NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

1) Formation of Contract of Sale(1475-1479)

Article 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price. From
that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

Article 1476. In the case of a sale by auction:

(1) Where goods are put up for sale by auction in lots, each lot is the 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. Until such announcement is
made, any bidder may retract his bid; and the auctioneer may withdraw the goods
from the sale unless the auction has been announced to be without reserve.
(3) A right to bid may be reserved expressly by or on behalf of the seller, unless
otherwise provided by law or by stipulation.
(4) Where notice has not been given that a sale by auction is subject to a right to
bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to
employ or induce any person to bid at such sale on his behalf or for the auctioneer,
to employ or induce any person to bid at such sale on behalf of the seller or
knowingly to take any bid from the seller or any person employed by him. Any sale
contravening this rule may be treated as fraudulent by the buyer.

Article 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.

Article 1478. The parties may stipulate that ownership in the thing shall not pass
to the purchaser until he has fully paid the price.

Article 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

Perfection of Contract of Sale

General rule: It is perfected at the moment there is a meeting of the minds upon
a determinate thing (object), and a certain price (consideration), even if neither
is delivered. A choice between rescission and fulfillment, with damages in either
case.

Exception: When the sale is subject to a suspensive condition by virtue of law

or stipulation.

Requirements for Perfection:

1. When parties are face to face, when an offer is accepted
without conditions and without qualification. If negotiation is
made through a phone, it is as if the parties are face to face.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

2. When contract is through a correspondence or thru telegram,

there is perfection when the offeror receives or has
knowledge of the acceptance by the offeree,
3. When sale is made subject to a suspensive condition,
perfection is when from the moment the condition is fulfilled.

Right of owner to fix his own price

a) The owner of a thing has the right to quote his own price; reasonable or
unreasonable. It is up to the prospective buyer to accept or reject it. He
may even impose a condition hard to fulfill and name a price quite out of
proportion to the real value of the thing offered for sale.
b) He is also well within his right to quote a small or nominal consideration
and such is just as effectual and valuable a consideration as a larger sum
stipulated or paid.

Sale by Auction

- Sales of separate lots by auction are separate contracts of sale.

- Sale is perfected by the fall of the hammer, gavel, or in any other
customary manner
- Seller has the right to bid in auction, provided:
a) Such right was reserved
b) Notice was given that the sale was subject to a right to bid on
behalf of the seller
c) Right is not prohibited by law or by stipulation
- Advertisements for bidders are simple invitations to make proposals, and
the advertiser is not bound to accept the highest or lowest bidder, unless
the contrary appears.

Transfer of Ownership

General Rule: While a contract of sale is consensual, ownership of the

thing sold is acquired only upon its delivery, actual or construction, to the
buyer.
- This is true even if the purchase has been made on credit. Payment
of the purchase price is not essential to the transfer of ownership, as
long as the property sold has been delivered.
- Nonpayment only creates a right to demand payment or to rescind
the contract, or to criminal prosecution in the case of bouncing
checks.

Exceptions:
a) Contrary stipulation or Pactum reservati dominii (Contractual
reservation of title) – a stipulation usually in sales by
installment, whereby, despite delivery of the property sold,
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

ownership remains with the seller until full payment of the

price is made.
b) Contract to sell
c) Contract of insurance – a perfected contract of sale, even
without delivery, vests in the vendee an equitable title, an
existing interest over the goods sufficient to be the subject of
insurance.

Kinds of promise treated in Article 1479:

i. An accepted unilateral promise to sell in which the promisee

(acceptor) elects to buy;
ii. An accepted unilateral promise to buy in which the promise
(acceptor) elects to sell; and
iii. A bilateral promise to buy and sell reciprocally accepted in which
either of the parties chooses to exact fulfillment.

Policitacion - A unilateral promise or offer to sell or to buy a thing which is not

accepted creates no juridical effect or legal bond.

Option – a privilege existing in one person for which he has paid a consideration
which gives him the right to buy/sell from/to another person, if he chooses, at
any time within the agreed period at a fixed price, or under, or in compliance
with certain terms and conditions.

a) Heirs of Fausto C. Ignacio vs. Home Bankers Savings and Trust Company, GR
177783, January 23, 2013, 689 SCRA 173

FACTS: Petitioner Fausto C. Ignacio (Ignacio), during his lifetime, mortgaged

two parcels of land located in Cabuyao, Laguna to respondent Home Bankers
Savings and Trust Company (Home Bankers), as security for the P500,000.00
loan. When Ignacio defaulted in the payment of his loan obligation, Home
Bankers proceeded to foreclose the real estate mortgage where it was the
highest bidder.

On February 8, 1983, the Certificate of Sale issued to Home Bankers. With the
failure of Ignacio to redeem the foreclosed properties within one year from such
registration, the titles were consolidated in favor of Home Bankers. Despite the
lapse of the redemption period and consolidation of title in Home Bankers,
Ignacio offered to repurchase the properties. While Home Bankers considered
Ignacios offer to repurchase, there was no repurchase contract executed. Home
Bankers made several dispositions of the foreclosed properties already titled in
its name.

In a letter addressed to Home Bankers dated July 25, 1989, Ignacio expressed
his willingness to pay the amount of P600,000.00 in full, as balance of the
repurchase price, and requested Home Bankers to release to him the remaining
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

parcels of land. Home Bankers turned down his request. Then, Home Bankers
sold the properties to herein respondents.

The RTC rendered judgment in favor of Ignacio and found that Home Bankers
deliberately disregarded petitioners substantial payments on the total
repurchase consideration. Home Bankers appealed to the CA. The CA reversed
the trial court and found that Ignacio modified the terms of the offer contained
in the March 22, 1984 letter of Home Bankers. There was also no written
conformity by Home Bankers officers to the amended conditions for repurchase
which were unilaterally inserted by Ignacio. Consequently, no contract of
repurchase was perfected and Home Bankers acted well within its rights when
it sold the subject properties to herein respondents.

ISSUE: Whether a contract for the repurchase of the foreclosed properties was
perfected between petitioner and respondent bank?

RULING: Contracts are perfected by mere consent, which is manifested by the

meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. In Palattao v. Court of Appeals, G.R. No. 131726,
the Court held that if the acceptance of the offer was not absolute, such
acceptance is insufficient to generate consent that would perfect a contract.
The acceptance must be identical in all respects with that of the offer so as to
produce consent or meeting of the minds. Where a party sets a different
purchase price than the amount of the offer, such acceptance was qualified
which can be at most considered as a counter-offer; a perfected contract would
have arisen only if the other party had accepted this counter- offer.

While it is impossible to expect the acceptance to echo every nuance of the

offer, it is imperative that it assents to those points in the offer which, under
the operative facts of each contract, are not only material but motivating as
well. Anything short of that level of mutuality produces not a contract but a
mere counter-offer awaiting acceptance. More particularly on the matter of the
consideration of the contract, the offer and its acceptance must be unanimous
both on the rate of the payment and on its term. An acceptance of an offer
which agrees to the rate but varies the term is ineffective. (Villanueva v.
Philippine National Bank, G.R. No. 154493)

In a letter dated March 22, 1984, Ignacio set a different repurchase price and
also modified the terms of payment, which even contained a unilateral condition
for payment of the balance (P600,000), that is, depending on petitioners
financial position. However, there was no evidence of any document or writing
showing the conformity of respondent banks officers to this counter-proposal.

A contract of sale is consensual in nature and is perfected upon mere meeting

of the minds. When there is merely an offer by one party without acceptance
of the other, there is no contract. When the contract of sale is not perfected, it
cannot, as an independent source of obligation, serve as a binding juridical
relation between the parties.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

b) Virgilio S. David vs. Misamis occidental II Electric Cooperative, Inc., GR 194785,

July 11, 2012, 676 SCRA 367

FACTS: Virgilio S. David filed a complaint for specific performance with

damages with the Regional Trial Court. In response, Misamis Occidental II
Electric Cooperative Inc. moved for its dismissal on the ground that there was
lack of cause of action as there was no contract of sale, to begin with, or in the
alternative, the said contract was unenforceable under the Statute of Frauds.
Misamis Occidental II Electric Cooperative Inc. argued that the quotation letter
could not be considered a binding contract because there was nothing in the
said document from which consent, on its part, to the terms and conditions
proposed by David could be inferred. David knew that Misamis Occidental II
Electric Cooperative Inc.’s assent could only be obtained upon the issuance of
a purchase order in favor of the bidder chosen by the Canvass and Awards
Committee.

The RTC dismissed the complaint. It found that although a contract of sale was
perfected, it was not consummated because David failed to prove that there
was indeed a delivery of the subject item and that Misamis Occidental II Electric
Cooperative Inc. received it.

ISSUE: Whether there was a perfected contract of sale.

RULING: A perusal of the records persuades the Court to hold otherwise. The
elements of a contract of sale are, to wit: a) Consent or meeting of the minds,
that is, consent to transfer ownership in exchange for the price; b) Determinate
subject matter; and c) Price certain in money or its equivalent. It is the absence
of the first element which distinguishes a contract of sale from that of a contract
to sell.

In a contract to sell, the prospective seller explicitly reserves the transfer of title
to the prospective buyer, meaning, the prospective seller does not as yet agree
or consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, such as, in most cases, the full payment of the
purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase
price is delivered to him. In other words, the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of which prevents the
obligation to sell from arising and, thus, ownership is retained by the
prospective seller without further remedies by the prospective buyer.

Since there was a meeting of the minds, there was consent on the part of David
to transfer ownership of the power transformer to MOELCI in exchange for the
price, thereby complying with the first element. Thus, the said document cannot
just be considered a contract to sell but rather a perfected contract of sale.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

c) Starbright Sales Enterprises, Inc. vs. Philippines Realty Corporation, Msgr.

Domingo A. Cirilos, et. al ., GR 177936, January 18, 2012

FACTS: Licup wrote Msgr. Domingo A. Cirilos, offering to buy parcels of land
that The Holy See and Philippine Realty Corporation (PRC) owned. Licup
enclosed a check for P100,000.00 to "close the transaction." He undertook to
pay the balance of the purchase price upon presentation of the title for transfer
and once the property has been cleared of its occupants.
Licup wrote Msgr. Cirilos requesting that the titles to the land be instead
transferred to petitioner Starbright Sales Enterprises, Inc. (SSE). He enclosed a
new check for the same amount. SSE's representatives, Mr. and Mrs. Cu, did not
sign the letter. Msgr. Cirilos wrote SSE, requesting it to remove the occupants
on the property and, should it decide not to do this, Msgr. Cirilos would return
to it the P100,000.00 that he received. SSE would be willing to comply with
Msgr. Cirilos' condition provided the purchase price is lowered to P1,150.00 per
square meter.
He gave SSE seven days within which to buy the property at P1,400.00 per
square meter, otherwise, Msgr. Cirilos would take it that SSE has lost interest in
the same. He enclosed a check for P100,000.00 in his letter as refund of what
he earlier received. SSE wrote Msgr. Cirilos that they already had a perfected
contract of sale.

ISSUE: Whether there is a perfected contract?

RULING: Three elements are needed to create a perfected contract: 1) the

consent of the contracting parties; (2) an object certain which is the subject
matter of the contract; and (3) the cause of the obligation which is established.
Under the law on sales, a contract of sale is perfected when the seller, obligates
himself, for a price certain, to deliver and to transfer ownership of a thing or
right to the buyer, over which the latter agrees. From that moment, the parties
may demand reciprocal performance. The P100,000.00 that was given to Msgr.
Cirilos as “deposit” cannot be considered as earnest money. Where the parties
merely exchanged offers and counter-offers, no contract is perfected since they
did not yet give their consent to such offers. Earnest money applies to a
perfected sale.
SSE cannot revert to the original terms stated in Licup’s letter to Msgr. Cirilos
dated April 17, 1988 since it was not privy to such contract. The parties to it
were Licup and Msgr. Cirilos. Under the principle of relativity of contracts,
contracts can only bind the parties who entered into it. It cannot favor or
prejudice a third person. Petitioner SSE cannot, therefore, impose the terms
Licup stated in his April 17, 1988 letter upon the owners.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

d) DBP vs. Ben P. Medrano and Privatization management Office, GR 167004,

February 7, 2011, 641 SCRA 559

FACTS: Medrano was the President and General Manager of Paragon Paper
Industries, Inc. (Paragon) wherein he owned 37,681 shares. DBP sought to
consolidate its ownership in Paragon. Medrano testified that all, including
himself, agreed to sell, and all took steps to have their shares surrendered to
DBP for payment. They made proposals to DBP and the Board of Directors of
DBP approved the sale under DBP Resolution No. 4270 subject to the following
terms and conditions: (1) that prior to the implementation of the approval,
57,596 shares of Paragon’s stock issued to the stockholders concerned shall
first be surrendered to the DBP; (2) that all the parties concerned shall give their
written conformity to the arrangement; and (3) that the transaction shall be
implemented within forty-five (45) days from the date of approval (December
24, 1980); otherwise, the same shall be deemed canceled. Medrano then
indorsed and delivered to DBP all his 37,681 shares which had a value of
P2,449,265.00. DBP accepted said shares and took over Paragon.

DBP also offered Medrano a commission of P185,010.00 if the latter could

persuade all the other Paragon minority stockholders to sell their shares.
Medrano was able to convince only two stockholders, Alberto Wong and
Gerardo Ledonio III, to sell their respective shares. Thus, his commission was
reduced to P155,455.00. Thereafter, Medrano demanded that DBP pay the
value of his shares, which he had already turned over, and hisP155,455.00
commission. When DBP did not heed his demand, Medrano filed a complaint
for specific performance and damages against DBP on September 2, 1981. DBP
filed an Answer arguing that there was no perfected contract of sale as the three
conditions in DBP Resolution No. 4270 were not fulfilled.

ISSUE: Whether the contract is perfected contract of sale.

RULING: As a rule, a contract is perfected upon the meeting of the minds of the
two parties. Under Article 1475 of the Civil Code, a contract of sale is perfected
the moment there is a meeting of the minds on the thing which is the object of
the contract and on the price. A qualified acceptance or one that involves a new
proposal constitutes a counter-offer and a rejection of the original offer. A
counter-offer is considered in law, a rejection of the original offer and an
attempt to end the negotiation between the parties on a different basis.
Consequently, when something is desired which is not exactly what is proposed
in the offer, such acceptance is not sufficient to guarantee consent because any
modification or variation from the terms of the offer annuls the offer. The
acceptance must be identical in all respects with that of the offer so as to
produce consent or meeting of the minds.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

e) Sps. Tongson, et.al. vs. Emergency pawnshop Bula, Inc. et. al vs. Rachel G.
Mandap, GR 196182, September 1, 2014, 734 SCRA 76

FACTS: Napala offered to purchase from the Spouses Tongson their parcel of
land, for P3,000,000. Finding the offer acceptable, the Spouses Tongson
executed with Napala a Memorandum of Agreement. Atty. Petronilo A.
Raganas, Jr. prepared a Deed of Absolute Sale indicating the consideration as
only P400,000. When Carmen Tongson "noticed that the consideration was
very low, she [complained] and called the attention of Napala but the latter told
her not to worry as he would be the one to pay for the taxes and she would
receive the net amount of P3,000,000. Parties executed another Memorandum
of Agreement showing that the selling price of the land was only P400,000.
Napala paid P200,000 in cash to the Spouses Tongson and issued a postdated
Philippine National Bank (PNB) check in the amount of P2,800,000. PNB check
was dishonored for the reason "Drawn Against Insufficient Funds." Despite the
Spouses Tongson's repeated demands to either pay the full value of the check
or to return the subject parcel of land, Napala failed to do either.

ISSUE: Whether the contract of sale is valid

RULING: A contract is a meeting of the minds between two persons, whereby

one is bound to give something or to render some service to the other. A valid
contract requires the concurrence of the following essential elements: (1)
consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price; (2) determinate subject matter; and (3) price certain in
money or its equivalent. While no causal fraud attended the execution of the
sales contract, there is fraud in its general sense, which involves a false
representation of a fact, when Napala inveigled the Spouses Tongson to accept
the postdated PNB check on the representation that the check would be
sufficiently funded at its maturity.

In other words, the fraud surfaced when Napala issued the worthless
check to the Spouses Tongson, which is definitely not during the negotiation
and perfection stages of the sale. Rather, the fraud existed in the consummation
stage of the sale when the parties are in the process of performing their
respective obligations under the perfected contract of sale.

f) ECE Realty and Development Inc., v. Rachel Mandap, GR 196182, September

1, 2014, 734 SCRA 76

FACTS: ECE Realty and Development, Inc. (ECE) started the construction of a
condominium project called Central Park Condominium Building located along
Jorge St., Pasay City. However, printed advertisements were made indicating
therein that the said project was to be built in Makati City. Mandap (respondent)
agreed to buy a unit from the above project by paying a reservation fee and,
thereafter, downpayment and monthly installments. On June 18, 1996, Mandap
and the representatives of ECE executed a Contract to Sell. In the said Contract,
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

it was indicated that the condominium project is located in Pasay City. More
than two years after the execution of the Contract to Sell, Mandap, through her
counsel, wrote ECE a letter dated October 30, 1998 demanding the return of
P422,500 representing the payments she made, on the ground that she
subsequently discovered that the condominium project was being built in Pasay
City and not in Makati City as indicated in its printed advertisements.

Treating the letter as a form of denial of her demand for the return of the sum
she had paid, Mandap filed a complaint with the Housing and Land Use
Regulatory Board (HLURB) seeking the annulment of her contract with ECE, the
return of her payments, and damages. The HLURB dismissed the complaint,
finding that Mandap failed to show or substantiate the legal grounds that
consist of a fraudulent or malicious dealing with her by ECE. The HLURB Board
affirmed the decision. On appeal to the Office of the President, the latter
affirmed in toto the decision of the HLURB.

ISSUE: Whether the contract of sale is valid.

RULING: The Court agrees with the HLURB in condemning petitioner's

deplorable act of making misrepresentations in its advertisements and in issuing
a stern warning that a repetition of this act shall be dealt with more severely.
However, insofar as the present case is concerned, the Court agrees with the
HLURB that the misrepresentation made by petitioner in its advertisements
does not constitute causal fraud which would have been a valid basis in
annulling the Contract to Sell between ECE and Mandap.

HLURB and the Office of the President unanimously held that Mandap failed to
prove that the location of the said project was the causal consideration or the
principal inducement which led her into buying her unit in the said condominium
project. The Court finds no cogent reason to depart from the foregoing findings
and conclusion of the above agencies. Indeed, she proceeded to sign the
Contract to Sell despite information contained therein that the condominium is
located in Pasay City. This only means that she still agreed to buy the subject
property regardless of the fact that it is located in a place different from what
she was originally informed. If she had a problem with the property's location,
she should not have signed the Contract to Sell and, instead, immediately raised
this issue with ECE. But she did not. It took her more than two years from the
execution of the Contract to Sell to demand the return of the amount she paid
on the ground that she was misled into believing that the subject property is
located in Makati City. In the meantime, she continued to make payments.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

g) Helen E. Cabling vs Joselin Tan Lumapas, GR 196950, June 18, 2014, 726 SCRA
628

FACTS: Petitioner was the highest bidder in an extrajudicial foreclosure sale

conducted on December 21, 2007 over a 216-square meter property. The Final
Deed of Sale was issued by the Sheriff and the title to the property was duly
transferred. TCT No. T-14853 was issued to the petitioner.

Petitioner filed an Application8 for the Issuance of a Writ of Possession

with the RTC. RTC issued an order granting the petitioner’s application, and
subsequently issued a Writ of Possession and Notice to Vacate. Lumapas,
through counsel, filed a Motion for Leave of Court for Intervention as Party
Defendant (with Urgent Motion to Hold in Abeyance Implementation of Writ
of Possession and an Answer in Intervention, as a third party in actual
possession of the foreclosed property. She claimed that the property had
previously been sold to her by Aida Ibabao, the property’s registered owner and
the judgment debtor/mortgagor in the extrajudicial foreclosure sale, pursuant
to a Deed of Conditional Sale.

ISSUE: Whether the contract of sale is valid.

RULING: The execution of a contract of conditional sale does not immediately

transfer title to the property to be sold from seller to buyer. In such contract,
ownership or title to the property is retained by the seller until the fulfillment
of a positive suspensive condition which is normally the payment of the
purchase price in the manner agreed upon.

In the present case, the Deed of Conditional Sale between the

respondent (buyer) and the subject property’s registered owner (seller)
expressly reserved to the latter ownership over the property until full payment
of the purchase price, despite the delivery of the subject property to the
respondent. It is provided in paragraph 6 of the parties’ contract that only upon
full payment of the total sale value of P2.2 million that the seller shall execute a
deed of absolute sale in favor of the respondent.

It likewise appears from the records that no deed of absolute sale over
the subject property has been executed in the respondent's favor. Thus, the
respondent's possession from the time the subject property was "delivered" to
her by the seller cannot be claimed as possession in the concept of an owner,
as the ownership and title to the subject property still then remained with the
seller until the title to the property was transferred to the petitioner in March
2009. In order for the respondent not to be ousted by the ex parte issuance of
a writ of possession, her possession of the property must be adverse in that she
must prove a right independent of and even superior to that of the judgment
debtor/mortgagor.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

h) Obligation to Preserve the Object of the Sale(1480)

Art. 1480. Any injury to or benefit from the thing sold, after the contract has
been perfected, from the moment of the perfection of contract to the time of
delivery, shall be governed by Articles 1163 to 1166, and 1262.

This rule shall apply to the sale of fungible things, made independently and for
a single price, or without consideration of their weight, number or measure.

Should fungible things be sold for a price fixed according to weight, number or
measure, the risk shall not be imputed to the vendee until they have been
weighed, counted and delivered unless the latter has incurred in delay.

Rules on risk of loss or deterioration:

i. If the thing is lost before perfection, the seller bears the loss, in
accordance with the principle that the thing perishes with the
owner (res perit domino);
ii. If the thing is lost at the time of perfection, the contract is void or
inexistent. The legal effect is the same as when the object is lost
before the perfection of the contract of sale.
iii. If the thing is lost after perfection but before its delivery, the risk
of loss is shifted to the buyer as an exception to the rule of res
perit domino; and
iv. If the thing is lost after delivery, the buyer bears the risk of loss
following the general rule of res perit domino.

Fungibles – personal property which may be replaced with equivalent

things.

2) Sale by Sample or by Description (1481)

Art. 1481. In the contract of goods by description or by sample, the contract may
be rescinded if the bulk of the goods delivered do not correspond with the
description or the sample, and if the contract be by sample as well as by description,
it is not sufficient that the bulk of goods correspond with the sample if they do not
also correspond with the description.

The buyer shall have a reasonable opportunity of comparing the bulk with the
description or the sample.

Sale by description – where seller sells things as being of a certain kind, the
buyer merely relying on the seller’s representations or descriptions.

Sale by sample – that where the seller warrants that the bulk of the goods shall
correspond with the sample in kind, quality and character.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

Sale by description and sample – must satisfy the requirements in both, and not
in the only one.

Bulk goods – used to denote the goods as distinguished from the sample with
which they must correspond. As a whole body, must correspond substantially
with the sample and description.

a) Teresita B. Mendoza vs. Beth David, GR 14757, October 22, 2004, 441 SCRA
172

FACTS: Mendoza alleged she ordered three sets of furniture from David worth
P185,650 and paid an initial deposit of P40,650. Mendoza cancelled some of
the furniture she ordered and David agreed to the cancellation. Mendoza paid
an additional deposit of P40,000. When David delivered the dining set,
Mendoza rejected the set because of inferior material and poor quality.
Mendoza likewise rejected the sala set and the tea set for the same reason.
When Mendoza requested a refund of her total deposit of P80,650, David
refused. Mendoza then sent David a letter dated 27 May 1997 demanding the
refund of her deposit but David ignored the demand letter. The parties failed to
arrive at an amicable settlement. Thus, Mendoza filed a complaint for collection
of money with damages.

ISSUE: Is it considered as made to order or a sale by description or sample?

RULING: The transaction in this case was a “made to order” agreement. There
is nothing in the records which would show that the intent of the parties was
for a sale by sample or description. Whether a sale is by sample or description
depends upon the facts disclosing the intention of the parties. Other than
Mendoza’s bare allegations that the transaction was a sale by sample or
description, Mendoza failed to produce evidence to substantiate her claim.
The sale of furniture in this case is not a sale by sample. The term sale by sample
does not include an agreement to manufacture goods to correspond with the
pattern. In this case, the three sets of furniture were manufactured according
to the specifications provided by the buyer. Mendoza did not order the exact
replica of the furniture displayed in David’s shop but made her own
specifications on the measurement, material and quality of the furniture she
ordered.

Neither is the transaction a sale by description. Mendoza did not rely on any
description made by David when she ordered the furniture. Mendoza inspected
the furniture displayed in David’s furniture shop and made her own
specifications on the three sets of furniture she ordered.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

3) Earnest Money (1482)

Art. 1482. Whenever earnest money is given in a contract of sale, it shall be

considered as part of the price and as proof of the perfection of the contract.

Earnest money – is something of value to show that the buyer was really in
earnest, and given to the seller to bind the bargain.

Significance of Earnest money:

a. Part of the purchase price
b. As proof of the perfection of the contract

EARNEST MONEY OPTION MONEY

Part of purchase price Separate and distinct from purchase
price
Given only when there is already a Given when sale is not yet perfected
sale
Buyer is bound to pay the balance Would-be-buyer is not required to
buy
In case of non-payment, specific In case of non-payment, there can be
performance or rescission can be an action for specific performance.
filed.

4) Form for a Contract of Sale (1483)

Art. 1483. Subject to the provisions of the Statute of Frauds and of any other
applicable Statute of Frauds and of any other applicable statute, a contract of sale
may be made in writing, or by word of mouth, or may be inferred from the conduct
of the parties.

Note: The sale of piece of land or interest therein when made thru an agent is
void, not merely unenforceable, unless the agent’s authority is in writing.

Statute of Fraud

The following transaction must be in writing, otherwise contract is

unenforceable. Unless ratified by failure to object to oral acceptance of
benefits under the contract.
a. Sale of property at price not less than P500.00
b. Sale not to be performed within one year.
c. Sale of real property or interest therein.

Modes of satisfaction of the Statute of Frauds.

a. the giving of a memorandum;

b. acceptance and receipt of part of the goods (or things in action)
sold and actual receipt of the same; and
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

c. payment or acceptance at the time some part of the purchase

price

Note: Applicable only to executory contracts and not to contracts which

are totally or partially performed.

a) Lagrimas de Jesus Zamora v. Sps. Miranda, et. Al, 687 SCRA 13

FACTS: Miranda was the registered owner of the property in question.

According to petitioner, her father-in-law, Alberto Zamora, through an
encargado, Eduardo Cecilio, was in possession of the property in question. In
1952, she (petitioner) was designated by Alberto Zamora as his assistant on land
matters. The property in question was turned over to her and she was
introduced to Eduardo Cecilio. Zamora told her that the property in question
was owned by respondent Beatriz Miranda whose family was permanently
residing in Manila.

Thereafter, petitioner alleged that respondent Beatriz Miranda sold to her the
said property for the sum of P50,000.00. An acknowledgment of the receipt of
the amount of P50,000.00 was prepared, and respondent Beatriz Miranda
allegedly signed4 the same. Petitioner further claimed that after 1972, she
rented out portions of the property in question. Eduardo Cecilio allegedly
continued to be her encargado as there were squatters on the property. In
January 1996, the tenants reported to her that there were two men who went
to the property in question. On the first week of February 1996, she met Atty.
Cabebe and Mr. Joe Ang. She informed them that she was the owner of the
property in question as she bought it in 1972. After sometime, she learned that
the occupants of the property in question were being harassed and were told
to vacate. She (petitioner) went to Manila and confronted respondent Beatriz
Miranda, and told her that she would file a case in court.

Petitioner filed with the RTC an action for specific performance, annulment of
sale and certificate of title, damages, with preliminary injunction and temporary
restraining order. Petitioner prayed that the Court render judgment nullifying
the deed of sale between respondents Beatriz Miranda and Ang involving the
property covered by TCT No. T-1594; declaring petitioner to be the owner of
the parcel of land covered by TCT No. T-1594 and ordering respondent Beatriz
Miranda to execute the corresponding deed of sale in her favor; and ordering
respondents, except the Registrar of Deeds, to pay her damages, including
litigation expenses and attorney's fees.

ISSUE: Whether the contract of sale is valid.

RULING: Article 1358 of the Civil Code provides that acts and contracts which
have for their object the transmission of real rights over immovable property or
the sale of real property must appear in a public document. If the law requires a
document or other special form, the contracting parties may compel each other
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

to observe that form, once the contract has been perfected. In Fule v. Court of
Appeals, 286 SCRA 698 (1998), the Court held that Article 1358 of the Civil
Code, which requires the embodiment of certain contracts in a public
instrument, is only for convenience, and registration of the instrument only
adversely affects third parties. Formal requirements are, therefore, for the
benefit of third parties. Non-compliance therewith does not adversely affect
the validity of the contract nor the contractual rights and obligations of the
parties thereunder.

5) Recto Law: Sale of Movables on Installment (1484-1486)

Article 1484. In a contract of sale of personal property the price of which is payable
in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case, he
shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.

Article 1485. The preceding article shall be applied to contracts purporting to be

leases of personal property with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.

Article 1486. In the case referred to in the two preceding articles, a stipulation that
the installments or rents paid shall not be returned to the vendee or lessee shall be
valid insofar as the same may not be unconscionable under the circumstances.

Non-Return of Installments Paid:

a. General rule, it is required that a case of rescission or cancellation of the sale

requires mutual restitution, that is, all partial payments of price or rents must be
returned.
b. Exception: it is valid to stipulate that there should be no returning of price that
has been partially paid or the rents given, provided the stipulation is not
unconscionable.

6) Who shall bear the expenses for the Execution and Registration of the Sale (1487)

Article 1487. The expenses for the execution and registration of the sale shall be
borne by the vendor, unless there is a stipulation to the contrary.
NOTES – ASSIGNMENT NO. 3 TUAZON, BLANCH AHN A.

7) Expropriation of Property (1488)

Article 1488. The expropriation of property for public use is governed by special
laws.

Essential Requisites of Expropriation:

a. Taking by competent authority
b. Observance of due process of law

Note: Expropriation is involuntary in nature, that is, the owner may be

compelled to surrender the property after all the essential requisites have been
complied with.

If the property owner voluntarily sells the property to the government, this
would be a sale, and not an example of expropriation.

c. Taking for public use

d. Payment of just compensation – fair and full equivalent value for the loss
sustained