SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
CHAPTER 1
NATURE OF SALE
Article 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional. (1445a)
Sale – a contract whereby one of the contracting parties (seller)
obligates himself to transfer the ownership, and to deliver the
possession, of a determinate thing; and the other party (buyer)
obligates himself to pay therefor a price certain in money or its
equivalent
Nature of Obligations Created in a Sale
a. Two obligations of the seller to:
1. Transfer the ownership
2. Deliver the possession, of the subject matter
b. An obligation for the buyer to pay the price
*both are real obligations (obligations “to give”) as contrasted from a
personal obligations “to do” and “not to do.”
*personal obligations cannot be enforced through actions for specific
performance because of the public policy against involuntary
servitude;
*although the creditor can have the same executed by another at the
cost of the obligor, and the obligor’s refusal to comply can be the
basis for claims for damages
*when what is to be delivered is a determinate thing, the buyer, in
addition to the right to recover damages, may compel the seller to
make the delivery
Subject Matter of Sale
- Determinate things
- Emphasizes the fact that the obligation to deliver and transfer
ownership can be performed only with the subject matter of
becoming specific or determinate; and
- Is not meant to exclude certain generic things from validly
becoming the proper subject matter of sale, at the point of
perfection
- Determinable things
 Article 1460: the requisite that the thing be determinate is
satisfied if at the time the contract is entered into, the thing is
capable of being made determinate without the necessity of a
new or further agreement between the parties
Elements of the Contract of Sale
a. Consent: meeting of the minds to transfer ownership in
exchange for the price
b. Subject Matter
c. Price: certain in money or its equivalent
 ART. 1165
Article 1165. When what is to be delivered is a determinate
thing, the creditor, in addition to the right granted him by article
1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to
two or more persons who do not have the same interest, he shall
be responsible for any fortuitous event until he has effected the
delivery.
Page 1 of 100
PREPARED BY:
SHANON GACA
*the validity of the contract is not affected by the fact that previously
a fictitious deed of sale was executed by the parties, or by the fact of
non-performance of the obligations thereafter
*the absence of any of these essential elements negates the
existence of a perfected contract of sale
*when all the three elements are present, but there is defect or
illegality constituting any of such elements, the resulting contract is
either voidable when the defect constitutes a vitiation of consent, or
void under Art. 1409
Stages in the Life of Sale
a. Policitation, Negotiation or Preparation Stage
- Covers the period from the time the prospective contracting
parties indicate their interests in the contract to the time the
contract is perfected
b. Perfection
- Conception or birth;
- Takes place upon the concurrence of the essential elements
of the sale
c. Consummation
- Begins when the parties perform their respecting
undertaking under the contract of sale, culminating in the
extinguishment thereof
Essential Characteristics of Sale
A. Nominate and Principal
- Nominate since it has been given a particular name by law
- Principal because it can stand on its own, and does not
depend on another contract for its validity or existence
B. Consensual
- Perfected by mere consent, at the moment there is a
meeting of the minds upon the thing which is the object of
the contract and upon the price
a. Modalities Affecting “Consensuality” of Sale
- Such as in sales with assumption of mortgage, the
assumption of mortgage is a condition precedent to the
seller’s consent and therefore, without approval of the
mortgagee, the sale is not perfected
- When there has been no agreement yet on the final price
 ART. 1475:
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. (1450a)
C. Bilateral and Reciprocal
- Bilateral as it imposes obligations on both parties to the
relationship;
- Whereby the obligation or promise of each party is the
cause or consideration for the obligation or promise of the
other
- Reciprocal are those which arise from the same cause, and
in which each party is a debtor and a creditor of the other,
such that the obligation of one is dependent upon the
obligation of the other;
- To be performed simultaneously such that the performance
of one is conditioned upon the simultaneous fulfillment of
the other
- A perfected contract of sale carries the correlative duty of
the seller to delivery the property and the obligation of the
buyer to pay the agreed price
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
a. The power to rescind is implied, and such power need not be
stipulated in the contract in order for the innocent party to
invoke the remedy
b. Neither party incurs delay if the other party does not comply,
or is not ready to comply in a proper manner, with what is
incumbent upon him
c. From the moment one of the parties fulfills his obligation, the
default by the other begins, without the need of prior demand
 ARTS. 1169 and 1191
Article 1161. Civil obligations arising from criminal offenses
shall be governed by the penal laws, subject to the provisions of
article 2177, and of the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of Title XVIII of this
Book, regulating damages. (1092a)
Article 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with
articles 1385 and 1388 and the Mortgage Law.
D. Onerous
- It imposes a valuable consideration as a prestation
- Ideally a price certain in money or its equivalent
E. Commutative
- A thing of value is exchange for equal value
- Nevertheless, there is no requirement that the price be
equal to the exact value of the subject matter;
- All the is required is for the seller to accept that what is to
be received is commercial equivalent of what he gave
 ARTS. 1355 and 1470
Article 1355. Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract, unless there
has been fraud, mistake or undue influence. (n)
Article 1470. 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. (n)
F. Sale is a Form of “Title” and Not a “Mode”
- Perfection of a sale gives rise to the obligation on the part of
the seller to transfer ownership and deliver possession of
the subject matter;
- It would be deliver or tradition that is the mode to transfer
ownership and possession to the buyer
- While title (such as sale) is the juridical justification, mode
(like delivery) is the actual process of acquisition or transfer
of ownership over a thing
- Mode: the legal means or process by which dominion or
ownership is created, transferred or destroyed
- Title: only constitutes the legal basis by which to affect
dominion or ownership
#1:
Page 2 of 100
PREPARED BY:
SHANON GACA
*in determining the nature of a contract, the courts look at the intent
of the parties and not at the nomenclature used to describe it
*contracts are not defined by the parties thereto but by the principles
of law; and
*in determining the nature of a contract, the courts are not bound by
the name or title given to it by the contracting parties
#2:
*from the moment of perfection of the sale, the parties may
reciprocally demand performance, even when the parties have not
affixed their signatures to the written form of such sale, but subject
to the provisions of the law governing the form of contracts
*the actual delivery of the subject matter or payment of the price
agreed upon are not necessary components to establish the existence
of a valid sale; and
*their non-performance do not also invalidate or render “void” a sale
that has began to exist as a valid contract at perfection;
*non-performance merely becomes the legal basis for the remedies
of either specific performance or rescission, with damages in either
case
*the binding effect of a deed of sale on the parties is based on the
principle the obligations arising therefrom have the force of law
between them.
*Article 1358 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
#3:
*since a sale is constituted of reciprocal obligations, then prior
demand is not necessary to rescind the sale, since the right of
rescission of a party to an obligation under Art. 1191 is predicated on
a breach of faith by the other party who violates the reciprocity
between them’
#4:
*the stipulation in a contract of sale on the payment of the balance of
the purchase price must be deemed to cover a suspensive period
rather than a condition
#5:
*the test for compliance therewith is not objective but rather
subjective;
*so long as the party believes in all honesty that he is receiving good
value for what he transferred, then it complied with the commutative
character of sale, and would not be deemed a donation nor an
aleatory contract
*there is no requirement that the price be equal to the exact value of
the subject matter of sale;
*all that sellers believed was that they received the commutative
value of what they gave
*inadequacy of the price does not affect ordinary sale
*inadequacy of price may show vice in consent, in which case the
sale may be annulled based on vice in consent;
*but inadequacy of price on its own is not a sufficient ground for the
cancellation of a voluntary contract of sale otherwise free from
invalidating effects
#6:
*sale is merely title that creates the obligation on the part of the
seller to transfer ownership and deliver possession, but on its own
sale is not a mode that transfers ownership
*sale by itself does not transfer or affect ownership;
SALES PREPARED BY:
PRIMARY REFERENCE: VILLANUEVA-TIANSAY SHANON GACA

*the most that the sale does is to create the obligation to transfer It is barter, where the value of
ownership; the thing given as part of the
*it is tradition or delivery, as a consequence of sale, that actually consideration exceeds the
transfer ownership When Intention Does Not amount of money given or its
Appear and Consideration equivalent
Sale Distinguish from Other Similar Contracts Consists Partly in Money and It is a sale, where the value of
Partly in Another Thing the thing given as part of the
A. DONATION (ARTS. 725 and 1471) consideration equals or is less
than the amount of money
Art. 725. Act of liberality whereby a person disposes gratuitously of given
a thing or right in favor of another person, who accepts it
C. DACION EN PAGO (ARTS. 1245 and 1934)
Art. 1471. If the price is simulated, the sale is void, but the act
may be shown to have been in reality a donation, or some other act Art. 1245. One whereby property is alienated to the creditor in full
or contract. (n) satisfaction of a debt in money

DONATION SALE Art. 1934. An accepted promise to deliver something by way of

- Gratuitous contract - Onerous contract commodatum or simple loan is binding upon parties, but the
- Being a solemn contract, commodatum or simple loan itself shall not be perfected until the
although consent is also delivery of the object of the contract.
required, must comply with - Perfected by mere consent
the formalities mandated by DACION EN PAGO SALE
law for its validity - Constitutes the delivery and
*when the price of a sale is simulated, the sale may be void, “but transmission of a thing by the
the act may be shown to have been in reality a donation or some debtor to the creditor as an -
other act or contract” accepted equivalent of the
* a contract may be entered into in the form of a “sale” and may performance of the obligation
end up being governed by the Law on Donations, even when there *what actually takes place in dacion en pago is an objective
may be a formal price agreed upon, if it is simulated, and the real novation of the obligation where the thing offered as unaccepted
intention is that the subject matter is being donated to the equivalent of the performance of an obligation is considered as the
supposed buyer object of the contract of sale while the debt is considered as the
*when the donor imposes upon the donee a burden, but which is purchase price
less than the value of the thing given, there is still a donation *dacion en pago considerations are not in the realm of perfection
*when the value of the burden placed upon the donee is more of contract, but rather in the stage of consummation, for indeed
than the value of the thing given, it becomes an “onerous” dacion en pago is by definition a special mode of payment,
donation whereby the debtor offers another thing to the creditor who
accepts it as equivalent of payment of an outstanding debt
B. BARTER (ARTS. 1468, 1638, and 1641) Requisites, Dacion En Pago
1. Performance of the prestation in lieu of payment (animo
Art. 1468. If the consideration of the contract consists partly in solvendi) which may consist in the delivery of a corporeal
money, and partly in another thing, the transaction shall be thing, real right, or a credit against the third person
characterized by the manifest intention of the parties. If such 2. Some difference between the prestation due and that which is
intention does not clearly appear, it shall be considered a barter if given in substitution
the value of the thing given as a part of the consideration exceeds 3. An agreement between creditor and debtor that the obligation
the amount of the money or its equivalent; otherwise, it is a sale. is immediately extinguished by reason of the performance of
the prestation
Art. 1638. One of the parties binds himself to give one thing in
consideration of the other’s promise to give another thing
D. CONTRACT FOR A PIECE OF WORK (ARTS. 1467, 1713, and
Art. 1641. As to all matters not specifically provided for in this 1715)
Title, barter shall be governed by the provisions of the preceding
Art. 1467. A contract for the delivery at a certain price of an article
Title relating to sales. (1541a)
which the vendor in the ordinary course of his business
BARTER SALE manufactures or procures for the general market whether the same
- One of the parties bind himself is on hand at the time or not, is a contract of sale, but if the goods
to deliver a thing in are to be manufactured specially for the customer and upon his
consideration of the other’s special order, and not for the general market, it is a contract for a
undertaking to pay the price in piece of work.
money or its equivalent
Art. 1713. Contractor binds himself to execute a piece of work for
Rules to Determine Whether Contract is Sale or Barter
the employer, in consideration of a certain price or compensation.
Manifest Intention of the Even if the acquisition of a
The contractor may either employ only his labor or skill, or also
Parties thing is paid for by another furnish the material.
object of greater value than the
money component, it may still Art. 1715. The contract shall execute the work in such a manner
be a sale and not a barter, that it has the qualities agreed upon and has no defects which
when such was the intention of destroy or lessen its value or fitness for its ordinary or stipulated
the parties use. Should the work be not of such quality, the employer may

Page 3 of 100
SALES PREPARED BY:
PRIMARY REFERENCE: VILLANUEVA-TIANSAY SHANON GACA

require that the contractor remove the defect or execute another revocable, even in the
work. If the contract fails or refuses to comply with this obligation, presence of an irrevocability
the employer may have the defect removed or another work clause
executed, at the contractor's cost. (n) - The agent is not obliged to
- the buyer himself pays for
pay the price, and is merely
CONTRACT FOR A PIECE OF the price of the object, which
SALE obliged to deliver the price
WORK constitutes his main
which he may receive from
- Essence is the disposition of obligation
- Sale of service the buyer
an object - agent does not become the
- The main subject matter is - the buyer, after delivery,
owner of the thing subject of
the service to be rendered becomes the owner of the
- Constituted of real obligations the agency, even if the object
(obligation to do), would not subject matter
and would be the proper is delivered to him
allow an action for specific - the agent who effects the
subject of an action for
performance in case the sale assumes no personal
specific performance
contractor refuses to comply liability as long as he acts - the seller warrants
with his obligation within his authority and in
- Not governed by Statute of the name of the principal
-
Frauds - because of the fiduciary
*whether the contract be one of sale or one for a piece of work, a nature of the relationship, the
transfer of ownership is involved and a party necessarily walks agent is disqualified from
away with an object receiving any personal profit
*the distinction between a sale and a contract for work, labor, and -
from the transaction covered
materials is tested by the inquiry of whether the thing transferred by the agency, and any profit
is one not in existence and which never would have existed but for received should pertain to the
the order of the party desiring to acquire it, or a thing which would principal
have existed and been the subject of sale to some other person, - Valid and enforceable in
even if the order had not been given - Must comply with the Statute
whatever form it may be
*the test of “special orders” is not one of timing, or habit, but of Frauds for enforceability
entered into
actually must be drawn from the nature of the work to be *a contract is what the law defines it to be, and not what it is
performed and the products to be made; called by the contracting parties
*the products must not be ordinary products of the manufacturer, *in agency, the agent is exempted from all liability in the
and they would require the use of extraordinary skills or discharge of his commission provided he acts in accordance with
equipment, if to be performed by a manufacturer the instructions received from his principal
*in a sale, only when the subject matter is indeterminate or
generic, is the buyer granted the remedy under Art. 1165 to have
F. LEASE (ARTS. 1484 and 1485)
the subject matter done by a third party with cost chargeable to
the seller Article 1484. In a contract of sale of personal property the price of
Two Tests for Distinction: which is payable in installments, the vendor may exercise any of
1. Manufacturing in the ordinary course of business to cover the following remedies:
sales contracts (1) Exact fulfillment of the obligation, should the vendee fail to
2. Manufacturing upon special order of customers, to cover pay;
contracts for piece-of-work (2) Cancel the sale, should the vendee's failure to pay cover two
or more installments;
E. AGENCY TO SELL OR TO BUY (ART. 1466) (3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two or
Article 1466. In construing a contract containing provisions more installments. In this case, he shall have no further action
characteristic of both the contract of sale and of the contract of against the purchaser to recover any unpaid balance of the price.
agency to sell, the essential clauses of the whole instrument shall Any agreement to the contrary shall be void. (1454-A-a)
be considered.
Article 1485. The preceding article shall be applied to contracts
AGENCY TO SELL OR TO BUY SALE purporting to be leases of personal property with option to buy,
- A person binds himself to when the lessor has deprived the lessee of the possession or
render some service or to do enjoyment of the thing. (1454-A-a)
something in representation
or on behalf of the principal, LEASE SALE
with the consent or authority - The lessor binds himself to -
of the latter give to another (lessee) the
- One that essentially enjoyment or use of a thing
establishes a representative for a price certain, and for a
and highly fiduciary capacity period which may be definite
in the person of the agent, or indefinite
involving obligations to do (in *a conditional sale may be made in the form of a “lease with
behalf of the principal) option to buy” as a device to circumvent the provisions of the
- Because it covers an - Not revocable Recto Law
underlying fiduciary
relationship, is essentially

Page 4 of 100
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
CHAPTER 2
PARTIES TO THE CONTRACT OF SALE
GENERAL RULE: (ART. 1489)
Article 1489. All persons who are authorized in this Code to
obligate themselves, may enter into a contract of sale, saving the
modifications contained in the following articles.
General Rule on Capacity of the Parties
 Any person who has “capacity to act,” or “the power to do acts
with legal effects,” or more specifically with the power to obligate
himself, may enter into a contract of sale, whether as seller or as
buyer
 For natural persons: the age of majority begins at 18 years,
upon which age they have the capacity to act
 For juridical persons (corporations, partnerships, and
associations): a juridical personality separate and distinct from
that of the shareholders, partners, or members, is expressly
recognized by law, with full “juridical capacity” to obligate
themselves and enter into valid contracts
Minor, Insane, or Demented Persons, and Deaf-Mutes (who do
not know how to write)
 Have no legal capacity to contract; and
 Therefore, disqualified from being parties to a sale
 Contract entered into by them are NOT void, but merely voidable,
subject to annulment or ratification;
 The action for annulment cannot be instituted by the person who
is capacitated since he is disqualified from alleging the incapacity
of the person with whom he contracts
 Contracts entered into during lucid intervals by insane or
demented persons are generally valid;
 Whereas, those entered into in a state of drunkenness or
during a hypnotic spell, are voidable
 When the defect of the contract consists in the incapacity of one
of the parties, the incapacitated person is not obliged to make
any restitution, except insofar as he has been benefited by the
thing or price received by him
 ARTS. 1327, 1397, and 1399
Article 1327. The following cannot give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not
know how to write. (1263a)
Article 1397. The action for the annulment of contracts may be
instituted by all who are thereby obliged principally or
subsidiarily. However, persons who are capable cannot allege the
incapacity of those with whom they contracted; nor can those
who exerted intimidation, violence, or undue influence, or
employed fraud, or caused mistake base their action upon these
flaws of the contract.
Article 1399. When the defect of the contract consists in the
incapacity of one of the parties, the incapacitated person is not
obliged to make any restitution except insofar as he has been
benefited by the thing or price received by him. (1304)
1. Necessaries
- Everything indispensable for sustenance, dwelling, clothing,
medicine, education, and transportation, in keeping with the
financial capacity of the family
Page 5 of 100
PREPARED BY:
SHANON GACA
 Where necessaries are sold and delivered to a minor or other
person without capacity to act, he must pay a reasonable
price therefore, and the resulting sale is valid, not merely
voidable
 Two Elements Needed
a. Perfection of the sale
b. Delivery of the subject necessaries
 If there is only perfection at the time the case reaches
litigation, the sale is not void, but voidable for vice in consent
 ARTS. 1489 and 290
Article 1489. All persons who are authorized in this Code to
obligate themselves, may enter into a contract of sale, saving the
modifications contained in the following articles.
Where necessaries are those sold and delivered to a minor or
other person without capacity to act, he must pay a reasonable
price therefor. Necessaries are those referred to in article 290.
(1457a)
Article 290. Support is everything that is indispensable for
sustenance, dwelling, clothing and medical attendance, according
to the social position of the family.
Support also includes the education of the person entitled to be
supported until he completes his education or training for some
profession, trade or vocation, even beyond the age of majority.
(142a)
2. Senility and Serious Illness
 GENERAL RULE: a person is not incompetent to contract
merely because of advanced years or by reason of physical
infirmities;
 However, when such age or infirmities have impaired the
mental faculties so as to prevent the person from properly,
intelligently, and firmly protecting her property rights then
she is undeniably incapacitated
 ARTS. 24 and 1332
Article 24. In all contractual, property or other relations, when
one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age
or other handicap, the courts must be vigilant for his protection.
Article 1332. When one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former. (n)
Sales By and Between Spouses
1. Sales With Third Parties
 ART. 73, Family Code
- Either spouse may exercise any legitimate profession,
occupation, business or activity without the consent of
the other, and the latter may object only on valid,
serious and moral grounds;
- In cases of disagreements, the courts shall decide
whether or not the objection is proper, and make rulings
on the benefits, depending on whether the benefits had
accrued to the family prior to the objection or thereafter.
- If benefits accrued prior to the objection, the resulting
obligation shall be enforced against the separate
property of the spouse who has not obtained consent;
- Otherwise, the same shall be chargeable against the
community property, without prejudice to the creditors
who acted in good faith
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
 Law on Sales
- A spouse may, without the consent of the other spouse,
enter into sale transactions in the regular or normal
pursuit of their profession, vocation, or trade
 ARTS. 96 and 124:
- The administration and enjoyment of the community
property or the conjugal property shall belong to both
spouses jointly;
- In case of disagreement, the husband’s decision shall
prevail, subject to the wife seeking remedy from the
courts, which must be availed of within five (5) years
from the date of the contract
- The disposition or encumbrance of community or
conjugal property shall be void without authority of the
court or the written consent of the other spouse;
- In such case, the transaction shall be construed as a
continuing offer on the part of the consenting spouse
and the third person, and may be perfected as a binding
contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn
by either or both offerors
 The sale by the husband of the property belonging to
the conjugal partnership without the consent of the wife
when there was no showing that the latter was
incapacitated, was held void ab initio, because it was in
contravention of the mandatory requirements of Art.
166
 However, exception is if such sale is necessary to
answer for conjugal liabilities
2. Sales Between Spouses
 ART. 1490, Civil Code
- Spouses cannot sell property to each other, except:
a. When a separation of property was agreed upon in
the marriage settlements
b. When there has been a judicial decree for the
separation of property
- Applicable to sales in legal redemption, compromises,
and renunciations
 ARTS. 133, 1492, Civil Code; Sec. 87, Family Code
Article 133. Every donation between the spouses during
the marriage shall be void. This prohibition does not apply
when the donation takes effect after the death of the donor.
Neither does this prohibition apply to moderate gifts which
the spouses may give each other on the occasion of any
family rejoicing. (1334a)
Article 1492. The prohibitions in the two preceding articles
are applicable to sales in legal redemption, compromises
and renunciations. (n)
Art. 87. Every donation or grant of gratuitous advantage,
direct or indirect, between the spouses during the marriage
shall be void, except moderate gifts which the spouses may
give each other on the occasion of any family rejoicing. The
prohibition shall also apply to persons living together as
husband and wife without a valid marriage. (133a)
a. Status of Prohibited Sales Between Spouses
 Contracts entered into in violation of Arts. 1490 and 1492
are NOT merely voidable, but have been declared as being
null and void
 NOT every person is given the right to assail the validity of
the transaction
Specific Incapacity Mandated by Law (Art. 1491)
Page 6 of 100
PREPARED BY:
SHANON GACA
- Spouses themselves, since they are parties to an illegal
act, cannot avail themselves of the illegality of the sale
on the ground of pari delicto
- Creditors who became such only after the transaction,
cannot attack the validity of the sale, for it cannot be
said that they have been prejudiced by the transaction
- Only persons who can question the sale are the following
- Heirs of either of the spouses who have been
prejudiced;
- Prior creditors; and
- The State when it comes to the payment of the proper
taxes due on the transactions
b. Rationale for Prohibition
1. Prevent a spouse defrauding his creditors by transferring
his properties to the other spouse
2. Avoid a situation where the dominant spouse would
unduly take advantage of the weaker spouse, thereby
effectively defrauding the latter
3. Avoid an indirect violation of the prohibition against
donations between spouses under Art. 133 of the Civil
Code
4. A sale is not possible because having the same estate
between themselves, a sale is not possible because
there simply cannot be a purchase of what a party-buyer
already owns.
- ART. 133, Civil Code
- Which declares void every donation between spouses
during marriage
- ART. 87, Family Code
- The prohibition shall also apply to persons living
together as husband and wife without a valid marriage
- EXCEPTION:
- A donation between spouses governed by the
complete separation of property regime, being a
gratuitous contract, would necessarily reduce the
estate of the donor and increase the estate of the
done;
- While a sale between such spouses, being an onerous
and commutative contract, would result in the
separate estates of the spouses being of the same
value as before the sale and no fraud could result,
either to the spouses or to their creditors
c. Rationale for Exceptions to Prohibition under Art. 1490
- Should apply more to spouses governed by the absolute
community of property regime, because the evils sought
to be avoided by the law cannot for practical purposes
happen in such regime
 Two Ways by which a Complete Separation of
Property Regime Could Exist Between Married
Spouses:
a. By the execution of a pre-nuptial agreement
stipulating such property regime to apply;
b. By the spouses going to court to ask for the
dissolution of the prevailing conjugal partnership of
gains or absolute community of property regimes
3. Applicability of Incapacity to Common Law Spouses
 Although under Art. 1490 the husband and the wife cannot
sell property to one another as a rule which, for policy
consideration and the dictates of morality require that the
prohibition apply to common-law relationship
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
1. The guardian, the property of the person or persons who may
be under his guardianship; [MAY BE RATIFIED]
2. Agents, the property whose administration or sale may have
been intrusted to them, unless the consent of the principal has
been given; [MAY BE RATIFIED]
3. Executors and administrators, the property of the estate under
administration; [MAY BE RATIFIED]
4. Public officers and employees, the property of the State or of
any subdivision thereof, or of any government-owned or
controlled corporation, or institution, the administration of
which has been intrusted to them; this provision shall apply to
judges and government experts who, in any manner
whatsoever, take part in the sale; [VOID]
5. Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with
the administration of justice, the property and rights in litigation
or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions;
[VOID]
6. Lawyers, with respect to the property and rights which may be
the object of any litigation in which they may take part by
virtue of their profession; [VOID]
7. Any others specially disqualified by law. (1459a)
 ART. 1492
Article 1492. The prohibitions in the two preceding articles are
applicable to sales in legal redemption, compromises and
renunciations. (n)
Legal Status of Contracts Entered into in Violation of Articles
1491 and 1942
- Art. 1491: only purchases made by agents of the property
covered by the agency are valid and binding when made with the
express consent of their principals;
- Consent or knowledge by the persons who is sought to be
protected by the law, cannot validate any of the transactions
covered
- Art. 1491 does not also state the legal consequences of having
entered into contracts in violation of said article;
- We must limit ourselves to classifying as void all acts done
contrary to the express prohibition of the statute
a. A Different Form of “Ratification”
- Contracts entered into by guardians, agents, administrators
and executors may be ratified by means of and in “the form
of a new contract, in which case its validity shall be
determined only by the circumstances at the time of
execution of such new contract;
- The ratification or second contract would then be valid from
its execution;
- However, it does not retroact to the date of the first
contract
FUNCTIONAL DIFFERENCE BETWEEN THE TWO GROUPS OF
CONTRACTS DECLARED VOID
1st GROUP 2nd GROUP
- After the inhibition has - Even when the inhibition has
ceased, the only real wrong ceased, there exists not only
that subsists is the private the private wrong, but in fact
wrong to the ward, principal, a public wrong, which is
or estate damage to public service or
to the high esteem that
should be accorded to the
administration of justice in
our society
- Therefore, if private parties - Therefore, even when the
Page 7 of 100
PREPARED BY:
SHANON GACA
parties seek to “ratify” the
private wrong by executing a
new contract between
wish to condone the private
themselves when the
wrongs among themselves,
inhibition no longer exists,
the State would not stand in
such cannot resurrect and
the way
validate a relationship, which
continues to be tainted with a
public wrong
b. Proper Party to Raise Issue of Nullity
 ART. 1491: any person may invoke the inexistence of the
contract whenever juridical effects found thereon are
asserted against him
 If the contract has already been fulfilled, an action is
necessary to declare its existence since nobody can take the
law into his own hands
 If the contract is still fully executory, no party need bring an
action to declare its nullity;
 But if any party should bring an action to enforce it, the
other party can simply set up the nullity as defense
c. Fraud or Lesion Not Relevant for Nullity
 Existence of fraud or lesion is NOT a factor at all in the
application of the prohibitions; and
 The proof that the person disqualified has paid more than
an adequate consideration for the property he purchased is
no defense in an action to declare the sale void
 RATIONALE FOR THE ABSOLUTE DISQUALIFICATIONS
- That each of such relationships is a trust of the highest
order, and the trustee cannot be allowed to have any
inducement to neglect his ward’s interest
1. Agents
 Brokers do not come within the coverage of the prohibition
as their authority consist merely in looking for a buyer or a
seller, and to bring the former and the latter together to
consummate the transaction; therefore, they are not
prohibited to but for themselves
 Broker
- one who is engaged, for others, on a commission,
negotiating contracts relative to property with the
custody of which he has no concern
- the negotiation between other parties, never acting in
his own name but in the name of those who employed
him
2. Guardian, Administrators, and Executors
 Necessarily officers of the courts since they are appointed or
confirmed to such position pursuant to judicial proceedings
 The prohibition cannot be made to apply unless there was
proof that a third-party buyer was a mere intermediary of
the guardian, or that the latter had previously agreed with
the third-party buyer to buy the property for the disqualified
guardian
a. Hereditary Rights Not Covered
- Hereditary rights pertain immediately to the heirs upon
the death of the decedent and do not form part of the
estate under the administration of the administrator or
executor
3. Judges, Justices, and Those Involved in the
Administration of Justice
- It is not required that some contest or litigation over the
property itself should have been tried by the said judge;
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
- Such property is in litigation from the moment that it
became subject to the judicial action of the judge (e.g. levy
on execution)
- Applies only to the sale or assignment of the property under
litigation, which must take place “during the pendency of
the litigation involving the property”
4. Attorneys
- in view of the fiduciary relationship involved
- intended to curtail any undue influence of the lawyer upon
his client
- applies only to attorneys when the property they are buying
is the subject of litigation; and
- does NOT apply to a sale to attorneys who were not the
defendant’s attorneys in that case
- does NOT apply to a lawyer who acquitted the property prior
to the time he intervened as counsel in an ejectment suit
involving such property
- cannot cover the assignment of the property given in
judgment made by a client to an attorney, who has not
taken part in the case wherein said judgment was rendered,
made in payment of professional services in other cases
- applies only during the period the litigation is pending
a. Contingent Fee Arrangements
 Prohibition does NOT apply to a contingent fee based on
the value of property involved in litigation and therefore
does NOT prohibit a lawyer from acquiring a certain
percentage of the value of the properties in litigation that
may be awarded to his client;
 Since the payment of said fee is not made during the
pendency of the litigation but only after judgment has
been rendered in the case handled by the lawyer
 A lawyer may have a lien over funds and property of his
client and may apply so much thereof as may be
necessary to satisfy his lawful fees and disbursements
 It is simply an obligation subject to a suspensive condition
 Permitted because they redound to the benefit of the poor
client and the lawyer especially in cases where the client
has meritorious cause of action, but no means with which
to pay for legal services unless he can, with the sanction
of law, make a contract for a contingent fee to be paid out
of the proceeds of the litigation
CHAPTER 3
SUBJECT MATTER
Requisites of Valid Subject Matter:
a) It must be existing, having potential existence, a future
thing, or even “contingent” or subject to a resolutory
condition
It must be a possible thing
Article 1347. All things which are not outside the commerce of
men, including future things, may be the object of a contract. All
rights which are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future inheritance except in
cases expressly authorized by law.
All services which are not contrary to law, morals, good customs,
public order or public policy may likewise be the object of a
contract.
Article 1348. Impossible things or services cannot be the object
of contracts.
Page 8 of 100
PREPARED BY:
SHANON GACA
Article 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."
There may be a contract of sale of goods, whose acquisition by
the seller depends upon a contingency which may or may not
happen.
b) It must be licit
Article 1347. All things which are not outside the commerce of
men, including future things, may be the object of a contract. All
rights which are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future inheritance except in
cases expressly authorized by law.
All services which are not contrary to law, morals, good customs,
public order or public policy may likewise be the object of a
contract.
Article 1411. When the nullity proceeds from the illegality of the
cause or object of the contract, and the act constitutes a criminal
offense, both parties being in pari delicto, they shall have no
action against each other, and both shall be prosecuted.
Moreover, the provisions of the Penal Code relative to the disposal
of effects or instruments of a crime shall be applicable to the
things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty;
but the innocent one may claim what he has given, and shall not
be bound to comply with his promise. (1305)
Article 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules
shall be observed:
(1) When the fault is on the part of both contracting parties,
neither may recover what he has given by virtue of the
contract, or demand the performance of the other's
undertaking;
(2) When only one of the contracting parties is at fault, he
cannot recover what he has given by reason of the contract, or
ask for the fulfillment of what has been promised him. The
other, who is not at fault, may demand the return of what he
has given without any obligation to comply his promise. (1306)
Article 1459. The thing must be licit and the vendor must have a
right to transfer the ownership thereof at the time it is delivered.
Article 1575. The sale of animals suffering from contagious
diseases shall be void.
A contract of sale of animals shall also be void if the use or
service for which they are acquired has been stated in the
contract, and they are found to be unfit therefor.
c) It must be determinate, or at least determinable
Article 1460. A thing is determinate when it is particularly
designated or physical segregated from all others of the same
class.
The requisite that a thing be determinate is satisfied if at the time
the contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further agreement
between the parties.
*lack of any requisite results in non-existent sale;
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
*the situation would either engender a “no contract” situation, or a
“void contract of sale”
*when the first requisite for a valid subject matter is not present (i.e.
must be a possible thing), there is no inequity to finding the resulting
contract of sale as void (as distinguished from a “no contract
situation”, because the innocent party may still be able to recover
under the principle of unjust enrichment
1. Subject Matter Must be a “Possible Thing”
 The thing may be existing or non-existing at the time of
perfection of the contract of sale, since Article 1461 explicitly
states that –
“things having a potential existence may be the object of
the contract of sale”
In addition, the second paragraph of Article 1462 provides –
“there may be a contract of sale of goods, whose acquisition
by the seller depends upon a contingency which may or
may not happen”
 The proper consideration of the first requisite 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 rather on 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
buyer reasonable certainty of being able to compel compliance
by seller of his real obligation to deliver
 When the existence of a thing is subject to a condition, then it
remains a “possible thing,” for it has the capacity, not
certainty, of coming into existence if subject to a suspensive
condition, or it already exists but may cease to exist if it is
subject to a resolutory condition
 Requiring that the subject matter of a valid sale must be a
possible thing would ensure demandability and enforceability
of the underlying obligation of the seller to deliver
a. Emptio Rei Speratae (Arts. 1347 and 1461)
Article 1347. All things which are not outside the commerce of
men, including future things, may be the object of a contract. All
rights which are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future inheritance except in
cases expressly authorized by law.
All services which are not contrary to law, morals, good customs,
public order or public policy may likewise be the object of a
contract.
Article 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.
The sale of a vain hope or expectancy is void.
 Strictly a contract covering future things, and subject to a
suspensive condition that the subject matter will come into
existence;
 If 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”
 Covers only contracts of sale whose subject matter are
determinate or specific, and has no application to
determinable generic things since the condition that they
must come into existence is wholly irrelevant, for generic
subject matters are never lost
Page 9 of 100
PREPARED BY:
SHANON GACA
Sibal v. Valdez
Pending crops which have potential existence may be the valid
subject matter of sale, and may be dealt with separately from the
land on which they grow.
Pichel v. Alonzo
Where the issue was whether the grantee of a public land under the
Public Land Act had violated the statutory prohibition from disposing,
assigning or encumbering the land, held no such violation of the law,
since the subject matter of the contract of sale were fruits of the
coconut trees on the land over specified years, and the same could be
dealt with separately from the land itself, and even from the coconut
trees themselves.
Mananzala v. Court of Appeals
The sale of a lot by a seller who is yet to acquire full ownership from
the government agency is a valid sale since it involves the sale of a
“future thing;” but really it was a sale subject to the condition that
the seller will acquire the property.
b. Emptio Spei (Art. 1461)
Article 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.
The sale of a vain hope or expectancy is void.
 Typifies a situation where the “commutativeness” of a
contract of sale seems not to be present
EXAMPLE:
Sale of a lotto 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 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
c. Subject to a Resolutory Condition (Art. 1465)
Article 1465. Things subject to a resolutory condition may be
the object of the contract of sale.
Article 1190. When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each other what they
have received.
In case of the loss, deterioration or improvement of the thing, the
provisions which, with respect to the debtor, are laid down in the
preceding article shall be applied to the party who is bound to
return.
As for the obligations to do and not to do, the provisions of the
second paragraph of article 1187 shall be observed as regards the
effect of the extinguishment of the obligation.
Gaite v. Fonacier
A contract of sale being an onerous and commutative contract, the
rules of interpretation would incline the scales in favor of “the greater
reciprocity of interests,” and unless the stipulation is clear a clause
should be interpreted as a term rather than as a condition.
Nonetheless, subject the object of sale to either a suspensive or a
resolutory condition does not undermine the commutative nature of a
contract of sale, essentially because the existence of such a condition
has tempered the amount of the consideration or price that could be
demanded from the buyer.
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
d. Subject Matter is the Nexus of the Sale
 The essence of a contract of sale is the meeting of minds that
bring about the obligation to transfer the ownership, and
deliver the possession, of subject matter
2. Subject Matter Must be Licit
 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
 the sale of animals suffering from contagious diseases, and
those which are unfit for the use of service for which they are
acquired are VOID
 the sale of future inheritance is also VOID
 Sale of future hereditary rights presumes the existence of a
contract of sale between the parties;
 Waiver of an acquired hereditary rights 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
 the illegality of the subject matter, even though it is
determinate and existing and capable of actual delivery,
undermines the demandability of the underlying obligation of
the seller to deliver, and renders the sale VOID
a. Sales Declared Illegal by Law
 Where the subject matter is prohibited
Quijada v. Court of Appeals
Did not consider as void the sale by a donor of land previously
donated to a local government unit under a resolutory condition as a
sale “outside the commerce of men, in that patrimonial properties of
a local government unit, especially those conditionally owned by said
unit, as being outside the commerce of men.
The objects referred to as outside the commerce of man are those
which cannot be appropriated, such as the open seas and the
heavenly bodies.
3. Subject Matter Must be “Determinate,” or “at least
Determinable”
a. Determinate Subject Matter
 When it is particularly designated or physically segregated
from all others of the same class
 The seller’s obligation to deliver, as well as the basis for
breach, are certain and unequivocable
b. “Determinable” Subject Matter (Arts. 1246 and 1409(6))
Article 1246. When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and circumstances
have not been stated, the creditor cannot demand a thing of
superior quality. Neither can the debtor deliver a thing of inferior
quality. The purpose of the obligation and other circumstances
shall be taken into consideration.
Article 1409. The following contracts are inexistent and void
from the beginning:
(6) Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained;
 (1) If the subject matter agreed upon is capable of being
made determinate (“capacity to segregate” test)
 (2) Without the necessity of a new or further agreement
between the parties (“no further agreement” test)
Page 10 of 100
PREPARED BY:
SHANON GACA
 Generic because it has not, at the perfection, been physically
segregated nor particularly designated from the rest of its
kind
 The requirement that a sale must have for its object a
determinate thing is fulfilled as long as, at the time the
contract is entered into, the object of the sale is capable of
being made determinate without the necessity of a new or
further agreement between the parties
 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
c. Test of “Determinability” is the Object Upon Which the
Minds Met, and Not the Covering Deed
 One seeks to sell or buy a real property, one sells or buys the
property as he sees it in its actual setting and by its physical
metes and bounds, and not by the mere lot number assigned
to it in the certificate of title
d. When Quantity of Subject Matter Not Essential for
Perfection (Art. 1349)
Article 1349. The object of every contract must be determinate
as to its kind. The fact that the quantity is not determinate shall
not be an obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a new
contract between the parties. (1273)
 The meeting of the minds on the identity, the nature and
quality, of the subject matter is essential for the purpose of
perfection of sale;
 It is what makes the subject matter determinate, or at least
determinable
 When the nature and quantity of the subject matter is agreed
upon, the subject matter, although essentially generic or
fungible, has complied with the characteristic of being
determinable, since the parties know more or less the exact
nature of the object or objects which will become the subject
of performance “without need of further agreement”
 Logically, the actual quantity of goods as subject matter of
sale would also be essential in the meeting of the minds, since
quantity constitutes an essential ingredient to achieve the
requisite of the goods being determinate or determinable;
 The meeting of the minds on the quantity of the goods as
subject matter is necessary for the validity of the sale
 The fact that the quantity is not determinate shall not be an
obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a new
contract between the parties
National Grains Authority Doctrine
Specific quantity of the subject matter is not important when it is still
possible to determine the quantity “without the need of a new
contract between the parties”
*generic objects may be the proper object of a contract of sale,
provided that they fulfill the characteristic of being “determinable” at
the point of perfection
e. Generic Non-Determinable Objects
Article 1246. When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and circumstances
have not been stated, the creditor cannot demand a thing of
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
superior quality. Neither can the debtor deliver a thing of inferior
quality. The purpose of the obligation and other circumstances
shall be taken into consideration.
 Since “determinable” objects may be the valid subject matter
of a sale, then even generic things that fall within said
definition can validly support a contract of sale
 Although the sale of determinable generic thing is valid, the
obligation to deliver the subject matter can only be complied
with when the subject matter has been made determinate,
either by physical segregation or particular designation;
before such time, even the risk of loss over the subject matter
does not arise, since by definition, generic object are never
lost
f. 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
g. Sale of Undivided Interest (Art. 1463)
Article 1463. The sole owner of a thing may sell an undivided
interest therein.
h. Sale of Undivided Share in Mass (Art. 1464)
Article 1464. In the case 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 to buy a definite number, weight or
measure of the goods in the mass, and though the number,
weight 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 owner in
common of 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 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.
Gaite v. Fonacier
When parties to a sale covering a specific mass had not made any
provisions in their contract for the measuring or weighing of the
subject matter sold, and the price agreed upon was not based on
such measurement, then “the subject matter of the sale is, therefore,
a determinate object, the mass and not the actual number of units or
tons contained therein, so that all that is required of the seller was to
deliver in good faith to his buyer all of the ore found in the mass,
notwithstanding that the quantity delivered is less than the amount
estimated.
i. Sale of Mortgaged Property
Pineda v. Court of Appeals
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, and noted that the law even considers void a stipulation
forbidding the owner from alienating the mortgaged immovable.
4. Seller’s Ability to Transfer Ownership Required at Time of
Deliver, Not at Perfection
Article 1459. The thing must be licit and the vendor must have a
right to transfer the ownership thereof at the time it is delivered.
Page 11 of 100
PREPARED BY:
SHANON GACA
Article 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."
There may be a contract of sale of goods, whose acquisition by the
seller depends upon a contingency which may or may not happen.
Article 1505. Subject to the provisions of this Title, where 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 the owner of the goods is by his conduct precluded from
denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any other
provision of law enabling the apparent owner of goods to dispose
of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of
sale or under the order of a court of competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or markets,
in accordance with the Code of Commerce and special laws. (n)
a. Subsequent Acquisition of Title by Non-Owner Seller –
Title Passes to Buyer by Operation of Law (Art. 1434)
Article 1434. When a person who is not the owner of a thing
sells or alienates and delivers it, and later the seller or grantor
acquires title thereto, such title passes by operation of law to the
buyer or grantee.
b. Acquisition by the Buyer May Even Depend on
Contingency (Art. 1462)
Article 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."
There may be a contract of sale of goods, whose acquisition by
the seller depends upon a contingency which may or may not
happen.
CHAPTER 4
PRICE AND OTHER CONSIDERATION
Price – the sum stipulated as the equivalent of the thing sold and
every incident taken into consideration for the fixing of the price put
to the debit of the buyer and agreed to by him
Requisites of Valid Subject Matter:
1. It must be 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
Article 1471. If the price is simulated, the sale is void, but the
act may be shown to have been in reality a donation, or some
other act or contract.
 When Price is Simulated
 VOID
 If there was no intent by the parties at the time of
perfection to pay and to receive the price stipulated, then it
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
is a wholly simulated price, and the underlying contract of
sale is void for lack of consideration
 Where the nullity arises from the illegality of the
consideration or the purpose of the contract
 When Price is False
 VALID subject to REFORMATION
 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
Article 1353. The statement of a false cause in contracts shall
render them void, if it should not be proved that they were
founded upon another cause which is true and lawful. (1276)
Article 1354. Although the cause is not stated in the contract,
it is presumed that it exists and is lawful, unless the debtor
proves the contrary.
 Effect of Non-Payment of Price
 DOES NOT render the sale inexistent or invalid;
 Merely gives rise to a right in favor of the seller to either
demand specific performance or rescission of the contract of
sale
 Simulation of Price Affects Delivery of Subject Matter
 When a contract of sale is fictitious and therefore void and
inexistent, no title over the subject matter of the sale can
be conveyed
 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
2. It must be in Money or its Equivalent
 Requires that “equivalent” be something representative of
money (e.g. check, draft)
 A contract is not a true sale where the price consists of
services or prestation
 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
Article 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership and to deliver
a determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
A contract of sale may be absolute or conditional.
Article 1468. If the consideration of the contract consists partly
in money, and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such
intention does not clearly appear, it shall be considered a barter if
the value of the thing given as a part of the consideration exceeds
the amount of the money or its equivalent; otherwise, it is a sale.
3. It must be Certain or Ascertainable
 When it has been expressed and agreed in terms of specific
pesos and/or centavos
 Money represents the best model of valuable consideration
 That it be so with reference to another thing certain
 That the determination thereof be left to the judgment of a
specified person(s)
Article 1469. In order that the price may be considered certain,
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 special person or persons.
Page 12 of 100
PREPARED BY:
SHANON GACA
Should such person or persons be unable or unwilling to fix it, the
contract shall be inefficacious, unless the parties subsequently
agree upon the price.
If the third person or persons acted in bad faith or by mistake,
the courts may fix the 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 the buyer, as the case may be.
Article 1472. The price of securities, grain, liquids, and other
things shall also be 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 when an amount is fixed above
or below the price on such day, or in such exchange or market,
provided said amount be certain. (1448)
Article 1473. The fixing of the price can never be left to the
discretion of one of the contracting parties. However, if the price
fixed by one of the parties is accepted by the other, the sale is
perfected.
 Price Fixed by Third Party
 VALID
 The fixing of price cannot be validly left to the discretion of
one of the contracting parties
 When the third party fixes the price in bad faith or by
mistake
 Parties to the contract can seek court remedy to fix the
price
 Fixing of Subject Matter by Third Party
 NOT allowed
 When adopted, would not give rise to a binding and valid
sale
 The obligation to pay the price is essentially a fungible
obligation; the price which is the subject of the obligation of
the buyer is essentially generic, therefore, the designation
of a third party to set the price is allowed
 The obligation to deliver the subject matter and the title
thereto can only be compelled with at the point when the
thing is either physically segregated or particularly
designated, and it is not a generic obligation, therefore, its
designation cannot be left to the will of a third party who
may choose a subject matter beyond the capacity of the
seller to comply with his obligations to deliver the same
 Price Ascertainable in Reference to Other Things Certain
 Effect of “Unascertainability” of Price
 Where the price cannot be determined in accordance with
any of the preceding rules, the contract of sale is
INEFFICACIOUS;
 The law does not use the term void, because of the implied
acknowledgment 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
Article 1474. 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 therefor. What is a reasonable
price is a question of fact dependent on the circumstances of
each particular case.
4. Manner of Payment of Price Must be Agree Upon
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
 Since it is part of the prestation of the contract, and without
such there can be no valid sale, nor can an action for specific
performance be made against the alleged seller
 Disagreement on the manner of payment is tantamount to a
failure to agree on the price, and no contract of sale is
deemed to have been perfected
 Because of the time value of the money
Navarro v. Sugar Producer’s Corp.
When the manner of payment of the purchase price is discussed after
acceptance, then such acceptance did not produce a binding and
enforceable contract of sale; there was therefore no complete
meeting of the minds and there is no basis to sue on a contract that
does not exist.
Art. 1179. Every obligation whose performance does not depend
upon a future or uncertain even, or upon a past event unknown to
the parties, is demandable at once.
Every obligation which contains a resolutory condition shall also be
demandable, without prejudice to the effects of the happening of the
event.
*in the absence of any stipulation or agreement or actuation
indicating that a different term of payment would be applicable and
for which a meeting of the minds must be achieved, the price is
deemed to be by operation of law immediately demandable upon the
perfection of the contract.
5. Instance When There is a Sale Even When No Price Has
Been Agreed Upon
Art. 1474. 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.
*Art. 1474 seems to present the only exception to the rule that
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
 What Does Art. 1474 Mean by the Term “Preceding
Articles”?
 Art. 1469: which provides ascertainable of price with
reference to another thing certain, or a specified formula;
up to
 Art. 1473: which prohibits the fixing of the price by any of
the parties;
 Art. 1471: which covers the situation when the price is
completely simulated and therefore gives rise to a void
contract of sale, although it may still be saved as a donation
where the consideration is shown to be pure liberality;
 Art. 1473: where the formula for the fixing of the price is
left to the discretion of a party, which makes the contract
entirely void
 What Does Art. 1474 Mean by “Inefficacious”?
 Because preceding articles which provide for sales which are
not void because the price, though not certain, is
ascertainable
 The inability to produce the effect wanted;
 Inability to get things done
 The use of such word does not exclude void sale contracts
when the price is neither certain or ascertainable
 Concept of “Appropriation”; Summation
Page 13 of 100
PREPARED BY:
SHANON GACA
 If the terms of a sale are complete, except for an
agreement with reference to the price, the law implies a
price equivalent to the reasonable value of the goods in
cases where the buyer has appropriated the things sold
 Where the buyer accepts delivery knowing the price claimed
by the seller, he cannot thereafter refuse to pay for it at
that price, even if there is no agreement as to price
 Art. 1474 covers all sale contract situations where there
must have been at least a meeting of the minds or an
agreement to buy and sell the subject matter, which is
coupled with tradition
 When Art. 1474 uses the twin concepts of “delivery” and
“appropriation” it would NOT apply to a situation where
there has only been delivery but no appropriation, because
the undoing of the contract and the return of the subject
matter to the seller would not present unjust enrichment to
either party
 “Appropriate” means to set apart for some special use; to
take for oneself; take possession of
 Art. 1474 meant to cover the situation of “acceptance” by
the buyer as the counterpart of delivery on the part of the
seller
 Return is not legally possible as it would amount to
unilateral withdrawal from the binding effect of the contract
There would nevertheless be a valid contract of sale upon which an
action for specific performance would prosper for the recovery of the
price when the following elements are present:
1. There was a meeting of the minds of the parties of sale and
purchase as to the subject matter
2. There was an agreement that price would be paid which fails to
meet the criteria of being certain or ascertainable;
3. There was delivery by the seller and appropriation by the buyer, of
the subject matter of the sale
Inadequacy of Price
Article 1355. Except in cases specified by law, lesion or inadequacy
of cause shall not invalidate a contract, unless there has been fraud,
mistake or undue influence. (n)
Article 1470. 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.
1. Distinguished from Simulated Price
Bravo-Guerrero v. Bravo
Simulation of Contract and Gross Inadequacy of Price are distinct
legal concepts, with different effects, and that the concepts are
incompatible with each other.
When the parties to an alleged contract do not really intend to be
bound by it, the contract is SIMULATED AND VOID which has no legal
effect whatsoever because there is no real agreement between the
parties.
Loyola v. Court of Appeals
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.
2. Rescissible Contracts of Sale
 Inadequacy of price is a ground for rescission of conventional
sale in case of rescissible contracts covered under Art. 1381
Article 1381. The following contracts are rescissible:
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
(1) Those which are entered into by guardians whenever the
wards whom they represent suffer lesion by more than one-fourth
of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the
latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot
in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have been
entered into by the defendant without the knowledge and
approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to
rescission.
Article 1386. Rescission referred to in Nos. 1 and 2 of article 1381
shall not take place with respect to contracts approved by the
courts.
3. Judicial Sale
 Gross inadequacy of price may avoid a judicial sale of real
property;
 Because the contract of sale is not the result of negotiations and
bargaining
 For a judicial sale to be set aside on the ground of
inadequacy of price, the inadequacy must be such as to be
shocking to the conscience of man; or that, in the event of a
resale, a better price can be obtained
4. Sales with Right to Repurchase
 The gross inadequacy of price raises a presumption of equitable
mortgage
 The proper remedy of the alleged seller, who is actually an
equitable mortgagor, is NOT to rescind the contract of sale, but
to have it REFORMED or DECLARED A MORTGAGE CONTRACT,
and to pay off the indebtedness which is secured
 The remedy of the alleged buyer would NOT be to appropriate
the subject matter as a buyer for that would be pactum
commissorium, but to FORECLOSE on the equitable mortgage
ARTICLE 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or
granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to
be received by the vendee as rent or otherwise shall be considered
as interest which shall be subject to the usury laws.
When Motive Nullifies Sale
 GENERAL RULE: consideration is different from the motive of the
parties;
 When the primary motive is illegal, the sale is VOID because
illegal motive predetermined the purpose of the contract
Uy v. Court of Appeals
Page 14 of 100
PREPARED BY:
SHANON GACA
Distinguished “CAUSE” which is the essential reason which moves
the contracting parties to enter into it, and “is the immediate, direct
and proximate reason which justifies the creation of an obligation
through the will of the contracting parties,” from “MOTIVE” which is
the particular reason of a contracting party which does not affect the
other party.
In a contract of sale of a piece of land, the Court observed that the
cause of the vendor in entering into the contract is to obtain the
price, while that for the vendee is the acquisition of the land. The
motive of the vendor, on the other hand, is to use said lands for
housing.
A party’s motive for entering into the contract do not affect the
contract. However, when the motive predetermines the cause, the
motive may be regarded as the cause.
CHAPTER 5
FORMATION OF SALE
Stages in Life of Sale
1. Policitacion, Negotiation, Preparation, Conception, or
Generation Stage
 Period of negotiation and bargaining, ending at the moment of
perfection
 Covers the period from the time the prospective contracting
parties indicate interest in the contract to the time the
contract is concluded (perfected)
2. Perfection or “Birth”
 Point in time when the parties come to agree on the terms of
the sale
 Takes place upon the concurrence of the essential elements
thereof
3. Consummation or “Death”
 Process of fulfillment or performance of the terms agreed
upon in the contract
 Begins when the parties perform their respective undertakings
under the contract culminating in the extinguishment thereof
POLICITACION STAGE (Art. 1479)
Article 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing
for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price.
 Invitation to make offer, offer, acceptance, right of first refusal,
option contract, supply agreement, mutual promises to buy and
sell (contracts to sell), and even agency to sell or agency to buy
 Formally initiated by an offer, which must be certain;
 There is freedom to contract – the right to choose with whom to
contract and what to contract
 An imperfect promise (policitacion) is merely an offer by an
offeror to an offeree
 Policitacion or unaccepted unilateral promise to buy or to sell,
prior to acceptance, does not give rise to any obligation or right,
and creates no privity between the offeror and the offeree
1. Advertisements and Invitations (Arts. 1325 and 1326)
Article 1325. Unless it appears otherwise, business advertisements
of things for sale are not definite offers, but mere invitations to make
an offer. (n)
Article 1326. Advertisements for bidders are simply invitations to
make proposals, and the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary appears. (n)
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
 GENERAL RULE: they are less than offers, and constitute merely
invitations to make an offer, or mere proposals;
 The direct acceptance of such advertisements does not give rise
to a valid and binding sale
 Even when the advertisement contains a certain offer, it remains
legally a mere invitation so long as it is addressed to the public at
large, and
 the exception comes in whenever it expressly provides that the
first absolute acceptance shall be binding, or when it is addressed
to a particular offeree
2. Offers
 Prior to its acceptance, even a certain offer remains subject to the
complete will of the offeror;
 It may be withdrawn or destroyed by the offeror prior to its
acceptance, and
 It is not even necessary that the offeree learns of the withdrawal
 The offeror has the right to attach to his offer any term or
condition he desires, and may fix the time, place, and manner of
acceptance;
 The offeree has no authority to treat is as consisting of separate
and distinct parts, since he must accept and comply with all the
requirements provided in the offer;
 He has only the choice to accept or reject the offer in its entirety;
 He has no choice to reject that portion of the offer which is
disadvantageous and accept only that which is beneficial
 Such an offer will be extinguished by the happening of the
resolutory condition, or the certainty that the suspensive
condition will not happen
 The offeree has the choice to indicate further negotiations by
making a counter-offer, which would then replace and repeal the
original offer;
 A counter-offer is always considered in law a rejection of the
original offer, and has the effect of extinguishing the original offer
 An offer which has been qualifiedly accepted is also
extinguished and cannot be further accepted;
 Whereas a conditional acceptance will constitute a counter-
offer, extinguishing the original offer, and which in turn must be
accepted absolutely by the original offeror to give rise to a valid
sale
 An offer becomes ineffective upon the death, civil interdiction,
insanity, or insolvency of either offeror or offeree, before the
acceptance is conveyed and received by the offeror
3. Option Contracts
a. The “Location” of Options
Article 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price.
Article 1324. When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, except when the
option is founded upon a consideration, as something paid or
promised. (n)
 When the option is founded upon a proper consideration, the
offer may not be withdrawn during the option period;
 It has essentially become a “contracted offer”
b. Definition and Essence of an Option Contract
Page 15 of 100
PREPARED BY:
SHANON GACA
Enriquez de la Cavada v. Diaz
Option is a privilege existing in one person, for which he had paid a
consideration, giving him the right, if he chooses, to buy certain
merchandise or certain specified property at a fixed price, from
another person, at any time within the agreed period.
Adelfa Properties, Inc. v. Court of Appeals
Option is a continuing offer by which the owner stipulates with
another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with,
certain terms and conditions, or which gives to the owner of the
property the right to sell or demand a sale;
It is also sometimes called an “unaccepted offer”
It is not of itself a purchase, but merely secures the privilege to
buy.
Equatorial Realty Dev. v. Mayfair Theater
Option is one necessarily involving the choice granted to another
for a distinct and separate consideration as to whether or not to
purchase a determinate thing at a predetermined fixed price.
Option is a contract granting a privilege to buy or sell within an
agreed time and at a predetermined price. It is a separate and
distinct contract from that which the parties may enter into upon
the consummation of the option. It must be supported by
consideration.
Carceller v. Court of Appeals
Option is a preparatory contract in which one party grants to the
other, for a fixed period and under specified conditions, the power
to decide, whether or not to enter into a principal contract.
It binds the party who has given the option, not to enter into the
principal contract with any other person during the period
designated, and, within that period, to enter into such contract with
one to whom the option was granted, if the latter should decide to
use the option.
c. Characteristics of an Option Contract as Compared with
Sale
 An option is also an onerous contract for to be valid it must
have a separate consideration from the purchase price;
 Without such a separate consideration, it is VOID as a contract
 Consideration in an option contract may be anything of value;
 Unlike in sale, where it must be the price certain in money or its
equivalent, or essentially a “valuable consideration”
 There can be a valid contract even when no separate
consideration is paid by the optionee, as in the case when the
option is embedded in another valid contract, such as a lease or
a mortgage
 An option contract is also a consensual contract since it is
perfected by the meeting of the minds as to the subject matter
and the price, even when the separate consideration for the
option itself has not been paid
 Although a separate consideration must exist for an option
contract to be valid;
 Unlike in a sale, it is essentially a unilateral contract, since only
the offeror is obliged, even when the offeree has not paid the
separate consideration, and that his exercise of the option does
not necessarily depend upon his ability to pay the separate
consideration
 The subject matter of an option contract is NOT the subject
matter of the sought sale;
 BUT rather the option to purchase such subject matter –
it is the accepted promise to sell or accepted promise to buy
 The main issue on the subject matter of a valid option
contract is:
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
 Whether the option or right secured is upon an obligation
“to do”, or an obligation “to give”
 Since an option contract, prior to its existence, is NOT a species
of the genus sale, it is not covered by the Statute of Frauds,
and can be proved by parol evidence, except if there has been
partial execution of the underlying sale
Adelfa Properties, Inc. v. Court of Appeals
The distinction between an “option” and a contract of sale is that an
option is an unaccepted offer. It states the terms and conditions on
which the owner is willing to sell his land, if the holder elects to
accept them within the time limited. If the holder does so elect, he
must give notice to the other party, and the accepted offer thereupon
becomes a valid and binding contract. If an acceptance is not made
within the time fixed, the owner is no longer bound by his offer, and
the option is at an end.
A contract of sale, on the other hand, fixes definitely the relative
rights and obligations of both parties at the time of its execution, and
leaves no choice to either party whether to withdraw or to proceed
with the contract. The offer and the acceptance are concurrent, since
the minds of the contracting parties meet in the terms of the
agreement.
d. Obligations of the Offeror in a Valid Option
1. Not to offer to any third party the sale of the object of the
option during the option period;
2. Not to withdraw the offer or option during the option period;
3. To hold the subject matter for sale and to transfer it to the
offeree in the event that offeree exercises his option during
the option period
*first two obligations are personal obligations “not to do”
*third obligation may either be a personal obligation “to enter into
a contract of sale,” or already “an obligation to transfer ownership
and deliver possession of the subject matter for a price certain”
e. Elements of Valid Option Contract
1. Consent or the Meeting of the Minds Upon:
2. Subject Matter: an option right to an “unaccepted unilateral
offer to sell, or to buy” or an “accepted promise to sell, or
promise to buy”
i. A determinate or determinable object
ii. For a price certain, including the manner of payment
thereof
3. Prestation: a consideration separate and distinct from the
purchase price for the option given
Salame v. Court of Appeals
In an option, in order to be valid and binding upon the promissor, it
must contain a price certain.
Kilosbayan, Inc. v. Morato
Although an option to buy is not a contract of purchase and sale, but
like a contact of sale, an option contract by its statutory definition can
only arise when the minds of the parties have met as to the specific
object thereof, the price and the manner of payment thereof
 The option must have all the requisites required for the subject
matter (possible thing, licit, determinate, or determinable) and
the price (real, valuable, certain or ascertainable, with terms of
payment stipulated)
f. Meaning of “Separate Consideration”
 Unlike in a sale where the price generally refers to cash or its
equivalent;
 In an option contract, the consideration may be anything or
undertaking of value
Page 16 of 100
PREPARED BY:
SHANON GACA
 Most controlling concept is the “separateness” of such
consideration from the purchase price agreed upon
Article 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price.
Article 1324. When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, except when the
option is founded upon a consideration, as something paid or
promised. (n)
g. When Option is Without Separate Consideration: VOID as
option, VALID as certain offer
Sanchez v. Rigos
Without a consideration separate from the purchase price, an option
contract would be VOID as a contract, but would still constitute a
valid offer;
So that if the option is exercised prior to its withdrawal, that is
equivalent to an offer being accepted prior to withdrawal and would
give rise to a valid and binding sale
h. Option Not Deem Part of Renewal of Lease
 When not exercised within the original period is extinguished
and cannot be deemed to have been included in the implied
renewal
i. The Option Period
Villamor v. Court of Appeals
When the option contract does not contain a period, it cannot be
presumed that the exercise thereof can be made indefinitely,
otherwise, it would render uncertain the status of the subject matter.
Article 1144. The following actions must be brought within ten
years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
j. Proper Exercise of Option
Nietes v. Court of Appeals
In an option to buy, the party in whose favor the option contract exist
may validly and effectively exercise his right by merely advising the
debtor of the decision to buy and expressing his readiness to pay the
stipulated price, provided that the same is available and actually
delivered to the offeror upon execution and delivery by him of the
corresponding deed of sale.
Notice of the exercise of the option need not be coupled with actual
payment of the price, so long as this is delivered to the owner of the
property upon performance of his part of the agreement.
Carceller v. Court of Appeals
Notice within the option period of clear intention to purchase the
property, with request for leeway within which to be able to raise the
funds to close the deal is a valid or at least substantial exercise of the
option.
The acceptance or exercise of the option must still be made within
the option period to give rise to a valid and binding sale, and it is only
then that the principle of substantial compliance would have
relevance.
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
The refusal of the offeror to comply with the demand by the offeree t
comply with the option may be enforced by an action for specific
performance.
k. Effects of Exercise of Option
Heirs of Luis Bacus v. Court of Appeals
Once an option is exercised, the obligations under an option to buy
are reciprocal obligations.
Limson v. Court of Appeals
In an option contract, the “timely, affirmatively and clearly
acceptance of the offer,” would convert the option contract into a
“bilateral promise to sell and to buy where both parties are then
reciprocally bound to comply with their respective undertakings.
l. Summation of Rules Pertaining to Options
i.If the period itself is not founded upon a separate
consideration, the offeror has the right to withdraw the offer
before its acceptance, or, if an acceptance has been made,
before the offeror’s coming to know of such fact, by
communicating that withdrawal to the offeree
ii. However, the withdrawal must not be exercised arbitrarily;
otherwise, it could give rise to a damage claim under Art. 19
of the CC
iii. If there is a separate consideration, a contract of “option” is
deemed perfected, and it would be a breach of contract to
withdraw the offer during such period
iv. The option, however, is an independent contract by itself, and
should be distinguished from the projected main agreement of
sale which is obviously yet to be concluded
If, in fact, the offeror withdraws the offer before its
acceptance by the offeree, the latter may not sue for specific
performance on the proposed contract since it has failed to
reach its own stage of perfection;
The offeror, however, renders himself liable for damages for
breach of the option
v. Care should be taken of the real nature of the consideration
given
A similar instance would be an “earnest money” in sale that
can evidence its perfection
Ang Yu Asuncion v. Court of Appeals
In an option contract, the granting of a consideration separate and
distinct from the purchase price of the intended sale, does not
guarantee to the offeree the absolute right to exercise the option,
anytime during the option period.
The separate consideration merely guarantees that within the option
period, before the offeror breaches his obligation and withdraws the
offer, an acceptance by offeree would give rise to a valid and binding
sale; and that an acceptance within the option period after the offeror
shall have unlawfully withdrawn the offer would not give rise to a
sale.
The optionee has the right, but not the obligation, to buy.
Once the option is exercised timely, a bilateral promise to sell and to
buy ensures and both parties are then reciprocally bound to comply
with their respective obligations.
4. Right of First Refusal
 A promise on the part of the owner that if he decides to sell the
property any time in the future, he would first negotiate its sale
to the promissee
 A right of first refusal would not allow an action for specific
performance or a rescission of the sale to a third party, the only
remedy afforded to the promissee was an action to recover
damages
Page 17 of 100
PREPARED BY:
SHANON GACA
 An innovative juridical relation, BUT cannot be deemed a
perfected sale, nor an option contract because it merely
pertains to a specific property without containing an agreement
as to the price or the terms of payment in case of exercise of
such right
Ang Yu Asuncion v. Court of Appeals
An option or an offer would require, among other things, a clear
certainty on both the object and the cause or consideration of the
envisioned contract. In a right of first refusal, while the object might
be made determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to enter into a
binding juridical relation with another but also on terms, including the
price, that obviously are yet to be later firmed up. Prior thereto, it
can at best be so described as merely belonging to a class of
preparatory juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would still be
indefinite and inconclusive) but by, among other laws of general
application, the pertinent scattered provisions of the Civil Code on
human conduct.
Equatorial Realty Dev. v. Mayfair Theater
The deed of option or the option clause in a contract, in order to be
valid and enforceable, must, among other things, indicate the definite
price at which the person granting the option, is willing to sell.
 Equatorial pins the enforceability of a right of first refusal on the
obligatory force of the main contract of lease to which it is
attached to, and thereby confirms the Ang Yu Asuncion
doctrine that on its own, a right of first refusal clause or contract
cannot be the subject of an action for specific performance
because of lack of an agreement on the price
a. Various Rulings on Rights of First Refusal Contained in
Lease Agreements
i. Rentals Deemed to be Consideration to Support Right
 An enforceable right of first refusal does not need
consideration for its validity and effectivity, since it is
merely a stipulation in a valid principal contract
ii. Sublessee May Not Take Advantage of Sublessor’s Right
 Because such sublessee is a stranger to the lessor who is
bound to respect the right of first refusal in favor of the
lessee only
iii. Right Does Not Extend with the Extension of the Lease
iv. Obligations of the Offeror Under a Right of First Refusal
Attached to a Lease
 Lessor has the legal duty to the lessee not to sell the leased
property to anyone at any price until after the lessor made
an offer to sell the property to the lessee and the lessee has
failed to accept it.
 Only after the lessee has failed to exercise his right of first
priority could the lessor sell the property to other buyers
under the same terms and conditions offered to the lessee,
or under terms and conditions more favorable to the lessor
v. Right Does Not Apply When There is No Intention to
Sell to a Third Party
5. Letter of Intent to Buy and Sell
 Whereby the purported seller and the purported buyer
memorialize their “mutual intentions to buy and sell” a
determinate thing, which means to negotiate in earnest towards
achieving a perfected contract of sale
6. Mutual Promise to Buy and Sell
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
 The promise to sell a determinate thing coupled with a correlative
promise to buy at a specified price is binding as an executory
agreement
 Certainty of the price must also exist, otherwise, there is no valid
and enforceable contract to sell
Article 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing
for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price.
Ang Yu Asuncion v. Court of Appeals
An unconditional mutual promise to buy and sell, as long as the
object is made determinate and the price is fixed, can be obligatory
on the parties, and compliance therewith may accordingly be
exacted, which means that an action for specific performance is
available.
PERFECTION STAGE: OFFER AND ACCEPTANCE (Arts. 1475,
1319, 1325, 1326)
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 1319. Consent is manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer
except from the time it came to his knowledge. The contract, in such
a case, is presumed to have been entered into in the place where the
offer was made.
Article 1325. Unless it appears otherwise, business advertisements
of things for sale are not definite offers, but mere invitations to make
an offer. (n)
Article 1326. Advertisements for bidders are simply invitations to
make proposals, and the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary appears.
 A contract of sale is “born” from the moment there is a meeting
of minds upon the thing which is the object of the contract and
upon the price and the manner of its payment
 Vitiated consent do NOT make the contract void ab initio but only
voidable, and the contract is binding upon the parties unless
annulled by proper court action
 Until a sale is perfected, it cannot become an independent source
of obligation, nor serve as a binding juridical relation
 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 and obligates himself to
pay the price
1. Consent that Perfects a Sale
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.
Page 18 of 100
PREPARED BY:
SHANON GACA
Article 1319. Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-
offer.
Acceptance made by letter or telegram does not bind the offerer
except from the time it came to his knowledge. The contract, in
such a case, is presumed to have been entered into in the place
where the offer was made.
2. Offer must be “Certain”
 What makes an offer certain is when it is floated by the
offeror having within its terms the description of the subject
matter that has all three (3) requisites of “possible thing,” licit,
and determinate or at least determinable; and with a price that
has the requisites of being real, constitute valuable
consideration, and must be certain or at least ascertainable,
including the terms of payment thereof
 An offer is certain where there is an offer to sell or an offer to
buy a subject matter and for a price having all the seven
essential requisites mandated by law for subject matter and
price
 The absence of even just one makes such offer “not certain”
and cannot give rise to a valid sale, even when such offer is
absolutely accepted by the offeree
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.
3. Acceptance must be “Absolute”
Zayco v. Serra
For an acceptance to have the effect of converting an offer to sell into
a perfected contract, it must be plain and unconditional, and it will
not be so, if it involves any new proposition, for in that case, it will
not be in conformity with the offer, and constitute a counter-offer.
Beaumont v. Prieto
For the acceptance of a proposition or offer to be efficacious and
binding upon the parties thereto, it is necessary that such acceptance
should be unequivocal and unconditional and the acceptance and
proposition shall be without any variation whatsoever.
Yuvienco v. Dacuycuy
The use of the term “to negotiate” in the acceptance letter given by
the buyer was held to indicate that there was as yet no absolute
acceptance of the offer made, since the term is practically the
opposite of the idea that an agreement has been reached.
DBP v. Ong
Placing the word “Noted” and signing such note at the bottom of the
written offer cannot be considered an acceptance that would give rise
to a valid sale. The very circumstance that the offer to purchase was
merely “NOTED” and not “APPROVED,” is a clear indication that there
is no perfected contract of sale.
a. When “Deviation” Allowed
Villonco v. Bormaheco
It is true that an acceptance may contain a request for certain
changes in the terms of the offer and yet be a binding acceptance, so
long as it is clear that the meaning of the acceptance is positively and
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
unequivocally to accept the offer, whether such request is granted or
not, a contract is formed.
Vendor’s change in a phrase of the offer to purchase which do not
essentially change the terms of the offer, does not amount to a
rejection of the offer and the tender or a counter-offer.
b. Acceptance May be Express or Implied
 Acceptance may be evidenced by some act, or conduct,
communicated to the offeror, either in a formal or an informal
manner, that clearly manifest the intention or determination
to accept the offer to buy or sell
c. Acceptance by Letter or Telegram
 Does not bind the offeror except from the time it came to his
knowledge
 Even if an acceptance has been mailed or sent to the offeror,
the offeror may still withdraw his offer anytime before he has
knowledge of the acceptance
d. Acceptance Subject to Suspensive Condition
 Even when there is a meeting of minds as to subject matter
and the price, there is deemed to be no perfected sale, if the
sale is subject to suspensive condition
 To the authors, the more appropriate doctrine should be that
when a sale is made subject to a suspensive condition, there
is already a contract upon the meeting of the minds, since the
principles of mutuality and obligatory force come into play,
but because the condition has not happened, the contract
itself and its underlying obligation are not yet demandable;
and in case of non-happening of the condition, then the
contract is extinguished as though the contract has never
been entered into.
e. Acceptance in Auction Sales (Arts. 1476, 1403(2)(d),
1326)
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. (n)
Article 1403. The following contracts are unenforceable, unless
they are ratified:
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
Page 19 of 100
PREPARED BY:
SHANON GACA
(d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action or
pay at the time some part of the purchase money; but when a
sale is made by auction and entry is made by the auctioneer
in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it
is a sufficient memorandum
Article 1326. Advertisements for bidders are simply invitations
to make proposals, and the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary appears.
 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
4. Earnest Money
a. Function of Earnest Money (Art. 1482)
Article 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.
 The rule is “no more than a disputable presumption” and prevails
only “in the absence of contrary or rebuttal evidence”
 Nonetheless, the presumption is founded upon the fact that there
must first be a valid sale
San Miguel Properties Philippines v. Huang
It is not the giving of earnest money, but the proof of the
concurrence of all the essential elements of the sale which
establishes the existence of a perfected sale.
Villonco v. Bormaheco
Even when the sale is subject to a condition, the acceptance of the
earnest money would prove that the sale is conditionally
consummated or partly executed subject to the fulfillment of the
condition, the non-fulfilment of which would be a negative
resolutory condition.
b. Varying Treatment of Earnest Money
San Miguel Properties Philippines v. Huang
When the amount is given only as a guarantee that the buyer would
not back out of the sale, then what was given is not earnest money,
especially when at the time the amount is given, the final terms of
the purchase had not been agreed upon
Sps. Doromal, Sr. v. Court of Appeals
The amount given as earnest money by the buyer, was acknowledged
by the sellers to have been received under the concept of the Civil
Code, as a guarantee that the buyer would not back out, and that if
they should do so they would forfeit the amount paid.
The Court took into consideration that even with the payment of the
earnest money, that would not by itself give rise to a valid and
binding sale, considering that it is not clear that there was already a
definite agreement as to the price.
c. Distinguishing Earnest Money and Option Money
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
Adelfa Properties, Inc. v. Court of Appeals
EARNEST MONEY OPTION MONEY
 The money given as a distinct
 Part of the purchase price consideration for an option
contract
 Given only where there is  Applies to a sale not yet
already a sale perfected
 When the would-be buyer
gives option money, he is not
 When given, the buyer is
required to buy, buy may
bound to pay the balance
even forfeit it depending on
the terms of the option
d. Effect of Rescission on Earnest Money Received
Article 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.
 Consequently, amounts received as part of the downpayment
and to be credited to the payment of the total purchase price
could not be forfeited when the buyer should fail to pay the
balance, especially in the absence of a clear and express
agreement thereon
Article 1385. Rescission creates the obligation to return the
things which were the object of the contract, together with their
fruits, and the price with its interest; consequently, it can be
carried out only when he who demands rescission can return
whatever he may be obliged to restore.
Neither shall rescission take place when the things which are the
object of the contract are legally in the possession of third
persons who did not act in bad faith.
5. Place of Perfection (Art. 1319)
Article 1319. Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-
offer.
Acceptance made by letter or telegram does not bind the offerer
except from the time it came to his knowledge. The contract, in
such a case, is presumed to have been entered into in the place
where the offer was made.
 Such determination is important in resolving issues of venue of
proceedings arising from the enforcement of the contract of sale
 Generally, the sale’s place of perfection is where there is a
meeting of the minds of the parties
 In case of acceptance through letter or telegram, it is
presumed that the contract was entered into in the place where
the offer was made
6. Expenses of Execution and Registration
 Generally, shall be borne by the seller, unless there is a
stipulation to the contrary
 In the case of goods, unless otherwise agreed, the expenses
of, and incidental to, putting the goods into a deliverable state
must be borne by the seller
 Duty to withhold taxes due on the sale is on the seller
7. Performance Should Not Affect Perfection
Form of Sales (Arts. 1357, 1358(1), 1406, 1483)
Page 20 of 100
PREPARED BY:
SHANON GACA
Article 1357. If the law requires a document or other special form,
as in the acts and contracts enumerated in the following article, the
contracting parties may compel each other to observe that form, once
the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract. (1279a)
Article 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest therein
are governed by articles 1403, No. 2, and 1405;
Article 1406. When a contract is enforceable under the Statute of
Frauds, and a public document is necessary for its registration in the
Registry of Deeds, the parties may avail themselves of the right
under Article 1357.
Article 1483. Subject to the provisions of the Statute of Frauds and
of any other applicable statute, a contract of sale may be made in
writing, or by word of mouth, or partly in writing and partly by word
of mouth, or may be inferred from the conduct of the parties. (n)
1. Form Not Generally Important for Validity of Sale
Article 1483. Subject to the provisions of the Statute of Frauds and
of any other applicable statute, a contract of sale may be made in
writing, or by word of mouth, or partly in writing and partly by word
of mouth, or may be inferred from the conduct of the parties. (n)
 The sale being consensual contract, no form is really required for
its validity
a. Requirement for Public Instrument for Immovables
under Art. 1358
Article 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest
therein are governed by articles 1403, No. 2, and 1405;
 All other contracts where the amount involved exceeds P500.00
must appear in writing, even a private one
 Transactions which are not found in a public instrument are still
valid and enforceable;
 The article merely grants a cause of action to the party to the
contract in a suit to sue to compel the other party to have the
document covering the contract, acknowledged before a notary
public
 When a contract is enforceable under the Statute of Frauds, and
a public document is necessary for its registration in the
Registry of Deeds, the parties may avail themselves of the right
and remedy to compel the other party to observe such form,
and such remedy may be exercised simultaneously with the
action upon the contract
Limketkai Sons Milling, Inc. v. Court of Appeals
The fact that the deed of sale still has to be signed and notarized did
not mean that no contract has been perfected – the requisite form
under Art. 1358 is merely for greater efficacy or convenience and the
failure to comply therewith does not affect the validity and binding
effect of the contract
Talusan v. Tayag
BUT when it comes to third parties, an unregistered deed of sale of a
condominium unit has no binding effect when the third persons has
no knowledge of it
SALES
PRIMARY REFERENCE: VILLANUEVA-TIANSAY
b. Function of the “Deed of Sale”
 Operates as a formal or symbolic delivery of the property sold
and authorizes the buyer to use the document as proof of
ownership
 To make it a public document, it must be properly subscribed
and acknowledged before a notary public
The execution and notarization of a deed of sale, though a form of
constructive delivery, is not conclusive presumption of delivery of
possession. On the other hand, the buyer’s immediate taking of
possession and occupation of the property subject matter of the
contract corroborates the truthfulness and authenticity of the deed of
sale; conversely, the seller’s continued possession of the property
makes dubious the sale between the parties.
On the other hand, when a deed of sale is merely subscribed and
sworn to by way of jurat )as contrasted from a notarial
acknowledgment), it would not be a public document because it was
invalidly notarized; it remains a private document.
2. When Form of Sale Affects its Validity
 To Bind Third Parties
a. The power to sell a piece of land or interest therein must be in
writing, otherwise the sale thereof by the agent (even when the
sale itself is in writing) would be void
b. Sale of large cattle must be in writing, and registered with the
municipal treasurer who shall issue a certificate of transfer,
otherwise, the sale is VOID
c. Sale of land by “non-Muslim hill tribe cultural minorities all
throughout the Philippines” is VOID if not approved by the
National Commission on Indigenous Peoples
3. Statute of Frauds: Form Important for Enforceability
a. Nature and Purpose of Statute of Frauds
 Important to prevent fraud and perjury in the enforcement of
obligations depending for their evidence upon the unassisted
memory of witnesses
 Pertain to enforceability and proof, of sale, and NOT to its
perfection
 The application of Statute of Frauds presupposes the
existence of a perfected contract
b. Sales Coverage in Statute of Frauds
Article 1403. The following contracts are unenforceable, unless
they are ratified:
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent;
i. A sale which by its terms is not to be performed within a year
from the making thereof
ii. Sale of goods, chattels or things in action, at a price not less
than P500.00
iii. Sale of real property or of an interest therein
c. Exceptions to Coverage of the Statute in Sales Contracts
i. When there is a note or memorandum thereof in writing
and subscribed by the party charged or his agent
a) Nature of Memorandum
 The “sufficient memorandum” may be contained in two or
more documents
Page 21 of 100
PREPARED BY:
SHANON GACA
 The memorandum to take the sale transaction out of the
coverage of the Statute of Frauds, must contain within its
four corners “all the essential terms of the contract of sale”
Yuvienco v. Dacuycuy
It is not enough that the total price or consideration is mentioned in
some note or memorandum and there is no need of any indication of
the manner in which such total price is to be paid.
In any sale of real property on installment, the Statute of Frauds read
together with the perfection of requirements of Art. 1476 of the Civil
Code must be understood and applied in the sense that the idea of
payment on installments must be in the requisite of a note or
memorandum.
David v. Tiongson
The sale of real property on installments even when the receipt or
memorandum evidencing the same does not provide for the stated
installments, when there has already been partial payment, the
Statute of Frauds is not applicable because it only applies to
executory and not to completed, executed, or partially executed
contracts.
ii. When there has been at least partial consummation of
the sale
a) Partial Performance
Baretto v. Manila Railroad Co.
Delivery of the deed to the buyer’s agent, with no intention to part
with the title until the purchase price is paid, does not constitute
partial performance that takes the case out of the Statute of Frauds
Vda. De Jomoc v. Court of Appeals
The partial execution of a sale over real property takes the
transaction out of the provisions of the Statute of Frauds, and
consequently even when not complete in form, so long as the
essential requisites of consent of the contracting parties, object and
cause of the obligation concur and they were clearly established to be
present (even by parol evidence, the sale is valid and binding)
b) Effect of Partial Execution on Third Parties
 Cannot be applied to third parties, who are granted legal
remedies against the contract
Fule v. Court of Appeals
Formal requirements are, therefore, for the benefit of third parties,
but as to the immediate parties to the sale, non-compliance therewith
does not adversely affect the validity of the contract nor the
contractual rights and obligations of the parties thereunder.
c) Nature and Coverage of Partial Performance
Ortega v. Leonardo
It is not only partial payment of the purchase price that is the only
manner of partial performance to take the contract out of the
coverage of the Statute of Frauds.
It recognized other modes which constitute partial performance, such
as possession, the making of improvements, rendition of services,
payment of taxes, relinquishment of rights, etc.
The Court also held that although tender of payment by itself would
not be considered partial performance, but accompanied by other
acts, such as building of improvements, the same may be considered
as partial performance.
Partial performance to constitute as an exception to the Statute of
Frauds must by itself pertain to the subject matter or to the price of
SALES PREPARED BY:
PRIMARY REFERENCE: VILLANUEVA-TIANSAY SHANON GACA

the purported sale, and must involve an act or “complicity” on the

party sought to be charged

iii. When there has been a failure to object to the

presentation of evidence aliunde as to the existence of
a contract

a) Waiver
 Where timely objections are made to the introduction of
parol evidence to prove a sale of real property and due
exceptions are taken to the adverse rulings, such evidence
must be disregarded by the courts and the contract cannot
be enforced

iv. When sales are effected through electronic commerce

4. Sales Effected as Electronic Commerce

5. Equitable Mortgage Claims Need Not be in Writing
6. “Sales on Return or Approval” Must be in Writing
7. Right of First Refusal Must be in Writing

Page 22 of 100