REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

FEBRUARY 24, 2021

SUBJECT MATTER
PROVISIONS RELATED TO SUBJECT MATTER
Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time
it is delivered. Licit – lawful
• Kahit hindi ang Seller ang OWNER basta meron siyang right, halimbawa yung mga agent, they are not
the owner pero, they are given the authority by the owner to transfer ownership.
Art. 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the
same class.
• Determinate – you can identify it from other classes.
• The Object of the contract must be determinate otherwise it is a VOID contract. Ex. “May ibebenta ako
sa yo for 1M” (hindi sinabi ang ibebenta) – here there is no COS.
Art. 1461. Things having a potential existence may be the object of the contract of sale.
• Kahit di pa nage-exist ang isang bagay as long as it has a potential for existence pwedeng ibenta. - The
efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will
come into existence.
• Kapag ang sale ay naka base sa expectation or hope (ibig sabihin pwedeng mangayari pwedeng hindi)
– the Sale is Conditional Sale.
- The sale of a vain hope or expectancy is void.
• Kapag vain hope it is VOID
Art. 1462. The goods which form the subject of a contract of sale may be either existing goods owned or
possessed by the seller or goods to be manufactured, raised, or acquired by the seller after the perfection of the
contract of sale, in this Title called “future goods.”
• Object ay pwedeng existing goods and pwedeng mag-exist in the future.
Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale.
• Suspensive Condition – the happening of the condition will give rise to the obligation. Ex. I promise to
give flowers to Joan if Joan will treat Gladys to dinner tonight. (magiging effective ang obligation mo
kapag tinreat ni Joan si Gladys)
• Resolutory Condition – kabaliktaran ng suspensive,nawawala ang obligation. The happening of the
condition will extinguish the obligation. Ex. I will give Joan her allowances until she graduates. (may
obligation na sa una, kapag nangyari ang condition mawawala na ang obligation mo)
• In Art. 1465, states that pwede ka raw magkaroon ng resolutory condition sa Sales. Ex. pacto de retro
sale – ibebenta mo ang isang bagay pero may kondisyon siya, kapag hindi nangyari ang condition maka-
cancel ang sale. ‘Ibebenta mo ang phone mo kay Joan pero kailangan 15 days from now bibigyan niya
ako ng libro’. May resolutory Condition – ‘ibebenta ko sayo ang lupa ko for 15 years, after 15 years
ibabalik mo sa akin, pwede kong bilhin pabalik.’

REQUISITES OF VALID SUBJECT MATTER (VILLANUEVA)

A valid contract of sale would result from the meeting of the minds of the parties on a subject matter that has at
the time of perfection the following requisites: (a COS is a consensual contract – meeting of the minds, so at the
time of perfection/ the time of agreement itself kailangan ma-satisfy itong tatlong portion na ito sa ibaba.
Villanueva compiled the provisions / articles stated above)
a) It must be existing, having potential existence, a future thing, or even contingent or subject to a resolutory
condition, in other words, it must be a “POSSIBLE THING;” b) It must be LICIT; and
c) It must be DETERMINATE or at least DETERMINABLE.

WHAT WOULD HAPPEN IF ONE OF THE REQUISITES IS MISSING?

- Lack of any Requisite Results In Non-Existent Sale

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- When the subject matter agreed upon fails to meet the requisites above-enumerated, the situation would
either engender a “no contract” situation, or the resulting contract of sale would be void under various cases
provided under Article 1409 of the Civil Code.
Ex. Kapag hindi determinate thing ang object mo sa COS that is a void contract or non-existing contract,
wala naman talagang kontrata at all, dahil the purposes of the contract ay mayroon kang meeting of the
minds as to the object or consideration, kung walang object or consideration it is as if wala kang kontrata.

LEGAL REQUISITES OF SUBJECT MATTER INTENDED TO GOVERN UNDERLYING OBLIGATION OF

SELLER

(1) SUBJECT MATTER MUST BE “POSSIBLE THING”

The first requisite of a valid subject matter provides that the thing may be existing or non-existing at the time of
perfection of the contract of sale. Article 1461 of the Civil Code explicitly states that “things having a potential
existence may be the object of the contract of sale.”
• Possible thing – things having a potential existence may be the object of the contract of sale. Ex. Farmers
can sell their crops kahit itatanim pa lang. During rambutan season ginagawa ng mga sellers kadalasan
ay binili na nila yung bunga ng puno kahit wala pang bunga. – ito ay mga possible thing kasi alam mo na
may puno at alam mo na may punla ng mga palay, meron silang potential to exist. Nagyayari rito ay may
COS na agad kahit wala pang bunga ang rambutan at di pa tumutubo ang palay mako-consummate lang
ang COS kapag namunga na or tumubo na. Another example sa mga manufacturer meron nang mga
COS / may bentahan na kahit wala pa yung mismong product, kahit ima-manufacture pa lang.
• In cases like this VALID pa rin ang contract because the subject matter have potential for existence. Iba
kasi ang usapan kung ibebenta mo ang palay na Dinurado pero ang nakatanim ay Sinandomeng, walang
potential for existence ito pag ganyan, it is vain hope, kailangan pwedeng mangyari and you have the
capacity to do that kung sinabi mong magbebenta ka. Ex. Si X a simple normal person sinabi niya na
magbebenta siya ng mga damit na ginamit ni Pres. Duterte – this is Void dahil wala namang koneksyon
si X kay president (there is no potential for existence), pwede lang itong mangyari at maging valid kung
ang magsabi / magbenta nito ay isa sa mga anak niya.
In addition, the second paragraph of Article 1462 provides that “there may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency which may or may not happen,” which clearly shows that
a valid contract of sale may exist even if at the time of its perfection, the seller was not even the owner of the
thing sold.

The proper consideration of the first requisite, if it is to have a legal significance, is to consider it not in terms of
physical existence or non-existence or whether the seller had or did not have ownership thereof at the time of
perfection, but whether the subject matter is of a type and nature, taking into consideration the state of technology
and science at the time the sale is perfected, that it exists or could be made to exist to allow the seller reasonable
certainty of being able to comply with his obligations under the contract.
• Hindi ito nakadepende kung meron ngang ganung bagay, ang basehan natin ay ‘could it be made?’. As
long as pwede siyang mangyari, valid subject matter siya.
For example, if a seller were to sell a particularly described chair, which at the time of the meeting of the minds,
did not yet exist, the contract of sale is valid and enforceable, because the nature of the subject matter, is of such
a type and nature that it can be manufactured and could come into existence.

On the other hand, if the seller were to sell a formula for a potion which would make the buyer forever young, in
spite of the fact that the seller may be a scientist, the sale would be considered void, since the subject matter
thereof, at least under current technological and scientific developments, is something that could not exist.
• Pero kung ang subject matter mo daw ay magbebenta ka ng Formula ng Anti-aging Potion, yung di ka
tatanda, this COS will be VOIS, dahil at least with the current scientific and technological development di
niya kayang mag-exist.
Even when the subject matter does not exist at the time of perfection of the sale; the contract is still valid until
Articles 1461 and 1409(3); but however, when the subject matter is of such nature that it cannot come to
existence – an impossible thing – the contract is indeed void.
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Art. 1461. Things having a potential existence may be the object of the contract of sale.
- The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will
come into existence. (Emptio Rei Speratae) - The sale of a vain hope or expectancy is void.
(a) EMPTIO REI SPERATAE (SALE OF FUTURE THINGS)
Under Article 1461, things having a potential existence may be the object of the contract of sale; however,
such a sale is subject to the condition that the thing will come into existence. Therefore, a sale emptio rei
speratae is strictly a contract covering future things, and subject to a suspensive condition that the subject
matter does not come into existence, as in the case of conditional obligations, the contract is deemed
extinguished “as soon as the time expires or if it has become indubitable that the event will not take place.
• The same with ‘possible thing’. ‘Future thing’ – yung mga gagawin pa lamang.
(b) EMPTIO SPEI (SALE OF HOPE OR EXPECTANCY)
Although the second paragraph of Article 1461 states that “[t]he efficacy of the sale of a mere hope or
expectancy is deemed subject to the condition that the thing will come into existence,” it should be noted
that such condition does not really refer to emptio spei, but rather to emptio rei speratae. The only
condition for a sale of hope to be a valid contract is provided by the last paragraph of Article 1461: that
the sale of a vain hope or expectancy is void, affirming the requisite of “possibility” of the subject matter
as contrasted from an impossible subject matter.
• Emptio Rei Speratae and Emptio Spei are both valid COS, tinawag lang siyang conditional COS,
kasi magkkaroon ka ng valid subject matter as long as mag come into existence yan, kapag hindi
yan mag come into existence Void yan or no existing contract at all. Kaya siya tinawag na
Conditional sale kasi kailangan mangyari muna ang conditions pero kung hindi mangyari ang
conditions as to the sale of hope or expectancy and sale of future things, at hindi nag come into
existence ang thing or object ng contract mai-invalidate nito ang COS or walang valid COS dahil
magiging pilay ang iyong requisites mo.
An example of emptio spei is the sale of a sweepstakes ticket, for say P100.00, where the buyer
purchases the ticket with the hope that upon the draw the ticket would win him, say a million pesos. The
object of the sale is not the prize, but rather the ticket, or the chance to win; if the ticket does not win, the
sale is still valid, and the buyer has no right to recover the amount paid for the ticket.
• Kapag tumaya ka sa lotto ang binibili mo ay yung’chance to win’ hindi yung para manalo, the
object of the sale is not the ‘PRIZE’ but the ‘ticket that will have the chance to win’. So kung hindi
mo makuha ang prize hindi ka para maghabol, dahil you as a buyer alam mo na ang binili mo is
not the prize but the chance.
(c) SALE OF THINGS SUBJECT TO RESOLUTORY CONDITION
Under Article 1465 of the Civil Code, things subject to resolutory condition may be the object of the
contract of sale. However, if the resolutory condition happens to extinguish the thing, what happens to
the contract of sale itself? The rule would be the same as applied to all obligations subject to a resolutory
condition under Article 1190:
• Under Art. 1190 pertains to magsasaulian sila, one of the paragraph says that when a contract is
subject to resolutory condition magsasaulian sila, yung isa ibabalik yung pera yung isa ibabalik
yung thing – this is the effect of Art. 1190, kapag may na-extinguish na mga reciprocal obligation.
(d) SUBJECT MATTER IS NEXUS OF SALE
From the foregoing discussions it can be deduced that whether the contract of sale involves a present
object (such as a hope or expectancy in emptio spei) or a future thing subject to a suspensive condition
(emptio rei speratae), or a present object subject to a resolutory condition, the subject matter must be
existing or must come to existence to be delivered to the buyer; otherwise, the contract of sale is void, or
an existing contract of sale is extinguished, with the obligation on the part of the seller to return the price
he has received thereby.
• Basta laging tatandaan dito sa unang requisite ng subject matter, it has a POTENTIAL FOR
EXISTENCE, magkakaroon, magagawa, pwedeng mangyari, kung ganito ang subject matter mo
na-comply mo na yung subject matter being a possible thing.

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(2) SUBJECT MATTER MUST BE LICIT

The subject matter of the contract of sale must be licit. A thing is licit and may be the object of a contract when it
is not outside the commerce of men, and all rights which are not intransmissible. When the subject matter is
illicit, the resulting contract of sale is void.
• Licit – lawful
• Bawal , sale of dangerous drugs, sale of body organs. Ex. Cigarettes are legal as of our laws now, kapag
pinagbawal sa batas then sellling of tobacco products will become illegal.
• Intransmissible rights – right to vote, kaya bawal magbenta ng boto for national ang local election. The
sale of future inheritance is also void. However, a distinction should be drawn between a sale of future
hereditary rights and a waiver of an acquired hereditary rights, since the first presumes the existence of
a contract of sale between the parties, while the second is a mode of extinction of ownership where there
is an abdication or intentional relinquishment of a known right with knowledge of its existence and
intention to relinquish it, in favor of co-heirs.
• Ex. Alam mo na may mamanahin ka from your parents during the lifetime of your parents bawal mo ibenta
yung future inheritance mo, dahil in the first place di pa saiyo iyon, di niyo alam in the future kung mage-
exist yun or hindi, paano kung naibenta pala ng parents mo yung mga ari-arian na iyon kawawa naman
ang ka-Deed of Sale mo. Yes you have right over that properties pero hindi mo alam kung mage-exist pa
rin ba yung mga yun at the time na mamatay ang parents mo. If may favorite car ang parents mo, alam
mo na saiyo ipamamana ito, pero as law persist, bawal mo pa ibenta hangga’t wala pa sa pangalan mo
dahil that legally hindi pa ikaw ang owner nito.
(a) SALES DECLARED ILLEGAL BY LAW
There are various special laws that declare certain sales contracts as illegal and therefore void. Some of
them are those where subject matter is prohibited, e.g., narcotics; wild birds or mammals; rare wild plants;
poisonous plants or fruits; dynamited fish; gunpowder and explosives, firearms and ammunitions; and sale
of realty by non-Christians.
• Kapag itinuloy mo ang sale ng mga nabanggit you will have criminal as well as civil liability.
• Sale of realty by non-Christians – this stipulation is heavily influenced ng situations noon, lumang
lumang batas na, and non-applicable na siya ngayon.

(3) SUBJECT MATTER MUST BE DETERMINATE OR AT LEAST DETERMINABLE

(a) DETERMINATE SUBJECT MATTER

A thing is determinate or specific when it is particularly designated or physically segregated from all others
of the same class.
• Mongol 3 pencil purchased at National Book store at Robinsons Place Binan – this is generic,
indeterminate siya dahil maraming lapis sa NBS. Pero kung ang sasabihin ay “Mongol 3 that I
purchase” – unique na siya pwede nang i-determine, kung isa lang ang binili then that could be
specific / determinate, pero kung maraming binili, then that is DETERMINABLE.
(b) DETERMINABLE SUBJECT MATTER
A thing is determinable only when two (2) requisites are present: (according to Villanueva meron daw
dalawang test to know that a thing is determinate or determinable)
a. If at perfection of the sale, the subject matter is capable of being made determinate (the “capacity to
segregate” test); and
• It is capable of being determinate or determinable at the time of perfection, dahil kapag
consummation na ang stage ng contract tyaka naging determinate or determinable pwedeng
maging void ang contract.
b. Without the necessity of a new or further agreement between the parties (the “no further agreement”
test).
• No further agreement test – ang isang thing ay determinate or determinable kapag hindi mo na kailangan
ng another agreement.
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 • May ibebenta ka kay Joan , sabi mo Joan may ibebenta ako saiyo for 10,000 pesos, then pumayag si
Joan – dito walang valid COS dahil walang determinate or at least determinable thing. Sa no further
agreement test hindi rin siya pumasa, dahil kailangan niyo pang mag-usap ULIT para mapag-agreehan
ang subject matter ng contract niyo.
• Dapat at the time of perfection, hindi na kailangan mag-agree pa at pagkasunduan pa ang subject matter
niyo, dahil kapag ganito na kailangan pang pagkasunduan ang subject matter means hindi ito determinate
or at least determinable.
By its very definition, a determinable subject matter is a generic object, because it has neither been
physically segregated nor particularly designated at the point of perfection from the rest of its kind.

In essence, the requisite of being “determinable” is met when at perfection, the agreement between the
parties included a formula which can be used by the courts to establish the subject matter upon which
the obligation to deliver can be enforced, without needing to get back to any one or both the parties of
the object of their intention.
• Kapag sa perfection kahit hindi determinate yung thing, PERO may formula ka to arrive kung ano yung
thing, ang subject matter mo becomes determinable and it can result to a Valid subject matter.

STATUS OF SALE NOT COMPLYING WITH THIRD REQUISITE

When the minds of the parties have met upon a subject matter which is neither determinate or determinable, the
resulting contract would be void. Again, the impetus of the law declaring sales covering subject matters which
are neither determinate or determinable is based on the fact that the “enforceability” or “demandability” of the
underlying obligation of the seller to deliver the subject matter is at grave risk.
• Kapg ang subject matter mo ay hindi determinable or determinate the contract will be VOID, kasi si buyer
hindi niya kakayaning i-enforce or i-demand yung subject matter. Ex. Si Joan nagbayad sayo ng 10,000
para doon sa binebenta mo but the subject matter is unknown – in this case Joan cannot force you or di
ka niya pwedeng kasuhan para magbigay ng ‘something’, pwede ka niyang kasuhan na ibalik yung
money pero kung ang usapan ay yung ‘thing’, she cannot demand you kasi in the first place wala naman
kayong napag-usapan sa enforceability or demandability.
• Mahirap magseek ng remedy sa court kung hindi mo alam yung gusto mong i-demand or kuhanin.

FOR DETERMINABLE SUBJECT MATTER NAGLAGAY NG GUIDES ANG BATAS

SALE OF UNDIVIDED INTEREST
Under Article 1463 of the Civil Code, the sole owner of thing may sell an undivided interest therein, and there
would result co-ownership over the subject matter.
• Ex. May lupa si X ibebenta niya kay Y, sabi ni X ibebenta niya yung 50% interest niya over that parcel of
land, since interest ang ibinenta hindi known kung anong parte ng lupa and the exact loacation ang
mapupunta kay Y, dahil sinabi lang ay interest doon sa land, the question here is kung pwede ka bang
magbenta ng ganito / same as the situation?
• According to the article above PWEDE, kapag ganun ang bentahan si X and Y ay magiging COOWNER,
pareho na silang mag mamaya-ari ng lupa, anumang parte ng lupa that is owned now by X and Y, kahit
saang location(sa gilid, sa unahan, sa gitna) basta within doon sa lupa ni X, ang may-ari na nun ay si X
and Y dahil hindi pa partition ang property, hindi pa alam ni X and Y kung ano ang portion nila.
• Another scenario, X and Y have a co-owned property, then binenta ni X yung half ng property kay Z –
this case bawal ang ginawa ni X dahil siya lang ang nagbenta without the knowledge ng co-owner niya
na si Y and wala pang partition na nangyari, dahil yung half ng land na binenta ni X ay co-owned pa rin
nila ni Y, means kahit 50% ang interest ni X doon sa property, dahil hindi pa niya alam ang hatian ng lupa
technically whatever portion ng lupa ay pagmamay-ari nila X at Y. Ang pwede lang ibenta ni X kay Z ay
yung interest niya dun sa property, NOT the property itself. If ibenta ni X ang interest niya ang bagong
may-ari ng property na iyon ay si Z at Y na.
• Pag ganito sabi ng batas, ito yung mga determinable subject matter, pero actually parang determinate
na yan, dahil valid na ang subject matter, hindi mo man alam kung saang part ng lupa ang binebenta,

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 pero at least CONFINED na siya sa isang property and at the same time sure ka na na 50% of the land
ay kay Z.
SALE OF UNDIVIDED SHARE IN MASS
In the sale of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller
purports to sell and the buyer purports to buy a definite number, weight, number or measure, of the goods in
the mass, and though the number, weight, or measure of the goods in the mass is undetermined.
By such a sale, the buyer becomes the co-owner to such share of the mass as the number, weight or measure
bought bears to the number, weight or measure of the mass.
• Dito isipin niyo nagma-mine kayo (mining), sa mga mining companies normally ang mass ay yung bato,
then ang subject matter mo is kung ano yung nasa bato, example Gold, may mga bumibili kasi minsan
ng grams of gold kahit hindi pa napa-process nasa mass pa siya. Sabi ng batas it could be consider as
determinable subject matter if ang ibebenta mo ay yung share mo doon sa mass, kahit hindi pa
determined kung ilan ang weight ng gold doon sa mga batong iyon pwede ka ng magbenta, it is valid
kahit meron ng weight, number, and measurement yung binenta mo.
If the mass contains less than the number, weight, or measure bought, the buyer becomes the owner of the
whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality,
unless a contrary intent appears.
• Ex. Bibili si Buyer ng 1 kilo of gold, pero ang na-produe lang ng mga bato ay less than 1 kilo – in this case
it is still valid but the seller is bound to make the deficiency, kailangang magprovide ni seller para
mapunan ang pagkukulang, but nonetheless the COS is still valid.
SALE OF MORTGAGED PROPERTY
Pineda v. Court of Appeals affirmed the principle that a prior mortgage of the property does not prevent the
mortgagor from selling the property, since a mortgage is merely encumbrance on the property and does not
extinguish the title of the debtor who does not lose his principal attribute as owner to dispose of the property.
It also noted that the law even considers void a stipulation forbidding the owner of the property from alienating
the mortgaged immovable.
• Sanla vs Pledge.
• Pledge – sa pawnshop; yung property na sinanla ay binibigay mo sa kanila. Ex. Nagsanla ka ng Hikaw,
yung hikaw binibigay mo sa pawnshop.
• Sanla – mga mortgage; yung property nasa iyo pa rin hindi mo binibigay ang property. Ex. Nag mortgage
ka ng kotse, yung kotse nagagamit mo pa rin though nakasanla.
• Pwedeng magbenta ng lupang nakasanla, no restriction sa ownership nito kaya pwede kang magbenta.
Mortgage does not affect the ownership of the thing, nagkakaroon lang siya ng sabit doon sa title. It only
gives rights doon sa pinag sanlaan to sell the property kung di ka makapagbayad. Normally mortgage
contracts are just for security purpose lang naman, na kapag hindi mo ginawa ang obligation mo yung
sinanlaan pwedeng ibenta ang property mo na iyon.
• Pwede mong ibenta ang mortgaged property kasi technically you are still the owner of that property,
nagbibigay ka lang ng right doon sa pinagsanlaan, hindi mo naman tinransfer sa kanila ang ownership.

SELLER’S OBLIGATION TO TRANSFER OWNERSHIP REQUIRED AT TIME OF DELIVERY

In general, a perfected contract of sale cannot be challenged on the ground that seller had no ownership of the
thing sold at the time of perfection. (Alcantara-Daus v. de Leon, 404 SCRA 74 (2003).
• Take note that the obligation of the seller – yung delivery of the thing, ay sa consummation stage siya
kaya sinasabi na hindi kailangan na owner ka at the time of perfection ng contract at least you have the
right to transfer the ownership at the time of the DELIVERY. Ownership is importante lang yan at the time
of delivery.
Although the seller must be the owner of the thing in order to transfer ownership to the buyer, he need not be the
owner thereof at the time of the perfection; it is sufficient that he be the owner at the time of the delivery,
otherwise, he may be held liable for breach of warranty against eviction. In fact, the acquisition by the buyer of
the subject matter of the sale may even depend upon contingency and this would not affect the validity of the
sale.

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Article 1505 of the Civil Code provides that when goods are sold by a person who is not the owner thereof, and
who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the
goods than the seller had, unless there is estoppel on the part of the owner, but this pertains only to the
consummation stage of the sale and does not affect the validity of the contract itself.
• Kapag may isang tao na nagbenta ng isang bagay na hindi sa kanya or wala siyang authority to do so,
yung Buyer he acquires no better title to the goods than the seller had , unless there is estoppel.
• Sa sale nagta-transfer kang ownership and you CANNOT transfer MORE of what you have. Ex. Ako ay
nangungupahan sa isang property, ang kaya ko lang ipasa sa buyer ay yung aking ’right to rent’ not the
property itself dahil di naman akin yun, nangungupahan lang ako
• Art. 1505 – you cannot give what you do not have. You can transfer your right or title to another person
but the title only not the property because it is what you possess.

PRICE AND OTHER CONSIDERATION

By definition under Article 1458, the ideal consideration for a contract of sale would be “price” as a “sum certain
in money or its equivalent.” However, it is possible that a “sale” may still be valid when it has for its cause or
consideration an item other than price.
• COS dapat ang cause or consideration niya ay PRICE, pero minsan nagkakaroon ng item other than
price. Contract of Barter, ang kapalit ng isang thing ay isa ring ting, meron siyang sariling rules pero
kapag wala ng applicable rules ang magpo-provide ay Law on Sales, supplementary ang Law on Sales
pagdating sa COB.
Consider the Supreme Court’s ruling in Torres v. Court of Appeals, thus: “Consideration, more properly
denominated as cause, can take different forms, such as the prestation or promise of a thing or service by
another. Therefore, it would be valid for a sale of the subject matter to have as its consideration the expectation
of profits from the subdivision project as part of the joint venture arrangement between the parties.”
• Ibebenta saiyo ang cellphone niya, ang bayad or price ay 10,000 or kaya naman basta hindi na
magbabayad basta maglilinis ka araw-araw ng bahay niya araw-araw – so the cause or consideration ay
hindi na money but it is service. This can be a valid COS.
This is in line with the principal doctrine reiterated by the Court in Polytechnic University of the Philippines v.
Court of Appeals, that the concept of “contract of sale” under Article 1458 of the Civil Code is “in effect, a ‘catch-
all” provision which effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is
ceded for consideration.”

MEANING OF “PRICE”
“Price” signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into
consideration for the fixing of the price put to the debit of the buyer and agreed to by him. (Inchausti & Co. v.
Cromwell, 20 Phil. 345 (1911).

A seller cannot unilaterally increase the price previously agreed upon with the buyer, even when the need to
adjust the price of sale is due to increased construction cost; otherwise, it would be a violation of the essential
characteristics of “obligatory force” of contracts of sale.
• In ObliCon may principle of obligatory force – you must observe in good faith kung ano ang mga pinag-
usapan niyo. Ex. Ang usapan niyo ay bibilhin ni Gladys ang phone mo worth 10,000, dapat pareho niyong
sundin yung napag-usapan niyo, and the seller(ikaw) bawal mong basta taasan or baguhin ang presyo
ng walang pahintulot ni buyer(Gladys), kasi maba-violate ng seller ang principle of obligatory force and
yung pagiging consensual in nature ng isang kontrata.Kapg nabago ng seller ang price ng hindi
pumapapayag at walang alam ang buyer and susundin pa rin ay ang original agreement.
In the same manner, buyer could not unilaterally withdraw form a valid sale on the ground that the interest rate
of 24% set on the payment of the price on installments was odious.
• Contract cannot be based on the sole will of one person, kaya nga siya meeting of minds, kailangan
parehong mag-agree.
• Si buyer, kung bumili siya sa mas mataas na interest, then hindi siya pwedeng tumiwalag doon sa
kaniyang obligation dahil in the first place, pumayag siya na ganun yung interest so dapat sundin niya ito.
REQUISITES FOR VALID PRICE
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The price or consideration of a contract of sale must have the following requisites at the time of the perfection of
the sale, thus: (1) It must be REAL;
(2) It must be in MONEY OR ITS EQUIVALENT, (i.e., it must be VALUABLE CONSIDERATION); and
(3) It must be CERTAIN or ASCERTAINEABLE.

As in the case of subject matter for sales, the requisites provided by law for a “valid” price to support a valid sale
are intended to preserve the integrity and enforceability of the underlying obligation of the buyer to pay.
It is also essential that the requisites for the price promote the onerous, commutative and bilateral-reciprocal
characteristics of the contract of sale.
• Ang sale kailangan may price yan, kapag iba ang price (pwedeng thing or service), technically it is also
govern suppletorily by Law on Sales pero it can be another form of contract. Kasi if ang cause or
consideration niyo is a thing then that is a COB but naga-apply pa rin ang Law on Sales kahit COB siya.
• COB has its own rules and provision pero kapag silent ang ia-apply ay Law on Sales.
(1) PRICE MUST BE REAL
Since a contract of sale is an onerous and commutative contract, it is essential that consideration agreed upon,
namely the price, must be real. (dapat totoong price)
(a) WHEN PRICE IS REAL
Price is “real” when at the perfection of the sale, there is legal intention on the part of the buyer to pay
the price, and legal expectation on the part of the seller to receive such price as the value of the subject
matter he obligates himself to deliver.
• Price is real kung may intention yung buyer na ibigay kung ano yung pinag-usapang presyo, ang
also the legal expectation on the part of the seller na maka-receive nung presyo na yun.
(b) WHEN PRICE IS SIMULATED
When the price is simulated because neither party to the Deed of Sale had any intention whatsoever
that the amount will be paid, the sale is void, although the act may be shown to have ben in reality a
donation, or some other contract. The whole issue therefore boils down to contractual intent: if there
was no intent by the parties at the time of perfection to pay and to receive the price stipulated, then it is
a wholly simulated price, and the underlying contract of sale is void for lack of consideration.
• In the past, nung hindi pa nababago ang Tax Code mas mahal ang Donor’s Tax and Estate Tax,
so ang ginagawa noon, yung mga magulang ibebenta sa anak ang mga property nila atleast ang
babayaran nalang nila ay yung 6% Capital Gains Tax, sa Donors and Estate kasi around 30 to
40% ang tax. Ang nagyayari noon nagkakaroon ng Deed of Sale kahit na walang bayad,
nagkakaroon ng bentahan pero hindi totoo yung presyo, dahil walang intensyon yung anak na
magbaigay ng pera at walang intensyon yung mga magulang na tumanggap ng pera. – This is a
VOID Contract of Sale because it lacks consideration but it can be another form of valid contract
which is the Contract of Donation.
The Court has held that “in absolute simulation, there is a colorable contract but without any substance,
because the parties have no intention to be bound by it. An absolutely simulated contract is void, and the
parties may recover from each other what they may have given under the ‘contract.”
• Two types of simulation – relative and absolute simulation.
• Absolutely simulated contracts – ito yung void
(c) WHEN PRICE IS FALSE
Price is “false” when there is a real price upon which the minds of the parties had met, but not declared,
and what is stated in the covering deed is not the one intended to be paid.
• Ginagawa karamihan ng tao kapagnagbebenta ng lupa, kasi minsan ang taas ng zonal value,
mataas ang tax, kaya minsan binababaan nila ang presyo.
If the price indicated in the covering instrument is false, the contract of sale is valid, but the underlying
deed is subject to reformation to indicate the real price upon which the minds of the parties have met. In
one case, when the parties intended to be bound by the contract except that it did not reflect the actual
purchase price of the property, the Court ruled that there was only a relative simulation of the contract
which remained valid and enforceable, but subject to reformation. In another case, the Court held that “if
the parties state a false cause in the contract to conceal their real agreement, such a contract is relatively
simulated …. the parties’ real agreement binds them. (Heirs of spouses Baile v.
PRELIMS-RFLIB-02-24 | 8
 Lim)
• Hindi sinabi ng batas na void ito, kapag false daw ang price nagiging subject ang contract for
reformation, nami-maintain pa rin ang validity ng sale pero ire-reform ang contract.
Nevertheless, the parties may be held bound by the false price indicated in the instrument under estoppel
principle, especially when the interest of the Government or third parties would be adversely affected by
the reformation of the instrument.
• Kapag mayroon kang false price technically pwedeng i-reform, pero kapag may maaapektuhan
ka ng third party bound yung parehong party on the false price. Sa paningin ng government or
ng third party kung mai-injure sila doon sa reformation of instrument pwedeng sundin yung false
price, but take note that it is only done kung may injury na pwedeng mangyari. Normally kasi ang
batas pinoprotektahan ang government and third party.
• Principle of Estoppel – kapag may isang partner na nagrepresent na siya ay isang partner sa
isang partnership pero sa totoong buhay hindi naman siya partner at may naniwala na third person
/ customer at nagkaroon ng liability sa customer na iyon , pwedeng kasuhan ng tao yung partner,
dahil hindi niya pwedeng i-raise ang defense na hindi siya legitimate partner dahil nagrepresent
siya sa ibang tao bilang partner sa isang partnership pwede siyang kasuhan ng taong yun, dahil
ang batas pinoprotektahan ang mga innocent third person. Kung nagrepresent ka na ganito ka at
naniwala yung third persons at nagkaroon ng transaction at na-injure mo yung third person liable
ka under the principle ng estoppel, kahit hindi totoo ang batas sasabihin niya “Hindi ganyan ka in
so far as the third person is concern”. Kung ano yung ni-represent mo sa third person kahit hindi
yun totoo i-aapply mo yun in so far as the innocent third person is concern. Pero sa ibang tao free
ka, wala kang liability, pero kapag may naapektuhan kang innocent third person magiging liable
ka

(e) EFFECT OF NON-PAYMENT OF PRICE

If the price is fixed but is later on remitted or condoned, this is perfectly all right, for then the price would not be
fictitious. The failure to pay the price does not cancel a sale for lack of consideration, for there is still
consideration. The failure to pay a real price goes not into perfection of the sale but into its consummation.
• Connected with the Priciple of Estoppel. Kung sa isang instrument false yung price na dineclare mo at
may naapektuhan na third person or governmet kapag na-injure sila ang batas ang gagawin niyang price
is the false price kung mai-injure ang gov’t or third person.
• Pero take note, sa under declaration ng mga tax and contractskapag favorablesa gov’t normally
compared dun sa normal value then ang i-aapply ay yung normal price.
• Principle of Estoppel ay isa lang sa mga maraming principles, Atty is not saying na for every estoppel
ganyan ang gagawin as long as may injury sa gov’t and/or third person applicable pa ang mga principle
stated above dahil principle of estoppel ay usapang injury

SIMULATION OF PRICE AFFECTS DELIVERY OF SUBJECT MATTER

When a contract of sale is fictitious, and therefore void and inexistent, as there was no consideration for the
same, no title over the subject matter of the sale can be conveyed. Nemo potest nisi quod de jure potest – no
man can do anything except what he can do lawfully.
• In order for a valid COS kailangan may valid cause or consideration, in short dapat meron kang price,
kung wala kang price then there is no valid COS.
Delivery of the subject matter made pursuant to a sale that is void for lack of consideration therefore does not
transfer ownership to the buyer. But care should be made to distinguish between a simulated price, on the other
hand, which does not affect the efficacy of delivery of the subject matter.
• Kung mayroon kang COS at ang price mo is Void, so for lack of consideration hindi mo mata-transfer ang
ownership.
• Simulation of Price – relative and absolute simulation o Absolute Simulation – that is a void COS o
Relative Simulation – (two scenarios below)
 Ex. It can be a void sale, but it can be a valid form of COD (may some validity kasi kapag
relative ang simulation). Dito walang intention ang both parties to enter into COS. The
price is Void kasi sa COD walang consideration given materially or in monetary value.

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  Ex. Undeclared price – sa Deed of Sale ng lupa minsan sa mas mababang presyo, but sa
relative simulation we must remember na dito, ang parties both of them are intended to
have a COS mali lang ang price, so in that sense kailangan pa ring i-deliver ang subject
matter.
 In relative simulation we have to check the situation first, perceive it, kasi iba yung lack of
consideration (yung as in walang consideration) vs sa false lang yung presyo. Kasi sa
False price there is still a possibility na magkaroon ka pa ng valid COS, unlike sa walang
consideration at all – dito wala talagang COS.
Determing Factor is to check : If the Seller has the legal intention to receive the money
and buyer has the legal intention to giv e the money according to price. If the answer to
both of theses are Yes then most probably meron yang valid contract of sale. Dahil ang
COS ay consensual in nature.

(2) PRICE MUST BE IN MONEY OR ITS EQUIVALENT “VALUABLE CONSIDERATION”

Article 1458 of the Civil Code, in defining the obligation of the buyer, provides that he must pay the price certain
in money or its equivalent. It had been proposed, though not resolved, in Bagnas v. Court of Appeals, that Article
1458 “requires that ‘equivalent’ be something representative of money, e.g., a check or draft, citing Manresa, to
the effect that services are not the equivalent of money insofar as said requirement is concerned and that a
contract is not a true sale where the price consists of services or prestations.
• Kaya siya valuable consideration kasi kailangan in pera siya or its equivalent.
• ‘Its equivalent’ – can be checks (may equivalent in money) or credit (mga bank drafts)
Nevertheless, even Article 1468 of the Civil Code recognizes that if the consideration of the contract consists
partly in money, and partly in another thing, the transaction can still be considered a contract of sale when this
is the manifest intention of the parties. This shows that the consideration for a valid contract of sale can be the
price and other additional consideration.
• Pwede rin yung partly in money and partly in kind.
• Money > Value of the thing – it is Sale – Law on Sales
• Money < Value of the thing – it is Barter – Law on Barter
• Ang Sale ipagpalagay nalang nating isa siyang Specie – Kingdom Animalia, yung sales marami siyang
sub species, at doon nanapapaloob rin ang Brater, Redemption. Ang sale ay malawak, and ang pinag-
aaralan lang natin ngayon ay one part lang ng Law on Sales.
(3) PRICE MUST BE CERTAIN OR ASCERTAINABLE AT PERFECTION
Price is certain when it has been expressed and agreed in terms of specific pesos and/or centavos. This affirms
the proposition that money represents the best model of valuable consideration.
• Ito ang pinagkaiba niya sa subject matter. Sa subject matter the ownership of the thing must be at the
consummation stage. For price it must be certain or ascertainable at perfection, sa subject matter it must
be determinate or at least determinable at perfection rin.
• Nagiging certain ang price kapag may number na nakalagay, alam kung magkano.
Under Article 1469 of the Civil Code, in order that the price may be considered ascertainable, it shall be sufficient
that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a
specified person or persons.
ASCERTAINABLE PRICES ARE DISCUSSED LOW
(a) PRICE FIXED BY THIRD PARTY
The designation of a third party to fix the price is valid, and such designation by itself makes the price
ascertainable as to give rise to a valid contract of sale. The fixing of the price cannot be validly left to the
discretion of one of the contracting parties (Art. 1473); for to consider a contract of sale already existing
when the price has yet to be fixed by one of the parties would render the contract to be without the
characteristics of “mutuality” or “obligatory force.”
• Pwede na at the time of the agreement ang magdi-dictate ng presyo ay third party. Kapag third
party ang nagdi-dictate nasa-satisfy niya yung pagiging ascertainable ng price.
• Ex. Ibebenta mo kay Gladys ang cellphone then sabi ni Gladys, bibilhin niya daw yung cellphone
– there is no valid contract of sale dahil walang price, kailangan mo ng cause or consideration in
order to have a valid COS.
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 • Kung sa scenario sa itaas sinabi na ang mag dedetermine ng price ay kung ano ang 50% ng
original market price ng brand new phone sa Robinsons – this time the price can be ascertainable,
though dinictate ng Oppo Corp ang price which is isang third party hindi yung buyer and seller
mismo this case still satisfy the validity of the COS by express provision of law, na kahit third party
ang nag dikta ng presyo considered ascertainable ang consideration.
• Kung hindi certain or ascertainable yung price kawawa si seller kasi hindi siya makakpagdemand
kay buyer, dahil hindi niya alam kung ano ang ide-demand niya.

Even before the fixing of the price by the designated third party, a contract of sale is deemed to be
perfected and existing, albeit conditional.
Under Article 1469, if the designated 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.

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When the designated third party is either unable or unwilling to fix the price, the parties do not have a
cause of action to seek from the court the fixing of the price because, in a manner of speaking, the
condition imposed on the contract of sale has not happened, and its non-happening extinguished the
underlying contract; consequently, there is no longer a contract upon which the courts have any
jurisdiction to fix the price. In such a case, the law declares the contract of sale “inefficacious.”
(b) FIXING OF SUBJECT MATTER BY THIRD PARTY
Although under Article 1469 of the Civil Code, the designation by the parties of a third party to fix the
price gives rise to a valid (albeit conditional) contract of sale, such formula is not allowed for the
determination of the subject matter of the sale.
The designation of a third party to fix the subject matter is not provided by law. In order that a contract of
sale can exist, the parties must have agreed on a subject matter which is determinate or determinable.
(c) PRICE ASCERTAINABLE IN REFERENCE TO OTHER THINGS CERTAIN
The price of securities, grain, liquids, and other things shall also be considered certain, when the price
fixed is that which the thing would have on a definite day, or in a particular exchange or market, or when
an amount is fixed above or below the price on such day, or in such exchange or market, provided said
amount be certain.
The price of a thing is certain at the point of perfection by reference to another thing certain, such as to
certain invoices then in existence and clearly identified by the agreement; or known factors or stipulated
formula.
(d) EFFECT OF UNASCERTAINABILITY
Where the price cannot be determined in accordance with any of the preceding rules, or in any other
manner, the contract of sale is inefficacious.
Note that the law does not use the term “void,” because of the implied acknowledgement that the
existence of the formula allowed by law at the point of perfection has actually rendered a contract valid
albeit conditional, which cannot be rendered void by what happens after perfection.
(4) MANNER OF PAYMENT OF PRICE MUST BE AGREED UPON
The point being made is this: that the “terms of payment,” being an integral part of the price, would have the
same requisites that the law imposes on price to support a valid contract of sale-certain or at least ascertainable.
If a price, unknown to both parties, can support a valid and binding contract of sale, such as when the fixing of
the price is left to a third party, then also, if the terms of payment are provided for in a formula or process that
does not require the agreement of the parties for the formula to work, then the terms of payment are deemed to
have been agreed upon and the sale would be valid, but subject to the same condition affixed to the price. Article
1474 of the Civil Code provides: “Where the price cannot be determined in accordance with the preceding
articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer, he must pay a reasonable price therefore. What is reasonable price
is a question of fact dependent on the circumstances of each particular case.”

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Note that in such a case, the courts have authority to fix the reasonable price for the subject matter appropriated
by the buyer. Article 1474 seems to present the only exception where there would still be a valid sale even when
there has been no meeting of the minds as to the price or any other consideration.
INADEQUACY OF PRICE
Under Article 1355 of the Civil Code, which governs contracts in general, and except in cases specified by law,
it is provided that lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud,
mistake or undue influence. Specifically, Article 1470 on contracts of sale, provides that “gross inadequacy of
price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really
intended a donation or some other act or contract.”
DISTINGUISHED FROM SIMULATED PRICE
Bravo-Guerrero v. Bravo, has held that “simulation of contract” and “gross inadequacy of price” are distinct legal
concepts, with different defects, and that the concept of a simulated sale is incompatible with inadequacy of
price, thus: “When the parties to an alleged contract do not really intend to be bound by it, the contract is
simulated and void. A simulated or fictitious contract has no legal effect whatsoever because there is no real
agreement between the parties . . . Gross inadequacy of price by itself will not result in a void contract, and it
does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties
actually intended a donation or some other contract

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13