Professional Documents
Culture Documents
Chapter1 Nature and Form of The Contract
Chapter1 Nature and Form of The Contract
Chapter1 Nature and Form of The Contract
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 1
Heirs of RomanaIngjutiro, et. al. v. Sps Leon Casals and Lilia C. “Contract of Sale” Distinguished from “Contract to Sell”
Casals, et. al GR 134718, Aug. 20, 2001
It is essential that the vendors be the owners of the property
sold, otherwise they cannot dispose that which does not belong Contract of Sale Contract to Sell
to them.Nemodat quod non habet (No one can give more than Non- 1. Non-payment of 1. The payment of the
what he has) payment price is a resolutory price is a positive
of price condition; contract of suspensive condition.
Sale Distinguished from Dation in Payment sale put an end to a Hence, if the price is
transaction that once not paid, it is as if the
upon a time existed obligation of the
Sale Dation in Payment seller to deliver and
1. There is NO pre-existing 1. There is a pre-existing to transfer ownership
credit credit never became
2. Gives rise to obligation 2. Extinguishes obligation effective and binding
3. The cause or consideration 3. The cause or consideration Ownershi 2. Title over generally 2. Ownership is retained
here is the PRICE, from here, from the viewpoint of p passes to the buyer by the seller,
the viewpoint of the seller, the person offering he upon delivery regardless of delivery
or the obtaining of the dation in payment, is the and is not to pass
OBJECT, from the extinguishment of his debt; until full payment of
viewpoint of the buyer. from the viewpoint of the the price.
creditor, it is the acquisition Effect of 3. After delivery has 3. Despite delivery, the
of the object offered in lieu delivery been made, the seller is enforcing and
of the original credit seller has lost not rescinding the
4. There is greater freedom 4. There is less freedom in ownership and contract if he seeks to
in the determination of the determining the price cannot recover oust the buyer for
price. unless the contract is failure to pay , since
5. The giving of the price 5. The giving of the object in resolved or rescinded he retains the
may generally end the lieu of the credit may ownership.
obligation of the buyer extinguish completely or
partially the credit “Sale” Distinguished from “Assignment of Property in Favor of
Creditors (Cession)”
Art. 1255 of the Civil Code provides the concept of cession that
“debtor may cede or assign his property to pay his creditors in
payment of hide debts. This cession, unless there is a stipulation
to the contrary, shall only release the debtor from responsibility
of the net proceeds of the thing assigned. The agreements
which, on the effect of cession, are made between the debtor
and his creditors shall be governed by special laws.”
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 2
Manresa Definition: “consists in the abandonment of all the Article 1459. Lawfulness of the Object and Right to Transfer Ownership
property of the debtor for the benefit of his creditors in order that
the latter may apply the proceeds thereof to the satisfaction of
heir credits. The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered.
Kinds of Extrajudicial Foreclosure Sale Artates and Pojas v. Urbi, et. al. L-29421, January 30, 1971
1) Ordinary execution sale – governed by the pertinent Under Section 118 of the Public Land Act (Com. Act 141), such
provisions of Rule 39 of the Rules of Court homestead generally cannot be sold, cannot be encumbered and
2) Judicial foreclosure sale – governed by the pertinent cannot be held liable for the satisfaction of any debt
provisions of Rule 68 of the Rules of Court CONTRACTED prior to the expiration of the period of 5 years
3) Extrajudicial foreclosure sale – governed by Act 3135, from and after the date of the issuance of the patent or grant.
amended by Act 4118, “An Act to Regulate the Sale of The sale, therefore of a homestead patent which was made less
Property Under Special Powers Inserted In or Annexed to than 4 years after the acquisition of the couple of the land is NOT
Real Estate Mortgages.” VALID.
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 3
Transfer of ownership declaration to the effect that the sale of the right of redemption
a) It is essential for a seller to transfer ownership (Art. to C be considered fraudulent and void.
1458) and, therefore, the seller must be the owner of the
subject sold. (Nobody can dispose of that which does not HELD: The sale of the right of redemption to C is perfectly valid,
belong to him – nemodat quad non habet) since A, the seller, was the owner of the right.
b) Although the seller must be the owner, he need not be
the owner at the time that he is the owner at the time of
the perfection of the contract. It is sufficient that he is he Note: B has no right to question the sale of the right of
owner at the time the object is delivered. redemption of A to C, unless what was sold was the property.
c) The seller need not be the owner at the time of
perfection because, after all, “future things or goods,” UyPiaco v. Micking, et. al., 10 Phil. 286
inter alia, may be sold. FACTS: A corporate stockholder sold his share o another, but the
→ There can be a sale of future property, there can sale has not yet been recorded in the books of the corporation. Is
generally be no donation of future property. (Aer. the sale valid?
751, CC)
d) A person who has a right over a thing (although he is not HELD: As between the seller and the buyer, the sale is perfectly
the owner of the thing itself) may sell such right. Hence, valid since the seller was the owner of the corporate shares.
a usufructuary may generally sell his usufructuary right. However, as between the corporation and the buyer, the latter
has acquired only an EQUITABLE TITLE which may eventually
Santos v. Macapinlac and Pinlac, 51 Phil. 224 ripen into a legal title after he presents himself to the corporation
FACTS: A mortgaged his land to B, but sold the land to C. give and performs the acts required to effectuate the transfer.
the effect of the transaction.
Martin v. Reyes, et. al, 91 Phil. 666
HELD: A, being the owner, could sell the property to C who after HELD: The vendor need not own the property at the time of
delivery became the owner, subject to B’s right to foreclose the perfection, it s being sufficient that he be the owner at the time
mortgage upon non-payment of the mortgage credit. B does not he is to deliver the object. The contention that there is no sale is
have to give C anything, even if the mortgage is foreclosed, for rather too technical a viewpoint. The deed of sale may be placed
the simple reason that B did not sell the property to him. Neither in the same category as a promise to convey the land not yet
did B receive the purchase price. owned by the vendor – an obligation which nevertheless may be
enforced.
Note: B has no right to nullify the contract between A and C Delpher Trades Corp. v. IAC, GR 69259, Jan. 26, 1989
provided that C is in good faith. The Deed of Exchange of property between A and B and Delpher
cannot be considered a contract of sale. There was no transfer of
Lichauco v. Olegario and Olegario, 43 Phil. 540 actual ownership interests by A and B to a third party. A and B
FACTS: A owed B, and was declared a judgment debtor. To pay merely CHANGED their ownership from one form to another. The
the debt, A’s properties were attached. At the auction sale, B was ownership remained in the same hands. Hence, Hydro has no
the highest bidder. Now then, under the law, the debtor, A, has basis for its claim of a right of first refusal.
the right to redeem the property sold within a certain period. A,
however, sold his right of redemption to C. b now seeks a court
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 4
Article 1460. Meaning of Determinate Article 1461. Things with Potential Existence
A thing is determinate when it is particularly designated or physically Things having potential existence may be the object of the contract of
segregated from all others of the same class. sale.
The requisite that a thing be determinate is satisfied if at the time the The efficacy of the sale of a mere hope or expectancy is deemed subject
contract is entered into, the thing is capable of being made determinate to the condition that the thing will come into existence.
without the necessity of a new or further agreement between the parties.
The sale of a vain hope or expectancy is void.
Meaning of determinate:
a) The object of the sale must be determinate, i.e., specific, Sale of a “mere hope or expectancy”
but it is not essential really that at the time of perfection, The hope or expectancy already exists; what does not yet exist is
the object be already specific. It is sufficient that it ne the expected thing. Therefore, for the 2nd paragraph to have
capable of being determinate without the need of any some sense, it should refer to a sale of “an expected thing,” not
new agreement to the “hope or expectancy”
b) However, from the viewpoint of risk or loss, not until the EmptioReiSperatae and EmptioSpei
object has really been made determinate can we say that a) EmptioReiSperatae – the sale of an expected thing
the object has been lost, for as is well known, “generic b) EmptioSpei – the sale of the hope itself
things cannot be lost.”
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 5
A full owner may sell the usufruct of his land leaving the naked
Vain Hope or Expectancy ownership to himself.
If the hope or expectancy itself is vain, the sale is itself VOID. Be
it noted that this is NOT an aleatory contract for while in an Asian Terminals, Inc. v. Philam Insurance Co., Inc. 702 SCRA 88
aleatory contract there is an element of chance, here, there is A letter of credit (L/C) is a financial device developed by
completely NO CHANCE. merchants as a convenient and relatively safe mode of dealing
with sale of goods to satisfy the seemingly irreconcilable interests
Example: Sale of a losing ticket for a sweepstakes already run. of a seller, who refuses to part with his goods before he is paid,
Exception: If the ticket be a collector’s item. and a buyer, who wants to have control of his goods before
paying
Article 1462. Sale of Goods
Article 1464. Sale of Share in a Specific MassGoods
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 In the case of fungible goods, there may be a sale of an undivided share
manufactured, raised, or acquired by the seller after the perfection of the of specific mass, though the seller purports to sell and the buyer to buy a
contract of sale, in this Title called “future goods.” definite number, weight or measure of the goods in the mass, and
though the number, weight or measure of the goods in the mass in
There may be a contract of sale of goods, whose acquisition by the seller undetermined. By such sale the buyer becomes owner in common of
depends upon a contingency. such a share of the mass as the number, weight or measure bought
bears to the number, weight or measure of the mass. If the mass
Sale of goods may be future or existing. contains less than the number, weight or measure bought, the buyer
Future goods are those still to be: becomes the owners of the whole mass and the seller s bound to make
a) Manufactured or printed good the deficiency from goods of the same kind and quality, unless a
b) Raised or future agricultural products contrary intent appears.
c) Acquired by the seller after the perfection of the contract
→ This is also referred to as the sale of “hereafter- Example: In a stock of rice, the exact number of cavans of which
acquired” property is still unknown, Jose buys 100 cavans. If there are really 150,
d) Things whose acquisition depends upon a contingency Jose becomes the co-owner of the whole lot, his own share being
which may or may not happen 2/3 thereof.
Article 1463. Sale of Undivided Interest Cassinelli v. Humphrey Supply Co., 183 Poc. 523
The sale is of a specific object since the mass is specific.
The sole owner of a thing may sell an undivided interest therein. Forest Hills Golf and Country Club v. Vertox Sales and Trading,
Inc., 692 SCRA 706
Fergusin v, Northern Bank of Ky., 14 Buck [Ky] 555, 29 Am. Rep. The corporation whose shares of stocks are subject of a transfer
418) transaction(through sale, assignment, donation or any other
If I own a house, I may sell an aliquot part thereof (say ½ or mode of conveyance) need not e a party to the transaction.
1/3) to somebody, I which case he and I will become co-owners.
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 6
However, to bind the corporation as well as third parties, it is him
necessary that the transfer is recorded in the books of the Warranty The seller warrants The agent who sells assumes
corporation. no personal liability as long
as he acts within his
Article 1465. Sale of Things Subject to a Resolutory Condition authority and in the name of
the principal.
Things subject to a resolutory condition may be the object of the contract BAR QUESTION:
of sale. X acquired a booklet of 10 sweepstakes tickets directly from the
office of the PCSO. X paid P1,800 for the booklet, less the customary
Examples: discount. What was the legal nature of X’s act in acquiring the
a) A property subject to reservatroncal may be sold. tickets? Did he enter into a contract of purchase and sale? Briefly
b) A usufruct that may end when the naked owner becomes a lawyer explain your answer.
may be sold
c) A sold B the former’s land a retro. After delivery to B, B becomes an ANS.: Yes, X entered into a contract of purchase and sale,
absolute owner subject to the right of redemption. This land may be notwithstanding the fact that he may be referred to as “agent” of
sold by B to C, a stranger, subject to the right of redemption; i.e., C the Sweepstakes Office, and the fact that he may be entitled to an
must respect the right of A to redeem the property within the “agent’s prize” should one of the tickets purchased win a principal
stipulated period if: prize. The truth is that he is not required to re sell the tickets, and
1) A’s right is registered even if he were to do so, still failure on the part of his purchasers to
2) Or even if not, if C had actual knowledge of the right of pay will not allow him to recover what he himself has paid to the
redemption. (It has been held that actual knowledge is office. Moreover, the delivery of the tickets to him transferred their
equivalent to registration) ownership to him; this is not true in the case of an agency to sell.
Furthermore, it has been said that in a contract of sale, the buyer
Article 1466. Distinctions Between a ‘Contract of Sale’ and an ‘Agency pays the price; while in agency to sell, the agent delivers the price.
to Sell’ (like a Consignment for Sale) The mere fact that a “discount” or so called commission has been
given is immaterial. (Quiroga v. Parsons Hardware Co., 38 Phil. 501)
In construing a contract containing provisions characteristic of both the
Quiroga v. Pasons Hardware Co., 38 Phil. 501
contract of sale and of the contract of agency to sell, the essential
FACTS: Plaintiff granted defendant the right to sell as an “agent”
clauses of the whole instrument shall be considered.
Quiroga beds in the Visayas. The defendant was obliged under the
contract to pay for the neds, at a discount of 25% as commission on
the sales. The payment had ti be made whether or not the
Contract of Sale Agency to Sell
defendant was able to sell the beds. Is this a contract of sale, or an
Price The buyer pays the price The agent delivers the price
agency to sell?
which in turn he get from his
buyer
ANS: This is clearly a contract of sale. There was an obligation
Ownershi The buyer after delivery The agent who is supposed
to supply the beds, and a reciprocal obligation to pay their price. An
p becomes the owner to sell does not become the
agent does not pay the price, he merely delivers it. If he is not able
owner, even if the property
to sell, he returns the goods. This not true in the present contract,
has already been delivered to
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 7
for the price was fixed and there was a duty to pay the same Schools of taught
regardless as to whether or not the defendant had sold the beds. a) Massachusetts Rule: If specially done at the order of another,
The phrase “commission on sales” means nothing more than a mere this is a contract for a piece of work
discount on the invoice price. The word “agent” simply means that → We follow Massachusetts Rule in the Phi;ippines
the defendant was the only one who could sell the plaintiff’s beds in b) New York Rule: If the thing already exists, it is a SALE, if not,
the Visayas. At any rate, a contract is what the law defines it to be, WORK
and not what it is called by the contracting parties. c) English Rule: If material is more valuable, SALE; if skill is more
valuable, WORK
Ker and Co., Ltd, v. Jose B. Lingad, L-20871, April 30, 1971
FACTS: In a contract between the US Rubber International QUERY:
Company and Ker and Co., the former consigned to the latter certain If I ask someone to construct a house for me, is this a contract of
goods to be sold by the distributor. Prior to such sale, the Rubber sale or for a piece of work?
Company would remain the owner. The contract, however, stated
expressly that Ker and Co. was not being made an agent, and could ANS: If he will construct on his own land, and I will get both
not bind the company. the land and the house it would seem that this can be very well
treated as a sale.
ISSUE: Between the 2 entities here, was there as contract of
SALE or one of AGENCY TO SELL? Article 1468. Contract of Sale or Barter
A contract for the delivery at a certain price of an article which the Rules to determine whether contract is one of sale or barter
vendor in the ordinary course of his business manufactures or procures a) First rule – intent
for the general market, whether the same is on hand at the time or not, b) If the intent does not clearly appear –
is a contract of sale, but if the goods are to be manufactures specially for 1) If the thing is more valuable than money – BARTER
the customer and upon his special order, and not for the general market, 2) If 50-50 – SALE
it is a contract for a piece of work. 3) If thing is less valuable than he money – SALE
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 8
Article 1469. Certainty of the Price If no specific amount has been agreed upon, the price is still
considered certain:
a) if it be certain with reference t another thing certain;
In order that the price may be considered certain, it shall be sufficient b) if the determination of the price is left to the judgment of a
that it be so with reference to another thing certain, or that the specified person or persons;
determination thereof be left to the judgment of a specified person or c) in the case provided for under Art. 1472, Civil Code
persons.
Robles v. LizarragaHermanos, 50 Phil. 387
Should such person or persons be unable or unwilling to fix it, the If the buyer and seller agreed on a sale and on determining the
contract shall be inefficacious, unless the parties subsequently agree price by a joint appraisal, the sale is still valid even if the buyer later
upon the price. on refuses to join the appraisal. The bad faith of the buyer holds him
liable for the true value of the object. The true value can be
If the third person or persons acted in bad faith or by mistake, the courts established by competent evidence.
may fix the price.
Article 1470. Gross Inadequacy of Price
Where such third person or persons are prevented from fixing the price
or terms by fault of the seller or the buyer, the party not in fault may
have such remedies against the party in fault as are allowed the seller or Gross inadequacy of price does not affect a contract of sale, except as it
the buyer, as the case may be. may indicate a defect in the consent, or that the parties really intended a
donation or some other act or contract.
The price must be certain; otherwise, there is no true consent
between the parties Effect of Gross Inadequacy of Price
→ There can be no sale without a price a) In ordinary sale, the sale remains valid even if the price is very
→If the price is fixed but is later on remitted or condoned, this is low. Of course, if there was vitiated consent, the contract may
perfectly all right, for then the price would not be fictitious be annulled but only due to such vitiated consent.
→The failure to pay the agreed price does not cancel a sale for lack → The fact that the bargain was a hard one is not important,
of consideration, for the consideration is still there, namely, the the sale having been made freely and voluntarily (Askay v
price. Cosolan, 46 Phil. 79)
→ The rule holds true even if the price seems too
If the money is counterfeit, would sale be still valid? inadequate as to shock the conscience of man. (Alarcon v.
Kasilag, 40 OG Sup. No. 16, p.203)
ANS: Yes, for we cannot say that the consideration or cause of b) In execution of judicial sales – While mere inadequacy of price
the contract is the illegal currency. The real consideration or cause is will not set aside a judicial sale of real property, still the price
still be the VALUE or price agreed upon. is so inadequate as to shock the conscience of the Court, it will
set aside.
Reparations Commission v Judge Morfe, GR 35796, Jan. 31, 1983 → As a matter of fact, it may be that the extremely low price
If a contract for the acquisition of reparation goods does not specify was the result not of a sale but of a contract of loan, with
the conversion rate of the dollar value of the goods, the conversion the price paid as the principal and the object, given
rate shall be the exchange rate of exchange prevailing in the free merely as security. In case like this, the contract will be
market at the time the goods are delivered. interpreted to be one of loan with an equitable mortgage.
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 9
The remedy would then be the reformation of the Article 1472. Certainty of Priceof Securities
instrument.
→ A buyer at a judicial sale is allowed to resell to others
what he has acquired. The mere fact that he demands a The price of securities, grain, liquids, and other things shall also be
very high price is of no consequence. considered certain, when the price fixed is that which the thing sold
would have on a definite day, or in a particular exchange or market, or
It is possible that a donation, not a sale, was really intended. In when an amount is fixed above or below the price on such day or in such
such a case, the parties may prove that the low price is sufficiently exchange or market, provided such amount be certain.
explained by the consideration of liberality. (Art. 1470, last
paragraph) Example: I can sell to you today my Mont Blanc fountain pen at the
price equivalent to the stock quotation 2 days from today of 100
Article 1471. Simulated Price shares of PLDT
The price must not be fictitious. Therefore, if the price is merely Article 1473. Price Cannot be Left to One Party’s Discretion
simulated, the contract as a sale is void. It may however, be valid as
a donation or some other agreement provided the requirements of The fixing of the price can never be left to the discretion of one of the
donations or other agreements have been complied with. If these contracting parties. However, if the price fixed by one of the parties is
requirements do not exist, then as a sale, the contract is absolutely accepted by the other, the sale is perfected.
void, not merely voidable. An action for annulment is therefore
essential. (De Belen v. Collector of Customs, 46 Phil. 241) Reason why price fixing cannot be left to the discretion of one of
them: the other could not have consented to the price for he did not
A simulated price is fictitious. There being no price, there is no cause know what it was
or consideration; hence, the contract is void as a sale. However it is
enough that the price be agreed on at the time of perfection. A
rescission of the price will not invalidate the sale.
If the price cannot really be determined, the sale is void for the Sale is a consensual contract (perfected by mere consent).
buyer cannot fulfil his duty to pay Therefore, delivery or payment is not essential for perfection.
(Warner, Barnes v. Inza, 43 Phil. 404)
Of course, if the buyer has made use of it, he should not be allowed The contract of sale is consummated upon delivery and payment.
to enrich himself unjustly at another’s expense. So he must pay a (Naval v. Enriquez, 3 Phil. 669)
“reasonable price.” The seller’s price, however, must be the one paid
if the buyer knew how much the seller was charging and there was
an acceptance of the goods delivered. Here, there is an implied
assent to the price fixed. Pacific Oxygen and Acetylene Co. v. Central Bank, L-23391, Feb 27,
1971
PROBLEM: The sale of foreign exchange of foreign currency is perfected from
Romy sells his Land Rover SUV (2012 model) to Oscar and leaves it the moment the contract of such sale is EXECUTED, not from the
to Oscar to determine the price. If Oscar refuses to fix a price and moment of payment or delivery of the amount of foreign currency to
simply take the 4-wheeler, is he still obliged t pay the price? Explain. the creditor.
ANS: Yes, Oscar is bound to pay the reasonable value thereof Obana v. Court of Appeals, GR 36249, March 29, 1985
on the basis of quasi-contract. Article 1474 of the Civil Code provides FACTS: A rice miller accepted the offer of a person to buy 170
that where the price has not been fixed by the parties and the thing cavans of clean rice at P37.26 per cavan. They agreed that the rice
or part thereof has been delivered to an appropriate buyer, he must will be delivered the following day at the buyer’s store, where the
pay a reasonable price therefore. What is reasonable price is a buyer will pay the purchase price to the miller’s representative. As
question of fact dependent on the circumstance of each particular agreed upon, the miller did deliver the 170 cavans of rice to the
case. buyer’s store but the buyer was nowhere to be found when the
miller’s representative tried to collect the purchase price.
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 11
If the condition precedent for the sale of the property fails to Republic v. CA, L-52774, Nov. 29, 1984
materialize, there can be no perfected sale. Since NEDA kept the check proceeds of a sale for 7 months without
any comment, it cannot now express its objections to the sale
The decisive legal circumstance is not where the private receipts
bore the elements of a sale. The real controversy is on whether the Before perfection of the contract of sale, no mutual rights and
contract arising from said receipts can be enforced in the light of the obligations exist between the would-be buyer and the would-be
priority right of petitioner under the registered contract. It is well- seller. The same thing is true when perfection is conditioned upon
settled in this jurisdiction that prior registration of a lien creates a something, and that thing is not performed. (Roman v. Grimalt, 6
preference, since the act of registration shall be the operative act to Phil. 96)
convey and affect the land.
It has been held that in our country, an accepted bilateral promise to
Requirements for Perfection buy and sell is in a sense similar to, but not exactly the same as, a
a) When parties are face to face, when a offer is accepted without perfect contract of sale. This is expressly permitted under the Civil
conditions and without qualifications Code, Art. 1479, first paragraph, which reads: “A promis to buy and
A conditional acceptance is a counter-offer sell a determinate thing for a price certain is reciprocally
If negotiated through a phone, it is as if the parties are demandable.”
face to face
b) When contract is through correspondence or through telegram, Formalities for Perfection
there is perfection when the offeror receives or has knowledge Under the Statute of Frauds, the sale of:
of the acceptance by the offeree. a) Real property (regardless of amount)
If the buyer has already accepted, but the seller does b) Personal property – if P500 or more must be in writing to be
not know yet of the acceptance, the seller may still enforceable. (Art. 1403, No. 2, Civil Code)
withdraw.
c) When a sale is made subject to a suspensive condition, If orally made, it cannot be enforced by a judicial action, except
perfection is had from the moment the condition is fulfilled. if it has been completely or partially executed, or except if the
defense of the Statute of Frauds is waived. (Art. 1405, Civil
Atkins, Kroll and Co., Inc. v. B. CuaHianTek, L-9871, Jan. 31, 1958 Code)
The sale was perfected in view of the acceptance of the offer. The
acceptance of an offer to sell by promising to pay creates a bilateral Also in writing should be sales which are to be performed only
contract, so much so that if the buyer had backed out after after more than 1 year (from the time the agreement was
accepting by either refusing to get the thing sold or refusing to pay entered into) – regardless as to whether the property is real or
the price, he could be sued. personal, and regardless of the price involved.
b) Give the effect of failure to do any of the things enumerated in If the contract is oral but already executed completely or
the preceding paragraph. partially, Art. 1357 can be availed of, for in this case the
Statute of Frauds is not deemed violated.
ANS: The defense of the Statute of Frauds is deemed waived,
and my client would be now compelled to pay, if the judge
believes the testimony of the witnesses.
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 13
Exempted from the rule is the case of donation propter After perfection the parties must now comply with their mutual
nuptiasof land, because here the law expressly provides obligations. Thus, the buyer can now compel the seller to deliver to
that as to formalities, such a donation must merely comply him the object purchased. In the meantime, the buyer has only the
with the Statute of Frauds. (Art. 127, Civil Code) Therefore, personal, not a real right. Hence, if the seller sells again a parcel of
even if made orally, a donation propter nuptias of land, if land to a stranger who is in good faith, the proper remedy of the
already delivered, is enforceable and valid and Art. 1357 buyer would be to sue for damages. He cannot successfully bring an
applies. Of course, if there has been no delivery yet, the accion reivindicatoria against the stranger for he cannot recover
oral wedding gift of land is still unenforceable and Art. 1357 ownership over something he had never owned.
cannot apply.
Retail sales of flour to bakeries to be manufactured into bread are Article 1476. Sale by Auction
subject to tax; if wholesale, they are not subject to tax. To
determine if the sale is wholesale or retail, we must not consider the
quantity sold, but the character of the purchase. If the buyer buys In the case of a sale by auction:
the commodity for his own consumption, the sale is retail and is
subject to tax; if for resale, the sale is deemed wholesale, regardless 1) Where goods are put up for sale by auction in lots, each lot is the
of the quantity, and is not subject ti the particular tax referred to. subject of a separate contract of sale.
2) A sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner.
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 14
Until such announcement is made, any bidder may retract his bid; and public, the sale would still be fraudulent, whether or not the owner
the auctioneer may withdraw the goods from the sale unless the of the goods knew what the auctioneer had done. (Carreta v.
auction has been announced to be without reserve. Castillo, 209 NYS. 257)
3) A right to bid may be reserved expressly by on behalf of the seller,
unless otherwise provided by law or by stipulation Veazie v. Williams, et. al, 12 L. Ed. 1081
4) Where notice has not been given that a sale by auction is subject to a The sale can be annulled in view of the fraud. Had the public been
right to bid in behalf of the seller, it shall not be lawful for the seller to informed of the puffers, this would have been different. To escape
bid himself or to employ or induce any person to bid at such sale on censure, notice of by bids is essential. By-bidding, if secret, deceives
his behalf or for the auctioneer, to employ or induce any person to bid and involves a falsehood and is, therefore, bad. It is not enough to
at such sale on behalf of the seller or knowingly to take any bid from apologize and say that by-bidding is after all common. It does not
the seller or any person employed by him. Any sale contravening this matter that the owner did not know of the auctioneer’s fraud. After
rule may be treated as fraudulent by the buyer. all, the auctioneer was merely the agent.
The sale is perfected when the auctioneer announces its perfection Leoquico v. Postal Savings Bank, 47 Phil. 772
by the fall of the hammer or in other customary manner. Action will not prosper for there was really no sale. By participating
in the auction and offering his bid, he voluntarily submitted to the
Before the hammer falls: terms and conditions of the auction sale announced in the notice
a) The bidder may retract his bid (Art. 1476[2]) Reason: Every and he, therefore, clearly acknowledged the right of the Board to
bidding is merely an offer and, therefore, before it is accepted, reject any or all bids. The owner of the property offered for sale
it may be withdrawn. The assent is signified on the part of the either at public or private auction has the right to prescribe the
seller by knocking down the hammer. manner, conditions and terms if such sale. He may even provide that
b) The auctioneer may withdraw the goods from the sale (Art. all of the purchase price shall be paid at the time of the sale, or any
1476[2]) Reason: This bid is merely an offer, not an acceptance portion thereof, or that time will be given for the payment. The
of an offer to sell. Therefore it can be rejected. What the conditions are binding upon the purchaser, whether he knew them
auctioneer does in withdrawing is merely reject the offer. or not.
Under what conditions may the seller bid? (Art. 1476, pars. 3 and 4)
a) When such a right to bid was reserved;
b) And notice was given that the sale by auction is subject to a
right to bid on behalf of the seller CFI of Rizal and Elena Ong Escutin v. CA and Felix Ong, July 25,
1981
The seller may employ others to bid for him provided he has notified A private sale authorized by a probate court cannot be assailed by a
the public that the auction is subject to the right to bid on behalf of person who is not an “interested party” one who merely offered a
the seller. (Art. 1476, par. 4) People who bid for the seller, but are higher price (without actually buying the property) is not an
not themselves bound, are called “by-bidders” or “puffers.” Without “interested party.” It would have been different had there been a
the notice, any sale contravening the rule may be treated by the public auction.
buyer as fraudulent.
Republic v. Reyes-Bakunawa, 704 SCRA 163
It may happen that the owner is not himself the auctioneer. Now A negotiated contract is one that is awarded on the basis of a direct
then if the auctioneer employs puffers and gives no notice to the agreement between the Government and the contractor without
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 15
going through the normal procurement process, like obtaining the [C.A] 54 OG 6088) Usually, if such a stipulation is present the sale is
prior approval from another authority, or a competitive bidding technically referred to not as a contract of sale, but a contract to
process. sell, the payment of the price being a condition precedent. If no
payment is made, the buyer can naturally be ejected. And here, the
Article 1477. When Ownership is transferred seller is truly enforcing, not rescinding the contractual agreement.
(Santos, et. al. v. Santos, [CA] 47 OG 6372)
The ownership of the thing sold shall be transferred to the vendee upon The Court held that the stipulation regarding the payment of the
the actual or constructive delivery thereof. balance is NOT the same as the stipulation that “ownership in the
thing shall not pass to the purchaser until he has fully paid the
Ownership is not transferred by perfection but by delivery. This is price.” Hence, the purchaser in this case still becomes the owner of
true even if the sale has been made on credit; payment of the the object sold upon its actual or constructive delivery to him, in
purchase price is NOT essential to the transfer of ownership, as long accordance with the general rule.
as the property sold has been delivered.
Kinds of delivery
a) Actual (Art. 1497, Civil Code)
b) Constructive (Arts. 1498-1601, Civil Code), including “any other
manner signifying an agreement that the possession is
transferred.” (Art. 1496, Civil Code)
C.N. Hodges, et. al. v. Jose Manuel Lezama, et.al. L-20630, Aug. 31,
1965
If upon the sale by Hodges to Borja, Borja became the owner
thereof, then, upon Hodge’s purchase of the shares at the
foreclosure proceedings, Hodges acquired ownership over the same.
Stock Certificate 18 must be cancelled; a new one must be given to
Hodges; and eventually, a new one also issued to Gurrea after the
deal between Hodges and Gurrea is finally settled. Article 1479. Mutual Promise and Accepted Unilateral Promise
Article 1478. When Ownership is not transferred despite delivery
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 18
Definitions
Sale by description – where seller sells things as being of a Earnest Money (Arras) is something of value t show that the buyer
certain kind, the buyer merely relying on the seller’s was really earnest, and given to the seller to bind the bargain.
representation or descriptions
→ Generally, the buyer has not previously seen the goods Under the Civil Code, earnest money is considered:
or even if he as seen them, he believes that the a) Part of the purchase price
description tallies with the goods he has seen → From the total price must be deducted the arras; the
Sale by sample – that where the seller warrants that the bulk balance is all that has to be paid.
of the goods shall correspond with the sample in kind, b) As proof of the perfection of the contract
quality and character.
→ Only the sample is exhibited. The bulk is not present,
and so there is an opportunity to examine and inspect Earnest money Money given as consideration for
Sale by description and sample – must satisfy the an option
requirements in both, and not in only one Applies to a PERFECTED sale Option money applies to a sale
NOT yet perfected
The mere exhibition of the sample does not necessarily make it a The money is part of the The money is NOT part of the
sale by sample. This exhibition must have been the sole basis or purchase price purchase price
inducement of the sale. The buyer is required to pay The would-be buyer is not
A sale by sample may still be had even if the sample was the balance required to buy
shown only in connection with a sale to the first purchaser.
There can be a sale by sample even if the sale is “as is.”
Whenever earnest money is given in a contract of sale, it shall be Article 1483. Statute of Frauds
considered as part of the price and as proof of the perfection of the
contract.
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 19
Subject to the provisions of the Statute of Frauds and of any other 2) The sale must be on the Instalment plan
applicable statute, a contract of sale may be made in writing, or by word 3) There must be a Contract
of mouth, or partly in writing and partly by word of mouth, or may be 4) The contract must be one of Sale (absolute sale)
inferred from the conduct of the parties. An instalment is any part or portion of the buying price, including the
down payment
See comments under Article 1475
If the sale is for cash or on straight terms, Art. 1484 does not apply.
The sale of a piece of land or interest therein when made through
an agent is void unless the agent’s authority is in writing. To prevent abuse in the foreclosure of chattel mortgages by selling
at a low price and then suing for the deficiency is the precise
If the deed of sale of land is notarized by a notary public whose purpose of the article.
authority had expired, the sale would still be valid, since for validity
of the sale, a public instrument is not even essential. The remedies enumerated are not cumulative. They are
ALTERNATIVE, and if one is exercised, the others cannot be made
use of. Indeed the election of one is a waiver of the right to resort to
others. (Pacific Commercial Co. v. De la Rama, 72 Phil. 380) But for
this doctrine to apply, the remedy must already have been fully
exercised. If after retaking possession of the chattel, the seller
desists from the foreclosure, he can still avail himself of another
remedy.
Even if the word “lease” is employed, when a sale on installment is Excludes: Industrial lots, commercial buildings and sales to tenants
evidently intended, it must be construed as a sale. (Abello v. under RA 344 as amended by RA 6389 (Section 3)
Gonzaga, 56 Phil. 132)
NGEstores Sales Notes Chapter 1 – Nature and Form of the Contract Page 23
There can however be a contrary stipulation. d) Payment of just compensation