has not yet been between the parties. (Melizza v. City of
opened. Iloilo)
2. The object of the contract forms part of
the inheritance.  The fact that the quantity is not determinate
3. That the promissory has, with respect to shall not be an obstacle to the existence of
the object, an expectancy of a right the contract, provided it is possible to
which is purely hereditary in nature. determine the same, without the need of a

new contract between the parties. (National

Grains Authority v. Intermediate A entered into a contract of sale of a mazda
Appellate Court ) car zjn 245 with B for P500k. Is there a
perfected contract? Suggested Answer:
 The object of a contract, in order to be Yes. All the elements of a contract of sale are
considered as "certain," need not specify present.
such object with absolute certainty. It is
enough that the object is determinable in Is there a valid object? Suggested Answer:
order for it to be considered as "certain." Yes. The object is determinate.
(Domingo Realty v. Court of Appeals)
A entered into a contract of sale of a mazda
Madam Sheila sold 50Kg of rice to Clau for car zjn 245 or lot with B for P500k. Is there a
4K. Is there a valid contract of sale? perfected contract? Suggested Answer:
Suggested Answer: No, the object is not Yes. All the elements of a contract of sale are
determinate or determinable. present.
Irene sold 4kg of wagwag rice to Ela for 400. Is there a valid object? Suggested Answer:
Is there a valid contract of sale? Suggested Yes. As to the car, the object is valid as to the
Answer: Yes, the object is determinable lot not valid object for it is not a determinate
without the need of a new or further or determinable object.
agreement between the parties.
A entered into a contract of sale of a mazda
Tracy bought one of the 10 horses of Joy for car zjn 245 and lot with B for P500k. Is there
50K. Is there a valid contract of sale? a perfected contract? Suggested Answer:
Suggested Answer: Yes, the object can be No. Not all the elements of a contract of sale
ascertained or determinable. are present.
 Why does the law require the object to be Is there a valid object? Suggested Answer:
determinate/ determinable? Because of No. The object is not determinate. Only the
mutuality of contract. car is determinate.
 If there is a need for further agreement, there  Is it necessary that the object be in existence
is no sale. at the time of perfection of contract? No. Art
1462.
 If the object is generic, there is no sale.
A owns a parcel of land worth P500k. S son
A entered into a contract of sale with B a dog of A, entered into a contract of sale with B for
for P5k. Is there a perfected contract? the sale of the said parcel of land. Is there a
Suggested Answer: No. Not all the elements perfected contract of sale? Suggested
of a contract of sale are present. Answer: No as to A and B as they don’t have
privity of contracts. Yes as between S and B
Is there a valid object? Suggested Answer: (privity of contracts). Is there a valid object?
No. The object is not determinate or No. Future inheritance cannot be a valid
determinable. object of contract of sale.

F has a paraphernal land. During his lifetime, price agreed upon is real. If there is no price
F divided the land to W, A, B, and C. A to support a contract of sale, the contract is
entered into a contract of sale with H for his void for lack of cause or consideration.
share of land for P500k. Is there a perfected
contract? Suggested Answer: Yes. All the If the price is simulated, the sale is void, but
elements of a contract of sale are present. Is the act may be shown to have been in
there a valid object? Yes. Upon the division of reality a donation, or some other act or
the land, A is already the owner of the land. contract (Art. 1471). If the price is false, the
contract is valid, but subject to reformation.
F owns a parcel of land. During his lifetime,
his wife and three children executed a Meeting of minds as to price – if the minds
partition of the said land and sold their shares of the parties have met as to the price, the
to H. Is the partition valid? Suggested contract of sale is valid, irrespective of the
Answer: No, the partition was executed manner of payment they agreed upon, or
during the lifetime of F and without his even by the breach of that manner of
consent. Is there a valid contract? No, the payment agreed upon. This is because
sellers have no right to sell the property. payment of the price is not necessary for
the perfection of the contract of sale.
 Quantity of things to be delivered or agreed
upon is not stated in the contract. Is the Adequacy of price to make it real – Although
contract valid? Yes. Quantity can be the cause is not stated in the contract, it is
ascertained by simple mathematical presumed that it exists and is lawful, unless
computation. the debtor proves the contrary (Art. 1454)
 Is the sale of losing lottery ticket valid? It 2. Price in money or its equivalent
depends upon the intention of the buyer. It Money – a medium that can be exchanged
is valid if the losing lottery ticket was sold for for goods and services and is used as a
collection or memorabilia, otherwise, it is measure of their values in the market.
void.
“its equivalent”
III. Price – price signifies the sum stipulated as a. Something representative of money like
the equivalent of the thing sold and also a check (Bagnas v. Court of
every incident taken into consideration for Appeals)
the fixing of the price put to the debit of the b. “Its equivalent” means that there is
buyer and agreed to by him (Inchausti & certainty as to the price but what is
Co. v. Cromwell) given as payment is an object. It does
not refer to negotiable instruments. A
Requisites: negotiable instrument, by its form, is
1. It must be real intended as a substitute for money
2. It must be in money or its equivalent (Casino and Rabajante)
(Arts. 1458 and 1468)
3. It must be certain or ascertainable at the Example: a 5 thousand pesos worth of
time of the perfection of the contract magi noodles was given as a
consideration for a 5 thousand pesos
1. Price must be real worth of pure foods corned beef. This
Since a contract of sale is an onerous and is a contract of sale and not a contract
commutative contract, it is essential that the of barter.

iii. By reference to a particular day,

Comment: this has no basis in law. In particular exchange or market
such case, the contract is barter and iv. By reference to another thing certain.
not a contract of sale. The law
expressly provides that it is only when Inadequacy of price
the consideration of a contract consists Except in cases specified by law, lesion or
partly in money and partly in another inadequacy of cause shall not invalidate a
thing should the manifest intention of contract, unless there has been fraud,
the parties be considered in mistake or undue influence (Art. 1355)
determining whether the contract is
that of barter or that of a sale. The Gross inadequacy of price does not affect
consideration in the given definition of a contract of sale, except as it may
“its equivalent” does not consists partly indicate a defect in the consent, or that the
in money and partly in another thing, it parties really intended a donation or some
is consists wholly by a thing. other act or contract (Art. 1470)
3. Price must be certain or ascertainable at  Inadequacy of price may be a ground for

the time of perfection setting aside an execution sale but is not a
a. Certain – expressed and agreed in sufficient ground for cancellation of a
terms of specific pesos and centavos voluntary contract of sale otherwise free
b. Ascertainable – in order that the price from invalidating effects. (Alarcon v.
may be considered certain, it shall be Kasilag)
sufficient that it be so with reference to
another thing certain, or that the  There is complete failure of proof that the
determination thereof be left to the price for which the properties were sold was
judgment of a specified person or unreasonably low, or in any way unfair, if
persons. the parties presented no evidence of the
i. By third persons – only the market value of the lots as of the time of the
designation of a third party to fix sale. (Goquilay v. Sycip)
the price is valid and such
designation by itself makes the  A contract of sale is void and produces no
price certain or ascertainable as effect whatsoever where the price, which
to give rise to a valid contract of appears therein as paid, has in fact never
sale. The fixing of the price been paid by the purchaser to the vendor.
cannot be left to the discretion of Such a sale is inexistent and cannot be
one of the contracting parties. considered consummated. (Ladanga v.
However, if the price fixed by Court of Appeals)
one of the parties is accepted by
the other, the sale is perfected Sum certain in money Certain sum of money
(Art. 1473) The price is known or The price is not
ii. By the courts – if the designated determinate determined or uncertain
third party fixes the price in bad
faith or by mistake, those are the
only two instances where the
parties to the contract can seek
court remedy to fix the price

A sold his lot, which has an assessed value of  Is it necessary that the exact price be stated
P500k, to B for P10. Is the contract of sale in the contract in order to be valid? No, as
valid as to price? Suggested Answer: Yes. long as the price can be ascertained.
(Autonomy of contracts)
 What if the parties did not agree as to the
manner of payment? Is the sale valid? No,
Simulated Price Simulated Contract one of the requisites of price is that the
Cause is absent, The contract is manner of payment must be agreed upon.
therefore the contract inexistent
is void A and B entered into a contract of sale of a
land, the contract merely states that the price
 A donated to B a parcel of land but executed will be based on the price of the adjoining lot.
a contract of sale. Is the sale valid? Suggested Answer: Yes.
In order that the price may be considered
 What is the effect of statement of false certain, it shall be sufficient that it be so with
cause? It is void unless founded upon a reference to another thing certain or that the
cause which is valid. determination thereof to the judgment person
or persons.
A and W are married with a complete
separation of property regime. If and when A A sold his land to B for P500K. They agreed
dies, W may inherit the land, to prevent this, that the price be paid on installment, A
A and B simulated a contract whereby A sells agreed but the manner of payment was not
his property to B. Nothing was paid by B. Is specified. No. The manner of payment must
there a valid contract of sale? Suggested be agreed upon.
Answer: No. the contract is simulated. There
was no cause or consideration.
Forms
B was able to register the sale. Then, B sold
the property to X for P50K. Later on A dies. Article 1874 of the Civil Code is explicit that:
As between X and W, who has a better right? "When a sale of a piece of land or any interest
Suggesed Answer: X has the better right. X therein is through an agent, the authority of the
acquired the property in good faith for value latter shall be in writing; otherwise, the sale shall be
without notice of the defect of B’s title. void." (Regina Dizon v. Court of Appeals)
What if X obtained from B through donation? Vincent orally told Ari to sell his parcel of land
Suggested Answer: W will have the better located in Mendiola. The latter then entered in
right for X paid nothing. to a Contract of Sale with Johnny and
subsequently issued a “Deed of Absolute
Sale”. Vincent then contested the sale. Can
“Or its equivalent” Johnny raise the defense that the contract of
agency between Vincent and Ari binded the
A sold his car to B for 10K USD. Is the former? Suggested Answer: No. The law
contract valid as to price? Yes, Uniform requires that the authority to sell a piece of
Currency Act repealed R.A. 8183 which land given by the principal to the agent must
requires the money paid to be of legal tender. be in writing. The requirement is absolute and
indispensable.

 The sale of a land or of an interest therein

has to be in a public document and the AC has a parcel of land. Gwy entered into a
contracting parties may compel each other contract with AC regarding the sale of the lot
to observe that form once the contract has for 500k. Can Gwy compel AC to execute the
been perfected. (Zaide v. Court of “Deed of Sale”? Suggested Answer:
Appeals) Generally, No. Since it is unenforceable. But
Gwy can demand extrajudicially to AC.
 The requirement that a sale be through public
instrument is not an essential requisite for If Gwy resorted to a judicial action but the
the validity of the contract as between same was not granted, can she file an action
contracting parties. It is only required for the for damages against AC? Suggested
purpose of making it effective as against a Answer: Yes. Based from Art. 19, not from
third person. (Tapec v. Court of Appeals) the contract itself.
 Existence of a written note or memorandum  May there be a valid right from a contract
evidencing the contract is sufficient to prove absolutely simulated? Yes.
the elements of a perfected contract.
(Limketkai Sons Milling Inc. v. Court of Kinds of Formalities
Appeals) 1. Validity – Public instrument ex. Donation
2. Efficacy – to bind third persons Art 1358
 The failure of the parties to specify with Public document
absolute clarity the object of a contract by 3. For purpose of evidence
including its technical description is of no
moment. What is important is that there is,  Contract of sale involves transmission of real
in fact, an object that is determinate or at rights.
least determinable, as subject of the
contract of sale. The form of a deed of sale What is a personal right? Is ownership over
provided in Section 127 of Act No. 496 is movable property a real or personal right? This
only a suggested form. It is not a mandatory is a real right. Real right is a right of a person
form that must be strictly followed by the over a specific thing and is enforceable against
parties to a contract. (Naranja vs. Court of the whole world.
Appeals)
 Contract of sale must appear in a public
 Is oral contract of sale of an immovable instrument to bind third persons.
property valid? Yes. The legal bases are
Arts. 1483 and 1356 What is a real right? Rights over a real or
personal property enforceable against the whole
 Enforceable? Unenforceable in court. world.
 Art 1403 (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;
deduced from conduct of the parties,
B wrote on his journal “I, B, thereby bound language used, or things done by them, or
myself to pay A 500k pesos for the Mazda other pertinent circumstances attending the
Car with plate number ZXN 215.” Is the transaction.
journal entry sufficient memorandum to
comply with the Statute of Frauds? Note: The Statute of Frauds is only
Suggested Answer: No. B is not the party applicable to executory contracts, which
charged. means delivery and payment are not yet
made by the parties.
A and B entered in to an oral contract of sale.  What if the offer and acceptance was made
On the same day, A entered in his journal thru (1) email? Valid and enforceable thru
“today, I bound myself to deliver Mazda car court action
with plate no zxn 215 in exchange of P500k  If thru SMS? Valid and enforceable
payable by B on 07/29/2011” Is this a  May an oral contract be subject to
sufficient memorandum? Suggested Answer: reformation? No. The law speaks of an
Yes because he is the party charged. “instrument” (Art 1359)
Performance or Consummation of the

 Subscribed by party charged: SELLER – the Contract of Sale
one who will alienate his property
Extinguishment of obligations
Contract of sale’s essence is transmission of rights
Obligations are extinguished by:
of ownership.
1. Payment or performance
2. By the loss of the thing due
What constitutes sufficient note or memo?
3. By the condonation or remission of the debt
1. All requirements of a valid contract of sale
4. By the confusion or merger of the rights of
2. name of the parties
creditor and debtor
3. terms and conditions
5. By compensation
4. Description of property (Swedish Match v.
6. By novation
Court of Appeals)
7. By other causes of extinguishment of
obligations such as annulment, rescission,
 If one of parties partially performs – not under
fulfilment of a resolutory condition, and
Statute of fraud. Statute of Frauds applies
prescription (Art. 1231)
only to executor contracts, not executed
contracts.
Payment – payment means not only delivery of
money but also performance, in any other
 Oral testimony without objection is deemed a
manner, of an obligation (Art. 1232)
waiver.
A debt shall not be understood to have been paid
 Implied in fact contract
unless the thing or service in which the obligation
consists has been completely delivered or
 A contract, the existence and terms of which
rendered, as the case may be (Art. 1233)
are manifested by conduct and not by direct
or explicit words between parties but is to be

 Is Delivery the same as payment? Yes. Art the thing which is the object of the sale (Art.
1232 and 1233 1495)
Obligations of Vendor Although it may seem that “transfer of

1. To preserve the subject matter of the sale ownership” and “delivery” are separate,
Every person obliged to give something is nonetheless, the means by which the seller
also obliged to take care of it with the proper can transfer ownership of the subject matter
diligence of a good father of a family, unless is by the mode of tradition or delivery.
the law or the stipulation of the parties
requires another standard of care (Art. 1163) 4. Deliver the fruits and accessories
The creditor has a right to the fruits of the
The obligation applies only to obligations to thing from the time the obligation to deliver it
deliver a specific or determinate object. In arises. However, he shall acquire no real
such case, upon perfection and even prior to right over it until the same has been delivered
delivery, even though the seller still owns the to him (Art. 1164)
subject matter, he is obliged to exercise due
diligence of a good father of a family in The vendor is bound to deliver the thing sold
preserving the thing. Otherwise, seller and its accessions and accessories in the
becomes liable for breach if the thing is lost condition in which they were upon the
or deteriorates through his fault (Art. 1170) perfection of the contract. All the fruits shall
pertain to the vendee from the day on which
Diligence of a good father of a family – the the contract was perfected (Art. 1163)
diligence which is required by the nature of
the obligation and corresponds with the In a sale involving a determinate subject
circumstances of persons, of the time and of matter, even prior to delivery and transfer of
the place (Art. 1173) ownership thereof to the buyer, the buyer
already has certain rights enforceable against
2. Deliver the thing to the vendee the seller, pertaining to the subject matter.
By the contract of sale, one of the contracting
parties obligates himself to transfer Since the subject matter is intended for
ownership of and to deliver a determinate delivery to the buyer from the point of the
thing (Art. 1458) perfection of the sale, then necessarily the
accessories and fruits must from then on be
The vendor is bound to transfer the held on the account of the buyer. This is in
ownership of and deliver, as well as warrant accordance with the principle that
the thing which is the object of the sale (Art. accessories always follow the principal.
1495)
5. Make warranties
3. Transfer ownership over the thing to the The seller is also obliged to warrant the thing
vendee which is the object of the sale (Art. 1495)
By the contract of sale, one of the contracting
parties obligates himself to transfer 6. Taking-out insurance coverage (Art. 1523)
ownership of and to deliver a determinate
thing (Art. 1458) 7. Expenses for the execution and registration of
the sale shall be borne by the vendor, unless
The vendor is bound to transfer the there is a stipulation to the contrary (Art.
ownership of and deliver, as well as warrant 1487)

What if A, on August 1, delivered only the

Delivery watch without the bracelet? Suggested
The thing sold shall be understood as delivered, Answer: The delivery is not complete. The
when it is placed in the control and possession of integrity of the object was not complied with.
the vendee (Art. 1497)
What if another brand of watch was delivered?
 In the absence of an express stipulation to the Suggested Answer: The delivery is not valid
contrary, the payment of the purchase price because the identity of the object was not
of the goods is not a condition precedent to complied with.
the transfer of title to the buyer, but title
passes by the delivery. (Philippine  In the absence of an express stipulation to the
Suburban Development Corp. v. Auditor contrary, the payment of the purchase price
General) of the goods is not a condition precedent to
the transfer of title to the buyer, but title
Tradition, or delivery, is a mode of acquiring passes by the delivery. (Philippine
ownership, as a consequence of certain Suburban Development Corp. v. Auditor
contracts such as sale, by virtue of which, General)
actually or constructively, the object is placed in
the control and possession of the vendee.  What is the essence of the Contract of Sale?
The acquisition of ownership.
Delivery is effected pursuant to a valid sale
 The perfection of the contract of sale does not
Delivery is a composite act: depend whether or not the vendor owns the
 One party parts with the title to and property sold or whether or not he made it
possession of the property under the authority or consent of the owner.
 The other party acquires the right to and It does not also depend whether or not the
possession of the same obligation to pay can be done. This is based
in the rule of Estoppel.
Requisites:
1. Intention A is the owner of a parcel of land. X, a third
2. Integrity person, sold the land to B. Is there a perfected
3. Identity contract of sale? Suggested Answer: Yes.
The remedy of B, in this case, because he
On July 1, 2011, A entered into a contract of cannot compel X to deliver the land, is to
sale with B to sell the former's gold watch for rescind the contract and an action for
1,000 to be delivered on August 1, 2011. B damages against X.
already paid the purchase price on the
perfection of the contract. On August 1, while Presumption of good faith
A was walking along Recto to deliver the  Any person who is aware that there is in his
watch to B, the latter suddenly appeared and title or in the manner of acquiring it any flaw
forcibly took the watch. Can B be considered invalidating the same shall be considered a
a owner? Suggested Answer: No. There was possessor in good faith. Good faith is always
no delivery. Delivery must be intentional and presumed, and any person alleging bad faith
voluntary. on the part of the possessor is obliged to
prove it. (Tablante v. Aquino)

Execution sale and notice of sale in mortgage manner signifying an agreement that the
foreclosure sale possession is transferred from the vendor to
the vendee. The vendor must have the right
 A purchaser of real property at an ordinary to transfer ownership of the thing at the time
execution sale is not entitled to possession it is delivered under the rule nemo dat quod
at an ordinary execution rents and profits non habet (he who does not own the thing
until after the period of redemption has cannot dispose the same)
expired and the legal title to the land had
become vested in him. (Flores v. Lim) Types of constructive delivery
a. Execution of public instrument
 The effective conveyance of the land is b. Symbolic delivery
accomplished by the deed which is issued c. Consitutum possessorium
only after the period of redemption has d. Tradition brevi manu
expired. The certificate of sale issued to the e. Tradition longa manu
purchaser at an auction sale is intended to f. Delivery of incorporeal property
be a mere memorandum of the purchase. It g. Delivery by negotiable document of title
does not transfer the property but merely h. Delivery through carrier
identifies the purchaser and the property,
states the price and the date when the right  A period was stipulated for the making of
of redemption expires. The effective payment, and this brings the case within the
conveyance is made by the deed of absolute exception provided in the Civil Code, that the
sale executed after the expiration of the sugar should have been delivered even
period of redemption. (Gonzales v. before its price was paid. (Warner, Barnes
Calimbas) & Co. v. Inza)
Non-payment of Purchase Price  In order that symbolic delivery may produce

 Non-payment of the purchase price by the the effect of tradition, it is necessary that the
impostor, although amounting to fraud, did vendor shall have had such control over the
not amount to unlawful deprivation under thing sold that, at the moment of the sale; its
Article 559, but merely may be considered material delivery could have been made.
vitiation of consent as to make the contract (Addison v. Felix)
voidable; but that so long as the contract has
not been annulled, it remained valid, and the On August 12, 2011, A executed a sale 4
subsequent sale and delivery by the parcels of land for 10,000 to F in a public
impostor of the books a purchaser in good instrument and in return, F paid 5,000 as
faith for value effectively transferred earnest money. The parties stipulated that the
ownership to the latter. (EDCA Publishing other payment shall be made on September
v. Santos) 12, 2011. On August 20, A accompanied F to
the location of the lots. But F found out that
Kinds of Delivery the same was full of informal settlers. When
September 12 arrived, A asked for the
1. Actual – when the thing sold is placed in the payment of the 5,000 but F refused and
control and possession of the vendee (Art. instead asked for the rescission of the
1497) contract and the return of the money he paid.
A filed an action to compel F to pay stating
2. Constructive delivery – constructive delivery that he already delivered the land to F and
can take several forms and may be any that the latter should pay him. Was he

correct? Suggested Answer: No. Delivery subject matter of the contract of sale is
made through a public instrument requires goods, but also to other kinds of property,
that the seller abandons the ownership of the including real property. (Quijada v. Court
object and that the object must be put under of Appeals)
the control of the vendee. Since the lots were
occupied by informal settlers, the same were  There must have been intention to deliver the
not place under the possession of F. thing. The act, without the intention, is
insufficient. (Union Motors Corp. v. Court
 Although it is postulated that the execution of of Appeals)
a public document is equivalent to delivery,
this legal fiction only holds true when there is  The,sale by itself does not transfer or affect
no impediment that may prevent the passing ownership; the most that sale does is to
of the property from the hands of the vendor create the obligation to transfer ownership.
into the hands of the vendee. (Bugarin v. It is tradition or delivery, as a consequence
Lesaca) of sale, that actually transfers ownership.
(San Lorenzo Dev’t Corp. v. Court of
 An invoice is nothing more than a detailed Appeals)
statement of the nature, quantity and cost of
the thing sold and has been considered not  A purchaser of real property at an ordinary
a bill of sale. Execution of sales invoice is execution sale is not entitled to possession
not equivalent to delivery nor transfer of at an ordinary execution rents and profits
ownership and dominion. (Norkis v. Court until after the period of redemption has
of Appeals) expired and the legal title to the land had
become vested in him. (Flores v. Lim)
 Devoid of any stipulation that “ownership in
the thing shall not pass to the purchaser until  Where required by the statute or by the terms
he has fully paid the price”, ownership in the of the foreclosure decree, public notice of
thing shall pass from the vendor to the the place and time of the mortgage
vendee upon actual or constructive delivery foreclosure sale must be given, a statute
of the thing sold even if the purchase price requiring it being held applicable to
has not yet been fully paid. subsequent sales as well as to the first
advertised sale of the property. It has been
 The failure of the buyer to make good the held that failure to advertise a mortgage
price does not, in law, cause the ownership foreclosure sale in compliance with statutory
to revest to the seller unless the bilateral requirements constitutes a jurisdictional
contract of sale is first rescinded or resolved defect invalidating the sale and that a
pursuant to Art. 1191. (Balatbat v. Court of substantial error or omission in a notice of
Appeals) sale will render the notice insufficient and
vitiate the sale. (Tambunting v. Court of
 A seller’s duty is to deliver the thing sold in a Appeals)
condition suitable for its enjoyment by the
buyer for the purposes contemplated.  If there is already delivery in an absolute
(Consing v. Court of Appeals) contract of sale, the remedy of the vendor in
case of non-payment of the vendee is either
 Article 1434 of the New Civil Code which specific performance or rescission.
states that the "title passes by operation of (Spouses Pingol v. Court of Appeals)
law to the buyer" applies not only when the

 Art. 1434 when a person who is not the owner subject matter at the time of execution and
of a thing sells or alienates and delivers it, passage of a reasonable time for the control
and later the seller or grantor acquires title to remain.
thereto, such title passes by operation of law
to the buyer or grantee. (Bucton v. Gabar) Exceptions (execution of public instrument
does not produce effects of delivery):
A. Execution of public instrument 1. Stipulation to the contrary
When the sale is made through a public Examples:
instrument, the execution thereof shall be a. A certain date fixed for buyer to take
equivalent to the delivery of the thing which is possession of property
the object of the contract, if from the deed the b. Stipulation that until last installment is
contrary does not appear or cannot be clearly made, title should remain in the seller
inferred (Art. 1498, par. 1) c. Seller reserves right to use and enjoy
property until gathering of pending crops
Requisites: d. Seller has no control over thing sold at
1. The seller must have control over the the moment of the sale
thing
2. The buyer must be put under control  Execution of the deed of sale, in the
3. There must be the intention to deliver absence of any defect, transfers delivery,
the thing for purposes of ownership even if the selling price has not yet been
paid. It is not payment that transfers
A public instrument is a notarized deed of ownership. (exception: If there is a
sale in the case of a contract of sale. stipulation: Art 1478)
Functions: 2. When at the time of execution of public

1. Operates as a formal or symbolic instrument, the subject matter was not
delivery of the property sold subject to the control of the seller.
2. Authorizes the buyer to use the (Addison v. Felix Doctrine)
document as proof of ownership  At the moment of sale, its material
delivery could have been made
General rule: execution of public instrument (CAPACITY rather than actual physical
has the same legal effect as actual or physical delivery)
delivery:  Moment of sale: consummation stage
1. Transfer the ownership of the subject  When there is no impediment
matter to the buyer whatsoever to prevent the thing sold
2. Constitutes a valid compliance by the from passing into the tenancy of the
seller of his primary obligations under purchaser by the sole will of the vendor
the sale  But if the buyer knew that the thing was
in possession of a third person and the
 Disputable presumption = execution of a agreement was for the buyer to take
public instrument is only presumptive necessary steps to obtain material
delivery possession of the thing = agreement is
valid
By itself, a deed of sale is merely a species of
evidence, and it becomes an integral part of Control or ability to transfer physical
tradition when coupled with other possession and enjoyment must subsist for a
requirements, namely, CONTROL over the

reasonable length of time after the E. Tradition longa manu

instrument’s execution Tradition longa manu is delivery of the thing
by mere agreement. When seller points the
B. Symbolic delivery property subject matter of the sale by way of
There is symbolic delivery when to effect, the delivery without need of actually delivering
delivery, the parties make use of a token physical possession thereof (Art. 1499)
symbol to represent the thing delivered Because the object cannot be placed yet
under the possession of the vendee.
With regard to movable property, its delivery
may also be made by the delivery of the keys Antonia Clarissa (AC) sold her pussy cat to
of the place or depository where it is stored or Bojie for 5,000 to be delivered on the next
kept (Art. 1498, par. 2) day. However, when the time of delivery
arrived, AC told Bojie that her pussy cat was
When Bojie and Roger were eating balut hospitalized for eating too many sausages.
outside the gate of Ceu Mendiola while babe Nonetheless, the parties agreed that the
watching, Bojie sold his Honda City to Roger ownership of the pussy cat belongs to Bojie.
for 500k. Bojie told Roger that his car was in What kind of delivery was made? Suggested
the parking lot of San Beda Mendiola near Answer: Traditio Longa Manu. By the
Med Building where many people were caught agreement of the parties, ownership was
making out. (madilim daw) Pursuant to the transferred to the vendee but the object was
sale, Bojie gave Roger the key of his car. not yet placed to his possession at the time of
What kind of delivery was made? Suggested delivery.
Answer: Actual Delivery. Symbolic delivery
pertains to the delivery of the key of a
depository or a place where the object of the F. Delivery of incorporeal property
contract was stored. With respect to incorporeal property, the
provisions of the first paragraph of Article
1498 shall govern. In any other case wherein
C. Constitutum possessorium said provisions are not applicable, the placing
There is consitutum possessorium when at of the titles of ownership in the possession of
the time of perfection, the seller held the vendee or the use by the vendee of his
possession of the subject matter in the rights, with the vendor’s consent, shall be
concept of owner, and pursuant to the understood as a delivery (Art. 1501)
contract, the seller continues to hold physical
possession thereof as lessee or other form of A. Constructive Tradition (Art. 1498) –
possession other than the concept of owner Execution of a public instrument;
(Art. 1500) Delivery can only be effected by
constructive delivery, because
D. Tradition brevi manu incorporeal property has no physical
There is tradition brevi manu when before the existence
sale, the would-be buyer was already in B. Quasi-Tradition (Art. 1501)
possession of the would-be subject matter of a. Placing of the titles of ownership in
the sale, and pursuant to the contract of sale, the possession of the vendee
he would now hold possession in the concept b. By allowing the vendee to use and
of an owner (Art. 1499). Tradition brevi manu enjoy his rights as new owner of the
is the opposite of constitutum possessorium. incorporeal property, with the
vendor’s consent

that of his immediate seller. If by assignment,

G. Delivery by negotiable document of title he acquires only his transferor’s title to the
Document title of goods – includes any bill goods, and always subject to the terms of
of lading, dock warrant, "quedan," or any agreement with the transferor.
warehouse receipt or order for the delivery of
goods, or any other document used in the Persons who may negotiate NDT
ordinary course of business in the sale or 1. The owner; or
transfer of goods, as proof of the possession 2. Any person to whom the possession or
or control of the goods, or authorizing or custody thereof has been entrusted by
purporting to authorize the possessor of the the owner, if by the terms of the
document to transfer or receive, either by document the bailee issuing the
endorsement or by delivery, goods document undertakes to deliver the
represented by such document (Art. 1636, goods to the order of the person to
par. 1) whom the possession or custody of the
document has been entrusted or if at the
Bill of Lading – a document that serves as time of such entrusting the document in
evidence of receipt of goods for shipment such form that it may be negotiated by
issued by a common carrier delivery (Art. 1512)
Warehouse Receipt – a document of title Note: If the holder of a BEARER

which is issued by a warehouseman negotiable document of title entrusts the
document to a friend for deposit, but the
Quedan – a warehouse receipt that covers friend betrays the trust and negotiates
sugar the document by delivering it to another
who is in good faith, the said owner
Dock warrant – a warrant given by dock- cannot impugn the validity of the
owners to the owner of merchandise negotiation. As between two innocent
imported and warehoused on the dock upon persons, he who made the loss possible
the faith of the bills of lading, as a recognition shall bear the loss, without prejudice to
of his title to the goods his right to recover from the wrongdoer.
Negotiable document of title – a document of Rights of a person to whom document has

title in which it is stated that the goods been negotiated:
referred to therein will be delivered to the 1. The title of the person negotiating the
bearer, or to the order of any person named document, over the goods covered by
in such document is a negotiable document the document;
of title (Art. 1507) 2. The title of the person (depositor or
owner) to whose order by the terms of
A person to whom a NDT has been duly the document the goods were to be
negotiated acquires such title to the goods as delivered, over such goods; and
the transferor had or had ability to convey to 3. The direct obligation of the bailee to hold
a purchaser in good faith for value, and also possession of the goods for him, as if
the title of the person to whom the documents the bailee had contracted with him
was originally directly. For a mere transferee to
acquire such right, he must notify the
A buyer can by process of negotiation of the bailee. (Art. 1513)
covering document acquire a title better than

W issued a document of title to B stating that it Answer: No, because the subsequent
is deliverable to B. B then transferred the indorsees have a superior right to the NDT as
document to A for 500k. What does A per Article 1513
acquire? Suggested Answer: An assignment
of the rights of B plus the rights of a transferee  Unauthorized Negotiation (Art. 1518) As
of a non-negotiable document of title. between the owner of a negotiable
document of title who indorsed it in blank
and entrusted it to a friend, and the
W issued a document of title to A stating that it holder of such negotiable document of title
is deliverable to A or his order. A negotiated to whom it was negotiated in good faith and
the same to B for 500k and B negotiated it to for value, the latter is preferred,
C for 400k. What rights does C acquire? under the principle that as between two
Suggested Answer: The rights of A and B to innocent persons, he who made the loss
the title of the goods and the ability to convey possible should bear the loss.
it to a purchaser in good faith for value as well
as the direct obligation of W to hold the  Warehouse receipt represents the goods, but
possession of the goods for C. the intrusting of the receipt is more than the
mere delivery of the goods; it is a
representation that the one to whom the
W issued a document of title to A stating that it possession of the receipt has been so
is deliverable to A or his order. A negotiated entrusted has the title to the goods. (Siy
the same to B for 500k and B transferred it to Cong Bieng v. Hongkong & Shanghai
C for 400k. What rights does C acquire? Bank)
Suggested Answer: The title to the goods
against B and the right to notify W of the said Warranties:
transfer so that the latter will be obligated to 1. Document is genuine;
hold possession of the goods for him. He also 2. He has a legal right to negotiate or transfer
has the right to compel B to indorse the it;
document of title to him. 3. He has knowledge of no fact which would
impair the validity or worth of the document;
W issued a document of title to A stating that it and
is deliverable to A or his order. A negotiated 4. He has a right to transfer the title to the
the same to B for 500k and B transferred it to goods and that the goods are merchantable
C thru a valid donation. Can C compel B to or fit for a particular purpose. (Art. 1516)
indorse the document to him? Suggested
Answer: No. The law speaks of the transferee Who can defeat the rights of transferee:
for value. 1. Creditor of transferor
2. Transferor
A executed and gave B a negotiable 3. Subsequent purchaser
document of title payable to the order of B. B
negotiated the same through indorsement and Negotiable Instrument vs Negotiable Document of
delivery to C. C, in turn, negotiated it to D, and Title
D to E. Meanwhile, X, A’s creditor was able to Negotiable Document
Negotiable Instrument
obtain a favorable judgment allowing for the of Title
attachment of the document of title in Operates as a (to facilitate goods)-
question. May X attach the document of title to substitute for money operates as proof of the
satisfy A’s indebtedness? Suggested

possession or control of delivery to the carrier is delivery to the buyer.

the goods, or – (Art. 1523)
authorizing or
purporting to authorize Note: This rule applies only if there is an
the possessor of the agreement between the seller and the buyer
document to transferor that the former will ship the goods.
receive, either by
indorsement or by On April 1, 2011, Manny sold his BMW X6 car
delivery, goods to Virgil for the price of 20M to be delivered on
represented by such May 5, 2011. The contract stated no place of
document delivery. Manny lives in Cebu and Virgil lives
Governed by the Governed by the Civil in Manila. On April 20, Virgil deposited 50% of
Negotiable Instruments Code, and in some the amount of the purchase price. On May 3,
Law cases, by the 2011, Manny delivered the car to the RORO.
Warehouse Receipt The RORO, on the course of transportation
Law and Code of collided with a huge rock and sank into two.
Commerce The car was destroyed. On the date of
delivery, the car can be no longer delivered to
A bearer instrument is The special Virgil. He now seeks to rescind the contract
always a bearer indorsement of a bearer and the restitution of the money he paid. Does
instrument instrument has Virgil has the right to rescind the contract?
even if a special the effect of converting Suggested Answer: Yes. There being no
indorsement is made the bearer instrument stipulation of the place where the delivery
into should be made, Article 1521 must be
an order instrument followed. Manny was neither authorized nor
If words “non- required by Virgil to send the car to Manila. As
negotiable” or the like provided in the law, the place of delivery,
are placed on aside from the stipulated location or the
the document which common usage or trade, should be either the
contains that it should business place or the residence of the seller.
be Putting the car in the RORO was not
delivered to the bearer, stipulated in the contract. Thus, Manny bears
such document may the loss and he should return what Virgil gave
nevertheless be him.
negotiated by the
holder. Exceptions:
1. When a contrary intention appears
2. Implied reservation of ownership under
H. Delivery through carrier pars. 1, 2, and 3 of Art. 1503
In the absence of stipulation or circumstance
to the contrary, delivery to carrier is deemed Kinds of delivery to the carrier
delivery to the buyer, the premise being that 1. F.A.S (free alongside) sales – the seller
the carrier acts as an agent of the buyer. pays all charges and is subject to risk
until goods are placed alongside the
General Rule: Where the seller is authorized vessel; delivery of the goods alongside
or required to send the goods to the buyer, the vessel completes the effect of
tradition.

2. C.I.F. (cost, insurance, freight) sales – if there is no time fixed, within a reasonable
signifies that the price fixed covers the time]
costs of the goods, the expense of the
freight and the insurance to be paid by 3. Article 1503, first, second and third
the seller. paragraphs
3. F.O.B. (free on board) sales – goods are a. Where goods are shipped and by the bill
to be delivered free of expense to the of lading the goods are deliverable to the
buyer to the point where they are F.O.B. seller or his agent, or tothe order of seller or
The point of F.O.B. (either at the point of agent
shipment or the point of destination) b. Where goods are shipped and by the bill
determines when the ownership passes. of lading the goods are deliverable to the
 F.O.B., point of shipment – order of the buyer or his agent but the
delivery of the goods to the carrier possession of the bill of lading is retained by
is equivalent to delivery to the the seller or his agent
buyer, and at that point the risk of c. Where the seller of goods draws on the
loss pertains to the buyer buyer for the price and transmits the bill of
 F.O.B., point of destination – there lading and bill of exchange to the buyer to
would be delivery to the buyer secure acceptance or payment of the bill of
only when the vessel has arrived exchange, and the buyer does not honor the
at the point of destination, and bill of exchange [Here, the drawer is the
prior to that point in time, the risk seller and the drawee is the buyer. If the
of loss over the subject matter of buyer does not honor the bill of exchange,
the sale will be borne by the seller he shall return the bill of lading. If he retains
the same, he acquires no added right
Reservation of ownership despite delivery thereby.
1. When there is an express reservation (Art.
1478) Time and place of delivery (Art. 1521 in relation
2. Sale on Acceptance, on trial or on to Art. 1251)
satisfaction Time = at a reasonable hour (question of fact)
- Ownership passes to the buyer only when: Place
(a) He signifies his approval or acceptance 1. Stipulation of the parties; or
to the seller or does any act adopting the 2. Seller’s place of business if he has one; or
transaction; or 3. Seller’s residence; or
(b) he does not signify his approval or 4. In case of sale of specific goods, in the place
acceptance but retains the goods without where the thing is.
giving notice of rejection, then if a time has
been fixed for the return of the goods, on the Sale by non-owner of goods (Art. 1505 in
expiration of such time, and, if no time has relation to Art. 559)
been fixed, on the expiration of a reasonable As aforementioned, the seller need not have the
time. title to the goods at the time of perfection of the
contract. However, he must have the title at the
Note: In “Sale or Return” ownership passes time of delivery.
to the buyer on delivery but he may revest
the ownership in the seller by returning the General rule: In a sale by the non-owner, the
goods within the time fixed in the contract, or buyer acquires no better title to the goodsthan
the seller had (he merely steps into the shoes of
the seller)

Exceptions (in which case the true owner iii. Co-owner sells 1 of 2 commonly-owned
cannot recover the thing): lands & does not turn over ½ of the proceeds,
other co-owner, by law & equity, has exclusive
1. Estoppel or when the owner is precluded, by claim over remaining land.
his own conduct, from denying the seller’s
authority to sell (Apply Art. 1438 by analogy) A owns a Rolex watch. B stole A’s watch, and
sold the same to C. C does not know that the
2. P.D. No. 1529 (Recording Laws; Torrens Title watch was stolen and he bought the same
– even when the sale is void, the general rule from B for value. May A recover the watch
that the direct result of a previous void contract from C? Suggested Answer: Yes. He may
cannot be valid is inapplicable when it will recovery it without the need of reimbursing C.
directly contravene the Torrens system of (Art. 559)
registration. The Court cannot disregard such
rights and order the cancellation of the
certificate, since the effect of such outright A owns a Rolex watch. B stole A’s watch, and
cancellation will be to impair sold the same to C. C knows that the watch
public confidence in the certificate of title. was stolen and he bought the same from B for
value. May A recover the watch from C?
3. Statutory power of sale or under the order of Suggested Answer: Yes. The requirement
a court of competent jurisdiction that the possessor or the purchaser of the
movable thing must be in good faith does not
4. Sale in merchant’s store, or in fairs, or pertain to the right of the owner to recover the
markets (Arts. 85 – 86, Code of Commerce). To property but to the doctrine of irrevindicability
allow recovery would retard commerce (that the possession of movable property is
equivalent to title). If A has the right to recover
Public Sale – one where there has been a even if C is in good faith, it is but logical to
public notice of sale in which anyone is give A the right to recover the property from a
allowed to bid for the object he desires to possessor in bad faith. Likewise, it may be
buy. said that B may be held criminally liable for
violating the Anti-Fencing Law.
Art. 1505 in Relation to Rules on Co-ownership A owns a Rolex watch. B stole A’s watch, and
a. Co-owner sells whole property prior to pawned the same to Villarica Pawnshop. For
partition – sale of property itself is void but valid failure to pay the loan, VIllarica Pawnshop
as to his spiritual share sold the watch at a public auction. C was the
b. Co-owner sells definite portion to partition – one who bought the watch. Rule the case.
sale is void as to other co-owner but valid as to Suggested Answer: A may recover the watch
his spiritual share if the buyer would have still from C. He must, however, reimburse C as C
bought such spiritual share had he known that obtained the watch from a public sale.
the definite portion sold would not be acquired
by him.
A owns a Rolex watch. B stole A’s watch, and
Exceptions to (b): sold the same to C, a merchant’s store. D,
i. Subject matter is indivisible who does not know that the watch was stolen,
ii. Sale of definite portion is with consent of bought the same from C. May A recover the
other co-owners watch from D?

Suggested Answer: No. In this case, Article Loss of the Thing Due
1505 is applicable. To allow A to recover
would retard commerce. Who bears the risk of loss, deterioration, and
the fruits
A owns a Rolex watch. B stole A’s watch, and
sold the same to C, a merchant’s store. D, in Before perfection
bad faith, purchased the watch from C. May A  Res perit domino
recover the watch from D? Suggested  Seller still owns the thing because there
Answer: No. Article 1505 does not require is no delivery or transfer of ownership
that the purchaser or buyer in a sale by non- yet; hence, seller bears the risk of loss
owner must be in good faith.
At Perfection
A owns a Rolex watch. B stole A’s watch, and  Res perit domino
sold the same to C, a seller of “bagoong.” D  Contract is merely inefficacious because
saw the watch from the bagoong-seller while loss of the subject matter does not affect
he was buying a “bagoong.” Without knowing the validity of the sale
that the watch was stolen, he offered to buy  Seller cannot anymore comply with
the same from C. C accepted the offer. obligation so buyer cannot anymore be
Thereafter, D bought the watch from C for compelled
P5k.May A recover the watch from D?
Suggested Answer: Yes. The sale is not After Perfection but before delivery
made in a merchant’s store, or in fairs, or a. Loss – confused state
markets.
2 Views:
A owns a Rolex watch. B stole A’s watch, and a. Justices Paras & Vitug / Padilla (as well as
sold the same to C. C sold the same at E-bay. Atty. Casino):
D, in good faith, bought the watch. May A BUYER bears the risk of loss (Res perit
recover the watch from D? Suggested creditori)
Answer: Yes. He must, however, reimburse D  Art. 1504, which embodies res perit
as a sale in E-bay may be considered a public domino, only covers goods.
sale.  The obligation of the obligor (seller, in a
contract of sale) is extinguished in
A entered into a contract of sale with B where applying Art. 1262.
A engages to deliver 100 sacks of corn for  The obligation to pay on the part of the
P100k. Before delivery, A became insane. A buyer is not extinguished (as he is not
delivered the sacks of corn to B while A is the obligor)
insane. May the guardian of A recover the
goods delivered to B? Suggested Answer: b. Tolentino / Jurado / Baviera / Villanueva:
No. The delivery was void pursuant to Article SELLER bears the risk of loss (Res perit
1239, which provides that “payment made by domino)
one who does not have the free disposal of  In reciprocal obligations, the
the thing due and capacity to alienate it shall extinguishment of the obligation due
not be valid.” However, Article 1427 provides to loss of the thing affects both
that in payment by incapacitated such as this debtor and creditor; the entire
one, there shall be no right to recover the juridical relation is extinguished.
goods from the obligee who has spent them or
consumed them in good faith.

 Deterioration & fruits -Buyer bears seller, although they have already been
loss (Article 1189) delivered to the buyer, under the
condition that ownership thereof will be
After delivery transferred to the buyer upon his full
 Res perit domino payment of the purchase price, it was
 The buyer is the owner; hence, buyer held that despite the loss of the books in
bears risk of loss a fire, the risk of loss would be borne by
 If no contract of sale was actually the buyer although he was not the owner
executed by the parties the loss of the yet, not only because such was agreed
thing must be borne by its owner and not merely to secure the performance by the
by a party who only intended to purchase buyer of his obligation, but also because
it and who was unable to do so on in the very contract itself, it was agreed
account of failure on the part of the that loss or damage to the books after
owner to show proper title to the thing delivery to the buyer shall be borne by
and thus enable them to draw up the the buyer. (Lawyer’s Cooperative
contract of sale. (Roman v. Grimalt) Publishing Company v. Tabora)
 If the contract sets no bounds or limits to  Gonzales (seller), who received
the palay to be paid, nor was there even payment, delivered no part of sugar
any stipulation that the cereal was to be promised. When a suit was brought
the produce of any particular land, the against him for failure to deliver, he
alleged failure of crops through alleged interposed the defense of force majeure
fortuitous cause does not excuse (there was a storm). SC held that he was
performance. (De Leon v. Soriano) still liable because no specific lot of
 A generic obligation is not extinguish by sugar was segregated and specifically
the loss of a thing belonging to a designated to make the subject matter of
particular genus. (Bunge Corp. v. the contract determinate or specific;
Camenforte) sugar being generic, there was no risk of
 In the absence of an express assumption it being lost. (Yu Tek Co v. Gonzales)
of risk by the buyer, the things sold  It appearing that the obligation of
remain at seller’s risk until the ownership appellants is to deliver copra in a generic
thereof is transferred to the buyer- sense, this obligation cannot be deemed
doctrine of res perit domino. (Norkis v. extinguished by the destruction or
Court of Appeals) disappearance of the copra they had
 Inasmuch as there was neither physical already stored in Samar. Their obligation
nor constructive delivery of a subsists as long as that commodity is
determinate thing, the thing sold available. A generic obligation is not
remained at the seller’s risk. (Union extinguished by the loss of a thing
Motor Corp v. Court of Appeals) belonging to a particular genus. Genus
 When the seller retains ownership only nunquam perit. (Bunge Corp. v.
to insure that the buyer will pay its debt, Camenforte)
the risk of loss is borne by the buyer.
Accordingly, petitioner bears the risk of
loss of the goods delivered. (Gaisano
Cagayan v. Insurance Co. of North
America)
 The ownership of the books purchased
on installment were retained by the


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Sales and Lease Reviewer 1

Contract of Sale II. Legal Effects of Sale being Bilateral

1. Nominate – nominate because it was given a 6. Onerous – sale imposes a valuable

a. Mode – Mode is the legal means by

Contract of Sale distinguished from Other

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

damages (Art. freedom in the determining the price.

III. From Dation in Payment

“That in all things, God may be glorified!”

- The debtor may cede or assign his thereof can be

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

2. Habituality Test – if manufacturer engages Sale Barter

b. When intention does not appear:

“That in all things, God may be glorified!”

Essential Elements of a Contract of Sale as to the price is an essential element of a

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

knowledge of the offeror because in such perfected

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

Consideration of the right to the very right itself;

“That in all things, God may be glorified!”

Requisites: The husband and the wife cannot sell

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

Kris Aquino is an actress. Boy Abunda, a TV

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

in the case nor to a lawyer who acquired

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

Example: sale of pending crops which

“That in all things, God may be glorified!”

new contract between the parties. (National

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

iii. By reference to a particular day,

3. Price must be certain or ascertainable at  Inadequacy of price may be a ground for

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

 The sale of a land or of an interest therein

 Art 1403 (2) Those that do not comply with

“That in all things, God may be glorified!”

in writing, and subscribed by the party

Performance or Consummation of the

“That in all things, God may be glorified!”

Obligations of Vendor Although it may seem that “transfer of

“That in all things, God may be glorified!”

What if A, on August 1, delivered only the

“That in all things, God may be glorified!”

Non-payment of Purchase Price  In order that symbolic delivery may produce

“That in all things, God may be glorified!”

“That in all things, God may be glorified!”

Functions: 2. When at the time of execution of public

“That in all things, God may be glorified!”

reasonable length of time after the E. Tradition longa manu