(Art.

1458)
Sale is a contract whereby one party [the seller] obligates
himself to transfer the ownership2 and to deliver the
possession, of a determinate thing, and the other party [the
buyer] obligates himself to pay therefor a price certain in
money or its equivalent.
xCruz v. Fernando, 477 SCRA 173 (2005).

SCRA 737 (2000).

1. Elements of Sale

A contract of sale is what the law defines it to be, taking into

consideration its essential elements, and not what the
contracting parties call it.
xSantos v. CA, 337 SCRA 67 (2000).7

(a) consent or meeting of the minds;

(b) determinate subject matter;
and (c) price certain in money or its equivalent.
xNavarra v. Planters Dev. Bank, 527 SCRA 562 (2007).
Sale being a consensual contract, its essential elements
must be proven. xVillanueva v. CA, 267 SCRA 89 (1997).
Absence of any essential elements negates a sale xDizon v.
CA, 302 SCRA 288 (1999),5 even when earnest money has
been paid. xManila Metal Container Corp. v. PNB, 511 SCRA
444 (2006). But once all elements are proven, a sales
validity is not affected by a previously executed fictitious
deed of sale. xPealosa v. Santos, 363 SCRA 545 (2001);
and the burden is on the other party to prove otherwise.
xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001).
2. Stages of Contract of Sale
Policitacion covers the period from the time the
prospective contracting parties indicate interest in the
contract to the time the contract is perfected.
Perfection takes place upon the concurrence of the
essential elements, which are the meeting of the minds of
the parties as to the object of the contract and upon the
price.
Consummation begins when the parties perform their
respective undertakings, culminating in the extinguishment
thereof. xSan Miguel Properties Philippines, Inc. v. Huang,
336

3. Sale Creates Real Obligations To Give (Art. 1165)

4. Essential Characteristics of Sale:
a. Nominate and Principal

b. Consensual (Art. 1475)

A contract of sale is not a real, but a consensual contract,
and becomes valid and binding upon the meeting of the
minds of the parties as to the object and the price,8 and
consequently: Upon its perfection, the parties may
reciprocally demand performance. xHeirs of Venancio
Bejenting v. Baez, 502 SCRA 531 (2006);9 subject only to
the provisions of the law governing the form of contracts.
xCruz v. Fernando, 477 SCRA 173 (2005). It remains valid
even if parties have not affixed their signatures to its written
form, xGabelo v. CA, 316 SCRA 386 (1999), or the manner of
payment is breached. xPilipinas Shell Petroleum Corp v.
Gobonseng, 496 SCRA 305 (2006). In an Extrajudicial
Settlement of Estate with Absolute Sale, it would be
immaterial that the buyers signature does not appear
thereon since the contract of sale is consensual and
perfected by mere consent. xBaladad v. Rublico, 595 SCRA
125 (2009). Failure of the subdivision developer to obtain
a license to sell does not render the sales void especially
that the parties have impliedly admitted that there was
already a meeting of the minds as to the subject of the sale
and price. Cantemprate v. CRS Realty Dev. Corp. 587 SCRA
492 (2009).
The binding effect of sale is based on the principle that the
obligations arising therefrom have the force of law between
the parties. xVeterans Federation of the Philippines v. CA,
345 SCRA 348

(2000).
Perfection Distinguished from Demandability Not all
contracts of sale become automatically and immediately
effective. In sales with assumption of mortgage, there is a
condition precedent to the sellers consent and without the
approval of the mortgagee, the sale is not perfected. xBian
Steel Corp. v. CA, 391 SCRA 90 (2002).
No Contract Situation versus Void Contract
Absence of consent (i.e., complete meeting of minds)
negates the existence of a perfected sale. xFirme v. Bukal
Enterprises and Dev.Corp., 414 SCRA 190 (2003). The
contract then is null and void ab initio, absolutely wanting in
civil effects; hence, it does not create, modify, or extinguish
the juridical relation to which it refers. xCabotaje v.
Pudunan, 436 SCRA 423 (2004).
When there is no meeting of the minds on price, the
contract is not perfected and does not serve as a binding
juridical relation between the parties. xManila Metal
Container Corp. v. PNB, 511 SCRA 444 (2006),10 and should
be more accurately denominated as inexistent, as it did not
pass the stage of generation to the point of perfection.
xNHA v. Grace Baptist Church, 424 SCRA 147 (2004).
c. Bilateral and Reciprocal (Arts. 1169 and 1191)
A contract of sale gives rise to reciprocal obligations,
which arise from the same cause with each party being a
debtor and creditor of the other, such that the obligation of
one is dependent upon the obligation of the other; and they
are to be performed simultaneously, so that the
performance of one is conditioned upon the simultaneous
fulfillment of the other. Cortes v. CA, 494 SCRA 570 (2006).
A perfected contract of sale is bilateral because it carries
the correlative duty of the seller to deliver the property and
the obligation of the buyer to pay the agreed price.
Congregation of the Religious of the Virgin Mary v. Orola,
553 SCRA 578 (2008). The power to rescind is implied in

reciprocal ones in case one of the obligors should not

comply with what is incumbent upon him, and without need
of prior demand. Almocera v. Ong, 546 SCRA 164 (2008).12
d. Onerous and Commutative (Gaite v. Fonacier, 2
SCRA 830 [1961]; BUT SEE: Arts. 1355 and 1470)
In a contract of sale, there is no requirement that the price
be equal to the exact value of thesubject matter of sale; all
that is required is that the parties believed that they will
receive good value in exchange for what they will give.
Buenaventura v. CA, 416 SCRA 263 (2003).
e. Sale Is Title and Not Mode
Sale is not a mode, but merely a title. A mode is the legal
means by which dominion or ownership is created,
transferred or destroyed, but title is only the legal basis by
which to affect dominion or ownership. Sale by itself does
not transfer or affect ownership; the most that sale does is
to create the obligation to transfer ownership. It is tradition
or delivery, as a consequence of sale, that actually transfers
ownership. xSan Lorenzo Dev. Corp. v. CA, 449 SCRA 99
(2005),13 citing VILLANUEVA, PHILIPPINE LAW ON SALES,
1995 ed., at p. 5. Sellers ownership of the thing sold is not
an element of perfection; what the law requires is that seller
has the right to transfer ownership at the time of delivery.
xQuijada v. CA, 299 SCRA 695 (1998).14
BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which
defined a sale as a contract transferring dominion and
other real rights in the thing sold.
B. SALE DISTINGUISHED FROM SIMILAR CONTRACTS
A contract is what the law defines it to be, taking into
consideration its essential elements, and the title given to it
by the parties is not as much significant as its substance.
The transfer of ownership in exchange for a price paid or
promised is the very essence of a contract of sale. xSantos
v. CA, 337 SCRA 67 (2000).
In determining the real character of sale, courts look at the
intent of the parties, their true aim and purpose in entering

into the contract, as well as by their conduct, words,

actions and deeds prior to, during and immediately after
executing the agreement, and not at the nomenclature
used to describe it. xLao v.
CA, 275 SCRA 237 (1997).
1. Donation (Arts. 725 and 1471)
Unlike a donation, sale is a disposition for valuable
consideration with no diminution of the estate but merely
substitution of values, with the property sold replaced by the
equivalent monetary consideration;
unlike donation, a valid sale cannot have the legal effect of
depriving the compulsory heirs of their legitimes.
xManongsong v. Estimo, 404 SCRA 683 (2003). The rules on
double sales under Art. 1544 find no relevance to donations.
xHemedes v. CA, 316 SCRA 347 (1999).
2. Barter (Arts. 1468, 1638 to 1641)
3. Contract for Piece-of-Work (Arts. 1467, 1713 to
1715)
Crux: Ineluctably, whether the contract be one of sale or
one for a piece of work, a transfer of ownership is involved
and a party necessarily walks away with an object.
xCommissioner of Internal Revenue v. CA, 271 SCRA 605
(1997), citing VILLANUEVA, LAW ON SALES, pp. 7-9 (1995).
In both, the provisions on warranty of title against hidden
defects applies. xDio v. CA, 359 SCRA 91 (2001). When a
person stipulates for the future sale of articles which he is
habitually making, and which at the time are not made or
finished, it is essentially a contract of sale and not a
contract for labor xInchausti & Co. v. Cromwell, 20 Phil. 345
(1911); even when he executes production thereof only after
an order is placed by customers.
Celestino & Co. v. Collector, 99 Phil. 841 (1956).
If the thing is specially done only upon the specific order of
another, this is a contract for a piece of work; if the thing is
manufactured or procured for the general market in the

ordinary course of business, it is a contract of sale.

Commissioner of Internal Revenue v. Engineering
Equipment & Supply Co., 64 SCRA 590 (1975).
To Tolentino, the distinction depends on the intention of
parties: if parties intended that at some future date an
object has to be delivered, without considering the work or
labor of the party bound to deliver, the contract is one of
sale; but if one of the parties accepts the undertaking on the
basis of some plan, taking into account the work he will
employ personally or through another, the contract is for a
piece of work. xEngineering & Machinery Corp. v. CA, 252
SCRA 156 (1996).
4. Agency to Sell (Art. 1466)
Assumption by agent of the risk pertaining to the cost or
price of the subject matter makes the relationship that of
buyer-seller, for the agent does not assume risk with respect
to the price or the property subject of the relationship. xKer
& Co., Ltd. v. Lingad, 38 SCRA 524 (1971).
Consequently:
(a) the contractual relationship is not inherently revocable.
Quiroga v. Parsons, 38 Phil. 501 (1918);
(b) the purported agent does not have to account for the
profit margin earned from acquiring the property for the
purported principal. Puyat v. Arco Amusement Co., 72
Phil. 402 (1941).
One factor that most clearly distinguishes agency from other
legal concepts, including sale, is control; one person the
agent agrees to act under the control or direction of
another the principal. xVictorias Milling Co., Inc. v. CA, 333
SCRA 663 (2000).
Commercial broker, commission merchant or indentor is a
middleman acting in his own name, and acts as agent for
both seller and buyer to effect a sale between them.
Although he is neither seller nor buyer to the contract
effected he may voluntarily assume warranties of seller.
xSchmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493
(1988).

5. Dacion En Pago (Arts. 1245 and 1934)

Governed by the law on sales, dation in payment is a
transaction that takes place when property is alienated to
the creditor in full satisfaction of a debt in money it
involves the delivery and transmission of ownership of a
thing as an accepted equivalent of the performance of the
obligation. Yuson v. Vitan, 496 SCRA 540 (2007).
In its modern concept, what actually takes place in dacion
en pago is an objective novation of the obligation where the
thing offered as an accepted equivalent of the performance
of an obligation is considered as the object of the contract of
sale, while the debt is considered as the purchase price.
xAquintey v. Tibong 511 SCRA 414 (2006).
Elements of dation in payment:
(a) performance of the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal
thing or a real right or a credit against the third person;
(b) some difference between the prestation due and that
which is given in substitution (aliud pro alio); and
(c) agreement between the creditor and debtor that the
obligation is immediately extinguished by reason of the
performance of a presentation different from that due.
Lo v. KJS Eco- Formwork System Phil., Inc., 413 SCRA
182 (2003).18
There is no dation in payment where there is no transfer of
ownership in the creditors favor, as when the possession of
the thing is merely given to the creditor by way of security.
Fort Bonifacio Dev. Corp. v. Yllas Lending Corp., 567 SCRA
454 (2008); as when the possession is only by way of
security. xPNB v. Pineda, 197 SCRA 1 (1991); there must be
actual delivery of the property to the creditor by way of
extinguishment of the pre-existing debt. Philippine Lawin
Bus Co. v. CA, 374 SCRA 332 (2002).
BUT SEE OBITER: SSS v. CA, 553 SCRA 677 (2008).
In a true dacion en pago, the assignment of the property
extinguishes the monetary debt. Ong v. Roban Lending
Corp., 557 SCRA 516 (2008).

A creditor, especially a bank, which enters into dacion en

pago, should know and must accept the legal consequence
thereof, that the pre-existing obligation is totally
extinguished. xEstanislao v. East West Banking Corp., 544
SCRA 369 (2008). A property subject to a real estate
mortgage, which has not been foreclosed, may validly be
the subject of dacion en pago, for a mortgage does not take
away the property rights of the mortgagor; however, the
creditor who becomes the buyer of the property is subject to
the real estate mortgage lien. xTypingco v. Lim, 604 SCRA
396 (2009).
A dacion en pago is governed by the law of sales, and
contracts of sale come with warranties, either express (if
explicitly stipulated by the parties) or implied (under Article
1547 et seq. of the Civil Code). The implied warranty in case
of eviction is waivable and cannot be invoked if the buyer
knew of the risks or danger of eviction and assumed its
consequences.
Luzon Dev. Bank v. Enriquez, 639 SCRA 332 (2011).
6. Lease (Arts. 1484 and 1485)
When rentals in a lease are clearly meant to be
installment payments to a sale contract, despite the
nomenclature given by the parties, it is a sale by
installments and governed by the Recto Law.
xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).
II. PARTIES TO A CONTRACT OF SALES
1. General Rule: Every person having legal capacity to
obligate himself, may validly enter into a contract of sale,
whether as seller or as buyer.
(Art. 1489)
2. Minors, Insane and Demented Persons, Deaf-Mutes
(Arts. 1327, 1397 and 1399)
A minor cannot be deemed to have given her consent to a
contract of sale; consent is among the essential requisites of
a contract, including one of sale, absent of which there can
be no valid contract.
xLabagala v. Santiago, 371 SCRA 360 (2001).
a. NECESSARIES (Arts. 1489 and 290)

b. Protection of the Senile and Elderly (Art. 24) and

Illiterates (Art. 1332)
Under Art. 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; otherwise, sale is void.
xVda. De Ape v. CA, 456 SCRA 193 (2005).
While a person is not incompetent to contract merely
because of advanced years or by reason of physical
infirmities, when such age or infirmities have impaired the
mental faculties so as to prevent the person from properly,
intelligently or firmly protecting his property rights, then he
is undeniably incapacitated, and the sale he entered into is
void. Paragas v. Heirs of Dominador Balacano,

dictates of morality require that the prohibition should apply

also to common-law relationships. cf. Matabuena v.
Cervantes, 38 SCRA 284 (1971).
Sale by husband of conjugal land to his concubine is null
and void for being contrary to morals and public policy and
subversive of the stability of the family, a basic social
institution which public policy cherishes and protects.
Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984).22
Nevertheless, when property resold to a third-party buyer in
good faith and for value, reconveyance is no longer
available. xCruz v. CA, 281 SCRA 491 (1997). The in pari
delicto doctrine would not apply to the spouses-parties
under Art. 1490, since only the heirs and the creditors can
question the sales nullity. xModina v. CA, 317 SCRA 696
(1999).

468 SCRA 717 (2005).

3. Sales By and Between Spouses:

4. Others Relatively Disqualified (Arts. 1491 and

1492)
Contracts entered into in violation of Arts. 1491 and 1492
are not merely voidable, but are null and void. Rubias v.
Batiller, 51 SCRA 120 (1973).23
a. Guardians, Agents and Administrators
Hereditary rights are not included in the prohibition insofar
as administrator or executor of the estate of the deceased.
xNaval v. Enriquez, 3 Phil. 669 (1904).
No more need to comply with xRodriquez v. Mactal, 60 Phil.
13 (1934) which required showing that a third party bought
as conduit/nominee of the buyer disqualified under Art.
1491; rather, the presumption now is that such disqualified
party obtained the property in violation of said article.
Philippine Trust Co. v. Roldan, 99 Phil. 392 (1956).
Prohibition against agents does not apply if the principal
consents to the sale of the property in the hands of the
agent. xDistajo v. CA, 339 SCRA 52 (2000).
b. Attorneys

a. Contracts with Third Parties (Arts. 73, 96, and 124,

Family Code)
Under Art. 124 of Family Code, sale by husband of a
conjugal property without the wifes consent is void and not
merely voidable, since the resulting contract lacks one of
the essential elements of full consent. xGuiang v. CA, 291
SCRA 372 (1998). A wife affixing her signature to a Deed of
Sale as a witness is deemed to have given her consent.
xPelayo v. Perez, 459 SCRA 475 (2005).
As an exception, husband may dispose of conjugal property
without wifes consent if such sale is necessary to answer
for conjugal liabilities mentioned in Articles 161 and 162.
xAbalos v. Macatangay, Jr., 439 SCRA 64 (2004).
b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87,
Family Code)
Sales between spouses who are not governed by a complete
separation of property regime are void, not just voidable.
xMedina v. Collector, 1 SCRA 302 (1960).
Since the spouses cannot validly sell property to one
another under Art. 1490, then policy consideration and the

(1) Prohibition against attorneys purchasing the

properties of their clients in litigation applies:
Only while litigation is pending. xDirector of Lands v. Ababa,
88 SCRA 513 (1979); Even though litigation is not

adversarial in nature Rubias v. Batiller, 51 SCRA 120 (1973);

or when it is a certiorari proceeding that may has no merit
xValencia v. Cabanting, 196 SCRA 302 (1991). Only to a
lawyer of record, and does not cover assignment of the
property given in judgment made by a client to an attorney,
who has not taken part in the case. Municipal Council of
Iloilo v. Evangelista, 55 Phil. 290 (1930); Not applicable to a
lawyer who acquired property prior to the time he
intervened as counsel in the suit involving such property.
Del Rosario v. Millado, 26 SCRA 700 (1969).

grasp a whole gamut of transfers whereby ownership of a

thing is ceded for a consideration. Polytechnic
University v. CA, 368 SCRA 691 (2001).
Where under an agreement, a party renounces and transfers
whatever rights, interests, or claims she has over a parcel of
land in favor of another party in consideration of the latters
payment of therein loan, the agreement is essentially a sale,
and the rule on delivery effected through a public
instrument apply. xCaoibes, Jr. v. Caoibes-Pantoja, 496 SCRA
273 (2006).

(2) Prohibition does not apply to:

(a) Sale of the land acquired by a client to satisfy a
judgment to his attorney as long as the property was not the
subject of the litigation. xDaroy v. Abecia, 298 SCRA 172
(1998);
(b) Contingency fee arrangement granting the lawyer
proprietary rights to the property in litigation since the
payment of said fee is not made during the pendency of
litigation but only after judgment has been rendered. [?]
Fabillo v. IAC, 195 SCRA 28 (1991).
c. Judges
A judge should restrain himself from participating in the sale
of propertiesit is incumbent uponhim to advise the parties
to discontinue the transaction if it is contrary to law.
Britanico v. Espinosa, 486 SCRA 523 (2006).
A judge who buys property in litigation before his court after
the judgment becomes final does not violate Art. 1491, but
he can be administratively disciplined for violation of the
Code of Judicial Ethics. xMacariola v. Asuncion, 114 SCRA 77
(1982). Even when the main cause is a collection of a sum of
money, the properties levied are still subject to the
prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1916).

1. Subject Must at Perfection Be Existing, Future or

Contingent (Arts. 1347, 1348, and 1462)
a. Emptio Rei Speratae (Arts. 1461 and 1347)
Pending crops which have potential existence may be valid
object of sale. xSibal v. Valdez, Phil. 512 (1927); and such
transaction cannot be considered to effectively be sale of
the land or any part thereof. xPichel v. Alonzo, 111 SCRA 341
(1981).
b. Emptio Spei (Art. 1461)
c. Subject to Resolutory Condition (Art. 1465)

III. SUBJECT MATTER OF SALE

Transfer of title or an agreement to transfer it for a price
paid or promised to be paid is the essence of sale.
xCommissioner of Internal Revenue v. CA and AdeMU, 271
SCRA 605 (1997). The Civil Code provisions defining sales is
a catch-all provision which effectively brings within it

2. Must Be Licit (Arts. 1347, 1459 and 1575)

Under Art. 1347, a sale involving future inheritance is void
and cannot be the source of any right nor create any
obligation. xTaedo v. CA, 252 SCRA 80 (1996). Article 1347
does not cover waiver of hereditary rights which is not
equivalent to sale, since waiver is a mode of extinction of
ownership in favor of the other persons who are co-heirs.
xAcap v. CA, 251 SCRA 30 (1995). Mortgagor can legally sell
the mortgaged property--mortgage is merely an
encumbrance that does not affect his principal attribute as
owner thereof. Law even considers void a stipulation
forbidding owner from alienating mortgaged immovable.
xPineda v. CA, 409 SCRA 438 (2003).
3. Must Be Determinate or At Least Determinable
(Art. 1460)
When deed of sale erroneously describes the lot adjacent to
the land seen and eventually delivered to the buyer, such

vetted land is the one upon which the minds have met, and
not thaterroneously described in the deed. Prudent people
buy land on the basis of what they see, and
not on what is technically described in the Torrens title.
Atilano v. Atilano, 28 SCRA 231 (1969).
a. Non-Specific Things (Generic) May Be the Object of
Sale (Arts. 1246 and 1409[6])
Subject matter is determinable when from the formula or
description adopted at perfection there is a way by which
the courts can delineate it independent of the will of the
parties. Melliza v. City of Iloilo, 23 SCRA 477 (1968).
Where the lot sold is said to adjoin the previously paid lot
on three sides thereof, the subject lot is capable of being
determined without the need of any new contract, even
when the exact
area of the adjoining residential lot is subject to the result of
a survey. xSan Andres v. Rodriguez,332 SCRA 769 (2000).
As the above-quoted portion of the kasunduan shows [giving
reference to the area, the locality located, and vicinity with
reference of old trees], there is no doubt that the object of
the sale is determinate. xCarabeo v. Dingco, 647 SCRA 200
(2011).
Determinable subject matter of sale are not subject to risk
of loss until they are physically segregated or particularly
designated. Yu Tek & Co. v. Gonzales, 29 Phil. 384
(1915).
b. Undivided Interest (Art. 1463) or Undivided Share
in a Mass of Fungible Goods (Art. 1464) May result it
co-ownership.
4. Quantity of Goods as Subject Matter Not Essential
for Perfection [?] (Art. 1349)
Sale of grains is perfected even when the exact quantity or
quality is not known, so long as the source of the subject is
certain. NGA v. IAC, 171 SCRA 131 (1989).
Where seller quoted to buyer the items offered for sale, by
item number, part number, description and unit price, and
the buyer had sent in reply a purchase order without

indicating the quantity being order, there was already a

perfected contract of sale, even when required letter of
credit had not been opened by the buyer.
Johannes Schuback & Sons Phil. Trading Corp. v.
CA, 227 SCRA 719 (1993).
5. Sellers Obligation to Transfer Title to Buyer (Art.
1459, 1462, and 1505)
a. Sellers Ownership Need Not Exist at Perfection:
Sale of copra for future delivery does not make seller liable
for estafa for failing to deliver because the contract is still
valid and the obligation was civil and not criminal.
xEsguerra v.
People, 108 Phil. 1078 (1960).
A perfected sale cannot be challenged on the ground of the
sellers non-ownership of thething sold at the time of the
perfection; it is at delivery that the law requires the seller to
have the
ownership of the thing sold. xAlcantara-Daus v. de Leon, 404
SCRA 74 (2003). It is essential that seller is owner of the
property he is selling. The principal obligation of a seller is
to transfer the ownership of the property sold (Art. 1458).
This law stems from the principle that nobody can dispose of
that which does not belong to him. NEMO DAT QUOD NON
HABET. Noel v. CA, 240 SCRA 78 (1995).
That the sellers are no longer owners of the goods at
perfection does not appear to be one of the void contracts
enumerated in Art. 1409 of Civil Code; and Art. 1402 thereof
recognizes a sale where the goods are to be acquired . . .
by the seller after the perfection of the contract of sale,
clearly implying that a sale is possible even if the seller was
not the owner at the time of sale, provided he acquires title
to the property later on; nevertheless such contract may be
deemed to be inoperative and may thus fall, by analogy,
under Art. 1409(5): Those which contemplate an
impossible service. Nool v. CA, 276 SCRA 149 (1997).

b. Subsequent Acquisition of Title by Non-Owner

Seller (Art. 1434) Title passes to the seller by
operation of law.
c. Acquisition by the Buyer May Even Depend on
Contingency (Art. 1462)
Illegality of Subject Matter (Arts. 1409, 1458, 1461,
1462, and 1575)
a. Special Laws: narcotics (R.A. 6425); wild bird or
mammal (Act 2590, Sec. 7); rare wild plants (Act 3983);
poisonous plants or fruits (R.A. 1288); dynamited fish (R.A
428); gunpowder and explosives (Act 2255); firearms and
ammunitions (P.D. 9); sale of realty by non-Christians (Sec.
145, Revised Adm. Code, R.A. 4252)
b. Following Sales of Land Void:
By Non-Christian if not approved by Provincial Governor
per Sec. 145 of Revised Administrative Code. xTac-an v. CA,
129 SCRA 319 (1984).
Friar land without consent of Secretary of Agriculture
required under Act No. 1120. xAlonso v. Cebu Country Club,
Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SCRA 430 (2000).
Made in violation of land reform laws declaring tenanttillers as the full owners of the lands they tilled.
xSiacor v. Gigantana, 380 SCRA 306 (2002).
Reclaimed lands are of the public domain and cannot,
without congressional fiat, be sold, public or
private. Fisheries Dev. Authority v. CA, 534 SCRA 490
(2007).
IV. PRICE AND OTHER CONSIDERATION (Arts. 14691474)
Price signifies the sum stipulated as the equivalent of the
thing sold and also every incident taken into consideration
for the fixing of the price put to the debit of the buyer and
agreed to by him. Inchausti & Co. v. Cromwell, 20 Phil. 345
(1911).
Seller cannot unilaterally increase the price previously
agreed upon with the buyer, even when due to increased
construction costs. GSIS v. CA, 228 SCRA 183 (1993).

Buyer who opted to purchase the land on installment basis

with imposed interest, cannot unilaterally disavow the
obligation created by the stipulation in the contract which
sets the interest at 24% p.a. The
rationale behind having to pay a higher sum on the
installment is to compensate the vendor for waiting a
number of years before receiving the total amount due. The
amount of the stated contract price paid in
full today is worth much more than a series of small
payments totaling the same amount. x x x To assert that
mere prompt payment of the monthly installments should
obviate imposition of the stipulated interest is to ignore an
economic fact and negate one of the most important
principles on which commerce operates. Bortikey v. AFP
RSBS, 477 SCRA 511 (2005).
1. Price Must Be Real (Art. 1471)
a. When Price Simulated
(1) Mapalo v. Mapalo, 17 SCRA 114 (1966), versus:
When two aged ladies, not versed in English, sign a Deed of
Sale on representation by buyer that it was merely to
evidence their lending of money, the situation constitutes
more than just fraud and vitiation of consent to give rise to a
voidable contract, since there was in fact no intention to
enter into a sale, there was no consent at all, and more
importantly, there was no consideration or price agreed
upon, which makes the contract void ab initio. Rongavilla
v. CA, 294 SCRA 289 (1998).

(2) Mate v. CA, 290 SCRA 463 (1998), versus:

When Deed of Sale was executed to facilitate transfer of
property to buyer to enable him to construct a commercial
building and to sell the property to the children, such
arrangement being merely a subterfuge on the part of
buyer, the agreement cannot also be taken as a

consideration and sale is void. Yu Bun Guan v. Ong, 367

SCRA 559 (2001).
(3) Effects When Price Simulated The principle of in
pari delicto nonoritur action, which denies all recovery to the
guilty parties inter se, where the price is simulated; the
doctrine applies only where the nullity arises from the
illegality of the consideration or the purpose of the contract.
Modina v. CA, 317 SCRA 696 (1999).28
b. When Price is False (Arts. 1353 and 1354)
When the parties intended to be bound but the deed did not
reflect the actual price agreed upon, there is only a relative
simulation of the contract which remains valid and
enforceable, but subject to reformation. xMacapgal v.
Remorin, 458 SCRA 652 (2005).
When price indicated in deed of absolute sale is
undervalued consideration pursuant to intention to avoid
payment of higher capital gains taxes, the price stated is
false, but the sale is still valid and binding on the real terms.
xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004).
c. Non-Payment of Price
Sale being consensual, failure of buyer to pay the price does
not make the contract void for lack of consideration or
simulation, but results in buyers default, for which the seller
may exercise his legal remedies. xBalatbat v. CA, 261 SCRA
128 (1996).29 In a contract of sale, the non-payment of
the price is a resolutory condition which extinguishes the
transaction that, for a time, existed and discharges the
obligations created thereunder. [?] The remedy of an unpaid
seller in a contract of sale is to seek either specific
performance or rescission. xHeirs of Pedro Escanlar v. CA,
281 SCRA 176 (1997).
Badge That Price Is Simulated, Not Just Unpaid: It is a
badge of simulated price, which render the sale void, when
the price, which is stipulated thereon to have been paid, has
in fact never been paid by the purchaser to the seller. xVda.
de Catindig. v. Heirs of Catalina Roque, 74 SCRA 83
(1976).31

2. Must Be in Money or Its Equivalent (Arts. 1458 and

1468)
Price must be valuable consideration as mandated by
Civil Law, instead of any pricemandated in common law.
Ong v. Ong, 139 SCRA 133 (1985); Bagnas v. CA,
176 SCRA 159
(1989); Republic v. Phil. Resources Dev., 102 Phil.
960 (1958).
Consideration for sale can take different forms, such as the
prestation or promise of a thing or service by another, thus:
When deed provides that the consideration was the
expected profits from the subdivision project.
xTorres v. CA, 320 SCRA 428 (1999). Cancellation of
liabilities on the property in favor of the seller. xPolytechnic
University v. CA, 368 SCRA
691 (2001). Assumption of mortgage constituted on the
property sold. xDoles v. Angeles, 492 SCRA 607 (2006).
3. Must Be Certain or Ascertainable at Perfection
(Art. 1469)
a. How Price Determined to Be Ascertainable
(i) Set by Third Person Appointed at Perfection (Art.
1469)
(ii) Set by the Courts (Art. 1469)
(iii) By Reference to a Definite Day, Particular
Exchange or Market (Art. 1472)
(iv) By Reference to Another Thing Certain, such as to
invoices then in existence and clearly identified by the
agreement xMcCullough v. Aenlle, 3 Phil. 285 (1904); or
known factors or stipulated formula. xMitsui v. Manila, 39
Phil. 624 (1919). Price is ascertainable if the terms of the
contract furnishes the courts a basis or measure for
determining the amount agreed upon, without having to
refer back to either or both parties.
xVillanueva v. CA, 267 SCRA 89 (1997).33
Where the sale involves an asset under a privatization
scheme which attaches a peculiar meaning or signification
to the term indicative price as merely constituting a ball-

park figure, then the price is not certain. xMoreno, Jr. v.

Private Management Office, 507 SCRA 63
(2006). Consideration is generally agreed upon as whole
even if it consists of several parts, and even if it is contained
in one or more instruments; otherwise there would be no
price certain, and the
contract of sale not perfected. xArimas v. Arimas, 55 O.G.
8682.
b. Price Never Set By One or Both Parties (Arts. 1473,
1182), unless the price is separately accepted by the
other party.
c. Effects of Un-Ascertainability Price: Sale Is
Inefficacious.
BUT: If Buyer Appropriates the Object, He Must Pay
Reasonable Price (Art. 1474) There can be no concept
of appropriation when it comes to land? Where a
church organization has been allowed possession and
introduce improvements on the land as part of its
application to purchase with the NHA, and thereafter it
refused the formal resolution of the NHA
Board setting the price and insisted on paying the lower
price allegedly given by the NHA Field Office, there can be
no binding contract of sale upon which an action for specific
performance can prosper, not even on fixing the price equal
to the fair market value of the property. xNHA v. Grace
Baptist Church, 424 SCRA 147 (2004). Even when there was
no meeting on the minds of the price, this Court rules that
to deny
petitioners claim would unjustly enrich respondent who had
benefited from the repairs of their four elevators. xHyatt
Elevators and Escalators Corp. v. Cathedral Heights Building
Complex Assn., 636 SCRA 401 (2010).
4. Manner of Payment of Price ESSENTIAL (Art. 1179)
A definite agreement on the manner of payment of price is
an essential element in the formation of a binding and
enforceable contract sale; without it the sale is void and an
action for specific performance
must fail. Navarra v. Planters Dev. Bank, 527 SCRA
562 (2007).34

When the manner of payment of the price is discussed after

acceptance, then such acceptancedid not produce a
binding and enforceable contract of sale. xNavarro v. Sugar
Producer's Corp., 1
SCRA 1180 (1961).Where there is no other basis for the
payment of the subsequent amortizations in a Deed of
Conditional Sale, the reasonable conclusion one can reach is
that the subsequent payments shall be
made in the same amount as the first payment. [?] xDBP v.
CA, 344 SCRA 492 (2000).
5. Inadequacy of Price Does Not Affect Ordinary Sale
(Arts. 1355 and 1470)
Mere inadequacy of the price does not affect the validity of
the sale when both parties are in a position to form an
independent judgment concerning the transaction, unless
fraud, mistake, or undue influence indicative of a defect in
consent is present. The contract may be annulled for
vitiated consent and not due to the inadequacy of price.
xBautista v. CA, 436 SCRA 141 (2004).35 Absent any
evidence of the fair market value of a land as of the time of
sale, it cannot be concluded
that the price was inadequate. xAcabal v. Acabal, 454 SCRA
897 (2005).36
a. Gross Inadequacy of Price May Avoid Judicial Sale:
(i) Only when it is shocking to the conscience of man.
xPascua v. Simeon, 161 SCRA 1 (1988); And
(ii) There is showing that, in the event of a resale, a better
price can be obtained. xCu Bie v. CA, 15 SCRA 307 (1965).
UNLESS: There is right of redemption, in which case the
proper remedy is to redeem. xDe Leon v. Salvador, 36 SCRA
567 (1970).38
BUT: By way of extraordinary circumstances perceived,
when in a judicial sale the right of redemption has been lost,
where the inadequacy of the price is purely shocking to the
conscience, such that the mind revolts at it and such that a
reasonable man would neither directly or indirectly be likely
to consent to it, the same will be se aside. xCometa v. CA,
351 SCRA 294 (2001). Gross inadequacy of price by itself

will not result in a void contract; it does not even affect the
validity of a contract of sale; unless it signifies a defect in
the consent (i.e., there has been fraud, mistake or undue
influence) or that the parties actually intended a donation or
some other contract. Bacungan v. CA, 574 SCRA 642 (2008).
There is gross inadequacy in price if it is such that a
reasonable man will not agree to dispose of his property.
xDorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
When judicial sale is voided without fault of purchaser, the
latter is entitled return of price with simple interest, together
with all sums paid out by him in improvements introduced
on the property,
taxes, and other expenses. xSeven Brothers Shipping Corp.
v. CA, 246 SCRA 33 (1995).
b. Lesion of more than 1/4 of value of thing makes
sale rescissible unless approved by court (Art. 1386)
c. Gross inadequacy of price may raise the
presumption of equitable mortgage (Art. 1602)

V. FORMATION OF CONTRACT OF SALE

A. POLICITACION STAGE (Art. 1479)
Policitation stage covers the doctrine of freedom to
contract which signifies the right to choose with whom to
contract. A property owner is free to offer his property for
sale to any interested person, and is not duty bound to sell
the same to the occupant thereof, absent any prior
greement vesting the occupants the right of first priority to
buy. Gabelo v. CA, 316 SCRA 386 (1999). A negotiation is
formally initiated by an offer, which, however, must be
certain. At any time prior to the perfection of the contract,
either negotiating party may stop the negotiation. At this
stage, the offer may be withdrawn; the withdrawal is
effective mmediately after its manifestation. To convert the
offer into a contract, the acceptance must be absolute and

must not qualify the terms of the offer; it must be plain,

unequivocal, unconditional and without variance of any sort
from the proposal. Manila Metal Container Corp. v.
PNB, 511 SCRA 444 (2006). An unaccepted unilateral
promise (offer to buy or to sell) prior to acceptance, does
not give rise to any obligation or right. xRaroque v. Marquez,
37 O.G. 1911. Where the offer is given with a stated time for
its acceptance, the offer is terminated at the expiration of
that time. xVillegas v. CA, 499 SCRA 276 (2006). The Letter
of Intent to Buy and Sell is just thata manifestation of
offerors intention to sell the property and offerees intention
to acquire the samewhich is neither a contract to sell nor a
conditional contract of sale. xMuslim and Christian Urban
Poor Assn, Inc. v. BRYC-V Devt Corp., 594 SCRA 724 (2009).
When the offeree negotiates for a much lower price, it
constitutes a counter-offer and is therefor not an acceptance
of the offer of offeror. xTuazon v. Del Rosario-Suarez, 637
SCRA 728 (2010).
1. OPTION CONTRACT
An 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 the one to whom the
option was granted, if the latter should decide to use the
option. It is a separate
agreement distinct from the contract of sale which the
parties may enter into upon the consummation of the
option. Carceller v. CA, 302 SCRA 718 (1999).40 An
option imposes no binding obligation on the person holding
the option aside from the consideration for the offer. Until
accepted, it is not treated as a sale. Tayag v. Lacson, 426
SCRA 282 (2004).
Tenants, not being the registered owners, cannot grant an
option on the land, much less any exclusive right to buy
the property under the Latin saying nem dat quod non
habet. xTayag v. Lacson, 426 SCRA 282 (2004).

a. Meaning of Separate Consideration (Arts. 1479

and 1324)
A unilateral promise to sell, in order to be binding upon the
promissor, must be for a price certain and supported by a
consideration separate from such price. xSalame v. CA, 239
SCRA 356 (1995). The separate consideration in an
option may be anything of value, unlike in sale where it
must be the price certain in money or its equivalent.
Villamor v. CA, 202 SCRA 607 (1991),43 such when the
option is attached to a real estate mortgage xSoriano v.
Bautista, 6 SCRA 946 (1962). Although no consideration is
expressly mentioned in an option contract, it is presumed
that it exists and may be proved, and once proven, the
option is binding. xMontinola v. Cojuangco, 78 Phil. 481
(1947).
b. No Separate Consideration: Void as Option, Valid
as a Certain Offer
Sanchez v. Rigos, 45 SCRA 368 (1972).44
BUT LATELY: xYao Ka Sin Trading v. CA, 209 SCRA 763
(1991); xMontilla v. CA, 161 SCRA 855 (1988); xNatino v.
IAC, 197 SCRA 323 (1991); and xDiamante v. CA, 206 SCRA
52 (1992). If the option is without any consideration, the
offeror may withdraw his offer by communicating such
withdrawal to the offeree at any time before acceptance. If it
is founded
upon a consideration, the offeror cannot withdraw his offer
before the lapse of the period agreed upon. Tuazon v. Del
Rosario-Suarez, 637 SCRA 728 (2010).

c. There Must Be Acceptance of Option Offer.

Vazquez v. CA, 199 SCRA 102 (1991).

d. Proper Exercise of Option Contract. Nietes v. CA,

46 SCRA 654 (1972).
An option attached to a lease when not exercised within the
option period is extinguished andcannot be deemed to have
been included in the implied renewal (tacita reconduccion)
of the lease. xDizon v. CA, 302 SCRA 288 (1999). Proper
exercise of an option gives rise to the reciprocal obligations
of sale xHeirs of Luis Bacus v. CA, 371 SCRA 295 (2001),45
which must be enforced with ten (10) years as provided
under Art. 1144. xDizon v. CA, 302 SCRA 288 (1999). There
must be virtual exercise of option with the option period.
Carceller v. Court of Appeals, 302 SCRA 718 (1999).
2. RIGHT OF FIRST REFUSAL
A right of first refusal cannot be the subject of specific
performance, but breach would allow a recovery of
damages. xGuerrero v. Yigo, 96 Phil. 37 (1954). Rights of
first refusal only constitute innovative juridical relations,
but do not rise to the level of contractual commitment since
with the absence of agreement on price certain, they are not
subject to
contractual enforcement. Ang Yu Asuncion v. CA, 238
SCRA 602 (1994).
Right of first refusal contained in a lease, when breached by
promissor allows enforcement by the promisee by way of
rescission of the sale entered into with the third party,
pursuant to Arts. 1381(3) and 1385 of Civil Code. xGuzman,
Bocaling & Co. v. Bonnevie, 206 SCRA 668 (1992);
Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc.,
264 SCRA 483 (1996);46 Paranaque Kings
Enterprises, Inc. v. CA, 268 SCRA 727, 741 (1997).
In a right of first refusal, while the object might be made
determinate, the exercise of the right would be dependent
not only on the grantors eventual intention to enter into a
binding juridical relation with another but also on terms,
including the price, that are yet to be firmed up. . . the
offer may be withdrawn anytime by communicating the
withdrawal to the other party. Vasquez v. Ayala Corp.,
443 SCRA 231 (2004).

A right of first refusal clause simply means that should the

lessor decide to sell the leased property during the term of
the lease, such sale should first be offered to the lessee;
and the series of negotiations that transpire between the
lessor and the lessee on the basis of such preference is
deemed a compliance of such clause even when no final
purchase agreement is perfected between the parties. The
lessor was then at liberty to offer the sale to a third party
who paid a higher price, and
there is no violation of the right of the lessee. Riviera
Filipina, Inv. v. CA, 380 SCRA 245 (2002). When a lease
contract contains a right of first refusal, the 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. Polytechnic University of the Philippines v.
Golden Horizon Realty Corp., 615 SCRA 478 (2010). A right
of first refusal is a contractual grant, not of the sale of a
property, but of the first priority to buy the property in the
event the owner sells the same. As distinguished from an
option contract, in a right of first refusal, whole the object
might be made determinate, the exercise of the right of first
refusal would be dependent not only on the owners
eventual intention to enter into a binding juridical relation
with another but also on terms, including the price, that are
yet to be firmed up. Polytechnic University of the Philippines
v. Golden Horizon Realty Corp., 615 SCRA 478 (2010). A
right of first refusal in a lease in favor of the lessee cannot
be availed of by the sublessee. xSadhwani v. CA, 281 SCRA
75 (1997).
4. MUTUAL PROMISES TO BUY AND SELL (Art. 1479):
TRUE CONTRACT TO SELL
Mutual promises to buy and sell a certain thing for a certain
price gives each of the contracting parties a right to demand
from the other the fulfillment of the obligation. xBorromeo v.

Franco, 5 Phil. 49 (1905). Even in this case the certainty of

the price must also exist, otherwise, there is no valid and
enforceable contract to sell. xTan Tiah v. Yu Jose, 67 Phil.
739 (1939). An accepted bilateral promise to buy and sell is
in a sense similar to, but not exactly the same, as a
perfected contract of sale because there is already a
meeting of minds upon the thing which is the object of the
contract and upon the price.48 But a contract of sale is
consummated only upon delivery and payment, whereas in
a bilateral promise to buy and sell gives the contracting
parties rights in personam, such that each has the right to
demand from the other the fulfillment of their respective
undertakings. Macion v. Guiani, 225 SCRA 102
(1993).49
The cause of action under a mutual promise to buy and sell
is 10 years. xVillamor v. CA, 202 SCRA 607 (1991).
B. PERFECTION STAGE (Arts. 1475, 1319, 1325 and
1326)
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 law governing the form
of contracts. xMarnelego v. Banco Filipino Savings and
Mortgage Bank, 480 SCRA 399 (2006).50 Mutual consent
being a state of mind, its existence may only be inferred
from the confluence of two
acts of the parties: an offer certain as to the object of the
contract and its consideration, and an acceptance of the
offer which is absolute in that it refers to the exact object
and consideration embodied in said offer. xVillanueva v.
PNB, 510 SCRA 275 (2006). If a material element of a
contemplated contract is left for future negotiations, the
same is too indefinite to be enforceable. For a contract to be
enforceable, its terms must be certain and explicit, not
vague or indefinite. xBoston Bank of the Phil. v. Manalo, 482
SCRA 108 (2006). So long as there is any uncertainty or
indefiniteness, or future negotiations or consideration yet to
be had between the parties, there is no contract at all.
xMoreno, Jr. v. Private Management Office, 507 SCRA 63

(2006). The essence of consent is the conformity of the

parties on the terms of the contract, that is, the acceptance
by one of the offer made by the other. However, the
acceptance must be absolute; otherwise, the same
constitutes a counter-offer and has the effect of rejecting
the offer. XYST Corp. v. DMC Urban Properties Dev., Inc., 594
SCRA 598 (2009).
1. Absolute Acceptance of a Certain Offer (Art. 1475)
Under Article 1319, the acceptance of an offer must
therefore be unqualified and absolute. In other words, it
must be identical in all respects with that of the offer so as
to produce consent or meeting of the minds. This was not
the case herein considering that petitioners acceptance of
the offer was qualified, which amounts to a rejection of the
original offer. Limketkai Sons Milling, Inc. v. CA, 255 SCRA
626 (1996). A qualified acceptance or one that involves a
new proposal constitutes a counter-offer and a rejection of
the original offer. The acceptance must be identical in all
respects with that of the offer so as to produce consent or
meeting of minds. Manila Metal Container Corp. v.
PNB, 511 SCRA 444
(2006).
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 contract of sale.
xDBP v. Ong, 460 SCRA 170 (2005).
If sale subject to suspensive condition: No perfected
sale of a lot where the award thereof was expressly made
subject to approval by the higher authorities and there
eventually was no acceptance manifested by the supposed
awardee. xPeople's Homesite & Housing Corp. v. CA, 133
SCRA 777 (1984).
2. When Deviation Allowed:
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 unequivocally to accept
the offer, whether such request is granted or not, a contract
is

formed. The vendors change in a phrase of the offer to

purchase, which change does not essentiall change the
terms of the offer, does not amount to a rejection of the
offer and the tender or a counter-offer. Villonco v.
Bormaheco, 65 SCRA 352 (1975).53 3. Sale by Auction
(Arts. 1476, 1403(2)(d), 1326) The terms and conditions
provided by the owner of property to be sold at auction are
binding upon all bidders, whether they knew of such
conditions or not. xLeoquinco v. Postal Savings Bank,
47 Phil. 772 (1925). An auction sale is perfected by the fall
of the hammer or in other customary manner and it does
not matter that another was allowed to match the bid of the
highest bidder. xProvince of Cebu v.
Heirs of Rufina Morales, 546 SCRA 315 (2008).
4. Earnest Money (Art. 1482)
Earnest money given by the buyer shall be considered as
part of the price and as proof of the perfection of the
contract. It constitutes an advance payment to be deducted
from the total price. xEscueta v. Lim, 512 SCRA 411 (2007).
Absent proof of the concurrence of all the essential elements
of a contract of sale, the giving of earnest money cannot
establish the existence of a perfected contract of sale.
Manila Metal Container Corp. v. PNB, 511 SCRA 444
(2006). 54 Article 1482 does not apply when earnest money
given in a contract to sell xSerrano v. Caguiat,
517 SCRA 57 (2007), especially where by stipulation the
buyer has the right to walk away from the transaction, with
no obligation to pay the balance, although he will forfeit the
earnest money. xChua v. CA, 401 SCRA 54 (2003).55
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. But when there is no contract of
sale because the parties never went pass the negotiation
stage, or more accurately, have not reached the perfection
stage with the present of the three essential elements of the
contract of sale, the concept of earnest money is certainly
inapplicable. The earnest money forms part of the
consideration only if the sale is

consummated upon full payment of the purchase price.

Hence, there must first be a perfected contract of sale
before we can speak of earnest money. xGSIS v. Lopez, 592
SCRA 456 (2009).56 When there is no provision for forfeiture
of earnest money in the event the sale fails to materialize,
then with the rescission it becomes incumbent upon seller to
return the earnest money as legal consequence of mutual
restitution. xGoldenrod, Inc. v. CA, 299 SCRA 141 (1998).
5. Difference Between Earnest Money and Option
Money. Oesmer v. Paraiso Dev. Corp., 514 SCRA 228
(2007).
6. Sale Deemed Perfected Where Offer Was Made.
(Art. 1319)
C. FORMAL REQUIREMENTS OF SALES (Arts. 1357,
1358, 1406 and 1483)
1. Form Not Important for Validity of Sale
Sale of land under private instrument is valid. Gallar v.
Husain, 20 SCRA 186 (1967).57 Articles 1357 and 1358, in
relation to Art. 1403(2), require that the sale of real property
must be in writing for it to be enforceable, it need not be
notarized for there is nothing in those provisions which
require that it must be executed in a public document to be
valid. xMartinez v. CA, 358 SCRA 38 (2001);58 but both its
due execution and its authenticity must be proven, pursuant
to Sec. 20, Rule 132 of the Rules of Court. xTigno v. Aquino,
444 SCRA 61 (2003).
Although the conveyance of land is not made in a public document, it
does not affect the
validity of such conveyance. Article 1358 of Civil Code does not
require the accomplishment of the
acts or contracts in a public instrument in order to validate the act or
contract but only to insure its
efficacy. The Estate of Pedro C. Gonzales v. Their Hiers of Marcos
Perez, 605 SCRA 47 (2009).
a. Other Rulings on Deeds of Sale:

Seller may agree to a deed of absolute sale before full payment of the
purchase price. xPan Pacific
Industrial Sales Co., Inc. v. CA, 482 SCRA 164 (2006).
Assuming that the buyers failed to pay the full price stated in the Deed
of Sale, such partial failure would
not render the sale void. Bravo-Guerrero v. Bravo, 465 SCRA 244 (2005).
That marital consent was executed prior to the Deed of Absolute Sale
does not indicate that it is a
phoney. Pan Pacific Industrial Sales Co., Inc. v. CA, 482 SCRA 164 (2006).
A Deed of Sale when acknowledged before a notary public, enjoys the
presumption of regularity and due
execution. To overthrow that presumption, sufficient, clear and convincing
evidence is required, otherwise
the document should be upheld. xBravo-Guerrero v. Bravo, 465 SCRA 244
(2005).59
Notarization of Deeds of Sale by one who was not a notary public does
not affect the validity thereof; said
documents were merely converted into private documents. xR.F. Navarro &
Co. Inc. v. Vailoces, 361
SCRA 139 (2001).
Notarization of a deed of sale does not guarantee its validity nor is it
conclusive of the true agreement of
the parties thereto, because it is not the function of the notary public to
validate an instrument that was
never intended by the parties to have any binding legal effect. xSalonga v.
Concepcion, 470 SCRA 291
(2005).60
Buyers immediate taking of possession of subject property corroborates
the truthfulness and authenticity
of the deed of sale. xAlcos v. IAC, 162 SCRA 823 (1988). Conversely, the
sellers continued possession
of the property makes dubious the contract of sale between them. xSantos v.
Santos, 366 SCRA 395
(2001).61
Any substantial difference between the terms of the Contract to Sell and
the concomitant Deed of
Absolute Sale (such as difference in subject matter, and difference in price
and/or the terms thereof), does
not make the transaction between the seller and the buyer void, for it is
truism that the execution of the
Deed of Absolute Sale effectively rendered the previous Contract to Sell
ineffective and cancelled
[through the process of novation]. xLumbres v. Talbrad, Jr., 516 SCRA 575
(2007).

b. Value of Business Forms to Prove Sale

Business forms, e.g., order slip, delivery charge invoice and the like,
which are issued by the seller in the ordinary course of the business
are not always fully accomplished to contain all the necessary
information describing in detail the whole business transaction
more often than not they are accomplished perfunctorily without
proper regard to any legal repercussion for such neglect such that
despite their being often incomplete, said business forms are
commonly recognized in ordinary commercial transactions as valid
between the parties and at the very least they serve as an
acknowledgment that a business transaction has in fact transpired.
xDonato C. Cruz Trading Corp. v. CA, 347 SCRA 13 (2000).
Such documents are not mere scraps of paper bereft of probative
value but vital pieces of evidence of commercial transactions. They
are written memorials of the details of the consummation of
contracts. xLagon v. Hooven Comalco Industries, Inc., 349 SCRA
363 (2001).
2. WHEN FORM IMPORTANT IN SALE
a. To Bind Third Parties
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; and non-compliance
therewith does not adversely affect the validity of the contract nor the
contractual rights and obligations of the parties thereunder. Fule v.
CA, 286 SCRA 698 (1998);62 Dalion v. CA, 182 SCRA 872
(1990).63 Article 1358 of the Civil Code which requires the
embodiment of certain contracts in a public instrument, in only for
convenience; and registration of the instrument only adversely
affects third parties, and non-compliance therewith does not
adversely affect the validity of the contract or the contractual rights
and obligations of the parties thereunder. xEstreller v. Ysmael, 581
SCRA 247 (2009).64
While sale of land appearing in a private deed is binding between the
parties, it cannot be considered binding on third persons, if it is not
embodied in a public instrument and recorded in the
Registry of Deeds. Secuya v. Vda. De Selma, 326 SCRA 244
(2000).65 b. For Enforceability Between the Parties: STATUTE OF
FRAUDS (Arts. 1403 and 1405) The term Statute of Frauds is
descriptive of the statutes which require certain classes of

contracts, such as agreements for the sale of real property, to be in

writing, the purpose being to prevent fraud and perjury in the
enforcement of obligations depending for their evidence on the
unassisted memory of witnesses by requiring certain enumerated
contracts and transactions to be evidenced by a writing signed by the
party to be charged. Shoemaker v. La Tondea, 68 Phil. 24 (1939).
Presupposes Valid Contract of Sale The application of the
Statute of Frauds presupposes the existence of a perfected
contract. When the records show that there was no perfected
contract of sale, there is no basis for the application of the Statute of
Frauds. xFirme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190
(2003).66
(1) Coverage:
(i) Sale of Real Property A sale of realty cannot be proven by means of
witnesses, but must necessarily be evidenced by a written instrument, duly
subscribed by the party charged, or by secondary evidence of the contents
of such document. No other evidence can be received except the
documentary evidence referred to. xGorospe v. Ilayat, 29 Phil. 21 (1914).67
(ii) Agency to Sell or to Buy As contrasted from sale, an agency to sell
does not belong to any of the three categories of contracts covered by Arts.
1357 and 1358 and not one enumerated under the Statutes of Frauds in Art.
1403. xLim v. CA, 254 SCRA 170 (1996).68 (iii) Rights of First Refusal A
right of first refusal is not covered by the statute of frauds. Furthermore,
Art. 1403(2)(e) of Civil Code presupposes the existence of a perfected, albeit
unwritten, contract of sale; a right of first refusal, such as the one involved in
the instant case, is not by any means a perfected contract of sale of real
property. xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001).
(iv) Equitable Mortgage Statute does not stand in the way of treating an
absolute deed as a mortgage, when such was the parties intention, although
the agreement for redemption or defeasance is proved by parol evidence.
xCuyugan v. Santos, 34 Phil. 100 (1916).69 (v) Right to Repurchase The
deed and the verbal agreement allowing the right of repurchase should
be considered as an integral whole; the deed of sale is itself the note or
memorandum evidencing the
contract. xMactan Cebu Intll Airport Authority v. CA, 263 SCRA 736 (1996).

(2) Memorandum (Yuviengco v. Dacuycuy, 104 SCRA 668

[1981]; Under Art. 1403, an exception to the unenforceability of
contracts pursuant to the Statute of Frauds is the existence of a
written note or memorandum evidencing the contract. The
memorandum may be found in several writings, not necessarily in
one document, and constitutes the written evidence that such a

contract was entered into. The existence of a written contract of the

sale is not necessary so long as the agreement to sell real property
is evidenced by a written note or memorandum, embodying the
essentials of the contract and signed by the party charged or his
agent. Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523
(1995). BUT: The memoranda must be signed by the party sought to
be charged, and must clearly provide a deed of sale categorically
conveying the subject property. Limketkai Sons Milling,
Inc. v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996).
For the memorandum to take the sale out of the coverage of the
Statute of Frauds, it must contain all the essential terms of the
contract of sale. xTorcuator v. Bernabe, 459 SCRA 439 (2005),70
even when scattered into various correspondences which can be
brought together xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA
408 (1999).71
EXCEPTION: Electronic Documents under the E-COMMERCE ACT
(R.A. 8792)
(3) Partial Execution (Art. 1405) Ortega v. Leonardo, 103 Phil.
870 (1958); Claudel v. CA,
199 SCRA 113 (1991).
Delivery of the deed to buyers agent, with no intention to part with
the title until the purchase price is paid, does not take the case out of
the Statute of Frauds. xBaretto v. Manila Railroad Co., 46 Phil. 964
(1924). The Statute of Frauds does not apply to contracts either
partially or totally performed. In addition, a contract that violates the
Statute of Frauds is ratified by the acceptance of benefits
under the contract, such as the acceptance of the purchase price
and using the proceeds to pay outstanding loans. Alfredo v.
Borras, 404 SCRA 145 (2003).

(4) Waiver (Art. 1405) Cross-examination on the contract is

deemed a waiver of the defense of
the Statute. xAbrenica v. Gonda, 34 Phil. 739 (1916); Talosig v. Vda.
De Nieba, 43 SCRA 472
(1972).When the purported buyers exhibits failed to establish the
perfection of the contract of

sale, oral testimony cannot take their place without violating the parol
evidence rule. It was therefore irregular for the trial court to have
admitted in evidence testimony to prove the
existence of a contract of sale of a real property between the parties,
despite the persistent objection made by the purported sellers
counsel as early as the first scheduled hearing, even
when cross-examination was made on the basis of the witnesses
affidavit-form testimony. Limketkai Sons Milling, Inc. v. CA, 255
SCRA 6 (1996); 261 SCRA 464 (1996).
(5) Rulings on Receipts and Other Documentary Evidence of
Sale
Since a contract of sale is perfected by mere consent, then when the
dealer of motor vehicles accepts a deposit of P50,0000 and pulls out
a unit from the assembler for that purpose, it was in breach of
contract when it sold the car subsequently to another buyer.
xXentrex Automotive, Inc. v. CA, 291 SCRA 66 (1998). A sales
invoice is a commercial document-commercial documents or papers
are those used by merchants or businessmen to promote or facilitate
trade or credit transactionsthey are not mere scraps of paper
bereft of probative value, but vital pieces of evidence of
commercial transactions, written memorials of the details of the
consummation of contracts. Seaiol Petroleum Corp. v. Autocorp
Group, 569 SCRA 387 (2008). Sales invoices are not evidence of
payment of the price, but evidence of the receipt of the
goods; since the best evidence to prove payment is the official
receipt. El Oro Engravers Corp. v. CA, 546 SCRA 42 (2008).
A receipt which is merely an acknowledgment of the sum received,
without any indication therein of the total purchase price of the land
or of the monthly installments to be paid, cannot be the basis of valid
sale. xLeabres v. CA, 146 SCRA 158 (1986). In itself, the absence of
receipts, or any proof of consideration, would not be conclusive of
the inexistence of a sale since consideration is always presumed.
xTigno v. Aquino, 444 SCRA
61 (2003).
Receipts proves payment which takes the sale out of the Statute of
Frauds. Toyota Shaw, Inc. v. CA, 244 SCRA 320 (1995).
c. For Validity: Sale of Realty Through Agent, Authority Must Be
in Writing (Art. 1874)

When sale of a piece of land or any interest therein is through an

agent, the authority of the latter shall be in writing; otherwise, the
sale shall be void,75 even when:
Agent is the son of the owner. xDelos Reyes v. CA, 313 SCRA 632 (1999)
There is partial payment of the price received by the supposed agent.
xDizon v. CA, 396 SCRA 154
(2003).76
In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA,
325 SCRA 385 (2000).77

When Contract to Sell was signed by the co-owners themselves as

witnesses, the written authority for their agent mandated under
Article 1874 of the Civil Code is no longer required. xOesmer
v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).
d. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm.
Code) XD. SIMULATED SALES
Characteristic of simulation is that the apparent contract is not really
desired or intended to produce legal effect or in any way alter the
parties juridical situation, or that the parties have no intention to be
bound by the contract.
The requisites are:
(a) an outward declaration of will different from the will of the
parties;
(b) false appearance must have been intended by mutual
agreement; and
(c) purpose is to
deceive third persons. xManila Banking Corp. v. Silverio, 466 SCRA
438 (2005).78

1. Badges and Non-badges of Simulation:

Non-payment of the stipulated consideration, absence of any attempt by
the buyers to assert their alleged
rights over the subject property. xVillaflor v. CA, 280 SCRA 297 (1997).79
Failure of alleged buyers to collect rentals from alleged seller. xSantiago v.
CA, 278 SCRA 98 (1997); but not

when there appears a legitimate lessor-lessee relationship between the

vendee and the vendor. xUnion Bank
v. Ong, 491 SCRA 581 (2006).
Although the agreement did not provide for the absolute transfer ownership
of the land to buyer, that did not
amount to simulation, since delivery of certificate of ownership and execution
of deed of absolute sale were
expressly stipulated as suspensive conditions, which gave rise to the
corresponding obligation on part of
buyer to pay the last installments. xVillaflor v. CA, 280 SCRA 297 (1997).
When signature on a deed of sale is a forgery. Fidel v. CA, 559 SCRA 186
(2008).80 But bare assertions that
the signature appearing on the Deeds of Sale is not that of her husband is
not enough to allege simulation,
since forgery is not presumed; it must be proven by clear, positive and
convincing evidence. xR.F. Navarro &
Co. v. Vailoces, 361 SCRA 139 (2001).
Simulation of contract and gross inadequacy of price are distinct legal
concepts, with different effects the
concept of a simulated sale is incompatible with inadequacy of price. When
the parties to an alleged contract
do not really intend to be bound by it, the contract is simulated and void.
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. xBravo-Guerrero v. Bravo, 465 SCRA 244 (2005).

2. When Motive Nullifies the Sale

In sale, consideration is, as a rule, different from the motive of
parties, and when the primary motive is illegal, such as when the
sale was executed over a land to illegally frustrate a person's right

to inheritance and to avoid payment of estate tax, the sale is void

because illegal motive predetermined purpose of the contract.
xOlegario v. CA, 238 SCRA 96 (1994).81 Where the parties to a
contract of sale agreed to a consideration, but the amount reflected
in the final Deed of Sale was lower, their motivation being to pay
lower taxes on the transaction, the contract of sale remains valid and
enforceable upon the terms of the real consideration. Although
illegal, the motives neither determine nor take the place of the
consideration. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004).
An action or defense for the declaration of the inexistence of a
contract is imprescriptible. On the other hand, an action to rescind is
founded upon and presupposes the existence of a contract. A
contract which is null and void is no contract at all and hence could
not be the subject of rescission. xCampos v. Pastrana, 608 SCRA 55
(2009).
3. Remedies Allowed When Sale Simulated
When a contract of sale is void, the right to set up its nullity or nonexistence is available to third persons whose interests are directly
affected thereby. Likewise, the remedy of accion pauliana is
available when the subject matter is a conveyance, otherwise valid,
undertaken in fraud of creditors. xManila Banking Corp. v. Silverio,
466 SCRA 438 (2005). The rescissory action to set aside contracts in
fraud of creditors is accion pauliana, essentially a subsidiary remedy
accorded under Article 1383 which the party suffering damage can
avail of only when he has no other legal means to obtain reparation
for the same. In such action, it must be shown
that both contracting parties have acted maliciously so as to
prejudice the creditors who were prevented from collecting their

claims. Rescission if generally unavailing should a third person,

acting in good faith, is in lawful possession of the property since he is
protect by law against a suit for rescission by the registration of the
transfer to him in the registry. xUnion Bank v. Ong, 491 SCRA 581
(2006).
4. Effect When Sale Declared Void:
The action for the declaration of the contracts nullity is imprescriptiblean
action for reconveyance of
property on a void contract of sale does not prescribe. Fil-Estate Golf and
Dev., Inc. v. Navarro, 526 SCRA
51 (2007).
Possessor is entitled to keep the fruits during the period for which the
buyer held the property in good faith.
xDBP v. CA, 316 SCRA 650 (1999).
Then restoration of what has been given is in order, since the relationship
between parties in any contract
even if subsequently voided must always be characterized and punctuated
by good faith and fair dealing.
xDe los Reyes v. CA, 313 SCRA 632 (1999); xHeirs of Ignacia AguilarReyes v. Mijares, 410 SCRA 97
(2003).

Alien who purchases land in the name of his Filipina lover, has no
standing to seek legal remedies
to either recover the property or the purchase price paid, since the
transaction is void ab initio for being
in violation of the constitutional prohibition. xFrenzel v. Catito, 406
SCRA 55 (2003).