I.

Elements of a Contract

Batchelder vs. Central Bank G.R. No. L-25071 March 29, 1972
Facts:
Under Resolution No. 857 and the implementing circular aforesaid, Filipino
and American resident contractors for constructions in U.S. military bases in the
Philippines whose contracts antedated April 25, 1960 were required to surrender
to the defendant-appellant Central Bank their dollar earnings under their
respective contracts but were entitled to utilize 90% of their surrendered dollars
for importation at the preferred rate of commodities for use within or outside said
U.S. military bases

II. Contract of Adhesion

Republic vs. PLDT G.R. No. L-18841

January 27, 1969

Facts:
Petitioner applied for the services of the respondent for private use. It
however, violated the terms and conditions of the contract as it made us of the
services for the general public, thus making it essentially in competition with
petitioner. Respondent with notice severed the connection of petitioner and
refused to make any inter-connection agreement with it. Thus the latter filed suit
praying that the respondent enter into contract with him under such terms and
conditions the court may deem reasonable.
Held:
Parties can not be coerced to enter into a contract where no agreement is
had between them as to the principal terms and conditions of the contract.
Freedom to stipulate such terms and conditions is of the essence of our
contractual system. But the court a quo has apparently overlooked that while the
Republic may not compel the PLDT to celebrate a contract with it, the Republic
may, in the exercise of the sovereign power of eminent domain, require the
telephone company to permit interconnection of the government telephone
system and that of the PLDT, as the needs of the government service may
require, subject to the payment of just compensation to be determined by the
court.
Corpus vs. C.A. G.R. No. L-40424 June 30, 1980
Facts:
The plaintiff rendered legal services to the defendant, which the latter
claimed that he did so gratuitously due to their intimate relationship and not
primarily for the professional fee. The case reached the Supreme Court which
remanded the original decision. Defendant in the meantime offered the plaintiff
compensation which he refused. The then CFI then rendered decision entitling
the defendant to backpay. Thus the plaintiffs law office collected from the

defendant counsel fees amounting to 50% thereof. He refused to pay contending

that there was no contract to that effect
Held:

the payment of attorney's fees to respondent David may also be justified

by virtue of the innominate contract of facio ut des (I do and you give which is
based on the principle that "no one shall unjustly enrich himself at the expense
of another." Whether the plaintiffs services were solicited or whether they were
offered to the defendant for his assistance, inasmuch as these services were
accepted and made use of by the latter, we must consider that there was a tacit
and mutual consent as to the rendition of the services. This gives rise to the
obligation upon the person benefited by the services to make compensation
therefor

Sales

Sanchez v. Rigos G.R. No. L-25494 June 14, 1972

Facts:
The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and
defendant Severina Rigos executed an instrument entitled "Option to Purchase,"
whereby Mrs. Rigos "agreed, promised and committed ... to sell" to Sanchez the
sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot,
municipality of San Jose, province of Nueva Ecija, and more particularly
described in Transfer Certificate of Title No. NT-12528 of said province, within two
(2) years from said date with the understanding that said option shall be deemed
"terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the
property" within the stipulated period.
Plaintiff tendered the required amount several times but were rejected,
thus he deposited the amount and filed this suit
Held:
An option is unilateral: a promise to sell at the price fixed whenever the
offeree should decide to exercise his option within the specified time. After
accepting the promise and before he exercises his option, the holder of the
option is not bound to buy. He is free either to buy or not to buy later. In this
case, however, upon accepting herein petitioner's offer a bilateral promise to sell

and to buy ensued, and the respondent ipso facto assumed the obligation of a
purchaser. He did not just get the right subsequently to buy or not to buy. It was
not a mere option then; it was a bilateral contract of sale.
"If the option is given without a consideration, it is a mere offer of a
contract of sale, which is not binding until accepted. If, however, acceptance is
made before a withdrawal, it constitutes a binding contract of sale, even though
the option was not supported by a sufficient consideration.
In other words, since there may be no valid contract without a cause or
consideration, the promisor is not bound by his promise and may, accordingly,
withdraw it. Pending notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if accepted, results in a perfected
contract of sale.

Quiroga vs. Parsons G.R. No. L-11491

August 23, 1918

Facts:
The parties entered into a contract wherein the plaintiff granted the
exclusive right to sell his goods to the defendant. The contracts used the term
agents and commission. Plaintiff instituted this suit claiming that the
defendant violated the terms of the contract not to sell the beds at higher prices
than those of the invoices; to have an open establishment in Iloilo; itself to
conduct the agency; to keep the beds on public exhibition, and to pay for the
advertisement expenses for the same; and to order the beds by the dozen and in
no other manner. As may be seen, with the exception of the obligation on the
part of the defendant to order the beds by the dozen and in no other manner,
none of the obligations imputed to the defendant in the two causes of action are
expressly set forth in the contract. But the plaintiff alleged that the defendant
was his agent for the sale of his beds in Iloilo, and that said obligations are
implied in a contract of commercial agency.
Held:
In order to classify a contract, due regard must be given to its essential
clauses. In the contract in question, what was essential, as constituting its cause
and subject matter, is that the plaintiff was to furnish the defendant with the
beds which the latter might order, at the price stipulated, and that the defendant
was to pay the price in the manner stipulated. The price agreed upon was the
one determined by the plaintiff for the sale of these beds in Manila, with a
discount of from 20 to 25 per cent, according to their class. Payment was to be
made at the end of sixty days, or before, at the plaintiff's request, or in cash, if
the defendant so preferred, and in these last two cases an additional discount
was to be allowed for prompt payment. These are precisely the essential features
of a contract of purchase and sale. There was the obligation on the part of the
plaintiff to supply the beds, and, on the part of the defendant, to pay their price.
These features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to sell it, and does not pay
its price, but delivers to the principal the price he obtains from the sale of the
thing to a third person, and if he does not succeed in selling it, he returns it.

Mapalo vs. Mapalo G.R. No. L-21489 and L-21628

May 19, 1966

Facts:
The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers,
were registered owners, with Torrens title certificate O.C.T. No. 46503, of a 1,635square-meter residential land in Manaoag, Pangasinan. Said spouses-owners, out
of love and affection for Maximo Mapalo a brother of Miguel who was about to
get married decided to donate the eastern half of the land to him. O.C.T. No.
46503 was delivered. As a result, however, they were deceived into signing, on
October 15, 1936, a deed of absolute sale over the entire land in his favor. Their
signatures thereto were procured by fraud, that is, they were made to believe by
Maximo Mapalo and by the attorney who acted as notary public who "translated"
the document, that the same was a deed of donation in Maximo's favor covering
one-half (the eastern half) of their land. Although the document of sale stated a
consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses did not
receive anything of value for the land.
Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938,
registered the deed of sale in his favor and obtained in his name Transfer
Certificate of Title No. 12829 over the entire land. Thirteen years later on
October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo,
Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos was
in turn registered on November 5, 1951 and Transfer Certificate of Title No.
11350 was issued for the whole land in their names.
Held:
The rule under the Civil Code, again be it the old or the new, is that
contracts without a cause or consideration produce no effect
whatsoever. Nonetheless, under the Old Civil Code, the statement of a false
consideration renders the contract voidable, unless it is proven that it is
supported by another real and licit consideration. And it is further provided by
the Old Civil Code that the action for annulment of a contract on the ground of
falsity of consideration shall last four years, the term to run from the date of the
consummation of the contract.
Paredes vs. Espino March 13, 1968 G.R. No. L-23351
Facts:
Appellant Cirilo Parades had filed an action to compel defendant-appellee
Jose L. Espino to execute a deed of sale and to pay damages. The complaint
alleged that the defendant "had entered into the sale" to plaintiff of Lot No. 67 of
the Puerto Princesa Cadastre at P4.00 a square meter; that the deal had been
"closed by letter and telegram" but the actual execution of the deed of sale and
payment of the price were deferred to the arrival of defendant at Puerto
Princesa; that defendant upon arrival had refused to execute the deed of sale
altho plaintiff was able and willing to pay the price, and continued to refuse
despite written demands of plaintiff; that as a result, plaintiff had lost expected
profits from a resale of the property, and caused plaintiff mental anguish and

suffering, for which reason the complaint prayed for specific performance and
damages. They claim the contract is unenforceable under the Statute of Fraud
Held:
This letter, transcribed above in part, together with that one marked as
Appendix B, constitute an adequate memorandum of the transaction. They are
signed by the defendant-appellee; refer to the property sold as a lot in Puerto
Princesa, Palawan, covered, by TCT No. 62; give its area as 1826 square meters
and the purchase price of four (P4.00) pesos per square meter payable in cash.
We have in them therefore, all the essential terms of the contract, and they
satisfy the requirements of the Statute of Frauds.
Kuenzle vs. Macke G.R. No. L-5295 December 16, 1909
Facts:
This is an action brought by the plaintiff to recover of the defendants the
sum of 1,000 pesos, the value of certain personal property, constituting a saloon
bar, furniture, furnishings, and fixtures. The plaintiff alleges that on or about the
month of January, 1907, it was the owner of the Oregon Saloon in Cavite,
Province of Cavite, consisting of bar, furniture, furnishings, and fixtures, of the
value of 1,000 pesos; that during the said month of January, 1907, the defendant
Jose Desiderio, as sheriff, levied upon such property by virtue of an execution
issued upon a judgment secured by the defendant Macke & Chandler, against
Stanley & Krippendorf; that said plaintiff notified the sheriff, in the manner
provided by law, that it was the owner of said goods and forbade the sale thereof
under said execution; that, notwithstanding such claim upon the part of the
plaintiff, the said sheriff sold said goods under said execution; that said firm of
Macke & Chandler was the purchaser of said goods and the same were delivered
to it; that the defendants Bachrach, Elser, and Gale, were the sureties upon the
bond given to the sheriff by Macke & Chandler before said goods were sold. The
defendants in this case allege that the property described by the plaintiff and
sold at the execution sale referred to was not the property of the plaintiff at the
time of said levy and sale, but was the property of Stanley & Krippendorf, who
were in possession of the same at the time of such levy. They further allege that
during the month of January, 1907, the said Stanley & Krippendorf, being
indebted in a considerable sum to the plaintiff in this case, attempted to sell to
the said plaintiff by an instrument in writing the property in question; that said
instrument was never recorded; that said instrument was a private document;
that the said property was not delivered to the plaintiff under said sale but that
said property remained from the time of said sale forward in the exclusive
possession and control of said Stanley & Krippendorf, and that they conducted
the business subsequent to the execution of said instrument exactly as they had
prior thereto in their own name purchasing goods and paying therefor
without reference to the plaintiff in this case.

Held:
The ownership of personal property can not be transferred to the prejudice
of third persons except by delivery of the property itself; and that a sale without

delivery gives the would-be purchaser no rights in said property except those of
a creditor.
SUN BROTHERS & CO. [SBC] v. JOSE VELASCO & CO KANG CHIU
1958 / Angeles / Appeal from CFI judgment [Note that this is a CA, not SC,
decision.]

FACTS
SBC delivered to Francisco Lopez an Admiral refrigerator. The stipulated price
was P1,700, but only the downpayment of P500 was paid. Their contract
stipulated the following:

Lopez shall not remove the ref nor part possession without the express
written consent of SBC.

In the event of a violation of the agreement, SBC may rescind the contract
of sale and recover possession of the ref. In addition, any amount
previously paid shall be forfeited as liquidated damages, and the ref
remains as SBCs absolute property until Lopez is able to pay the full
purchase price.

Without SBCs knowledge, Lopez (who misrepresented himself as Jose Lim) sold it
to JV Trading (owned by Jose Velasco) for P850, and Lopez executed a document
that stated that he is the absolute owner of the ref. Without SBCs knowledge,
after displaying the ref at his store, JV Trading sold the ref to Co Kang Chiu for
P985, and it was delivered to the latters house.
SBC filed a complaint for replevin against Lopez and Co Kang Chiu (later, JV
Trading / Jose Velasco was included), and asked for a preliminary writ of replevin
for the recovery of the possession of the ref, and it was issued. However, on Co
Kang Chius request and having filed a counter-bond, the ref was not taken out of
his residence.
CFI decided in favor of SBC, declaring it as the absolute owner. Co Kang Chiu
should return ref, or else, Lopez shall pay full amount of P1,700 to SBC, and JV
Trading should reimburse Co Kang Chiu the amount of P985.

CFI ERRED; CO KANG CHIU IS THE ABSOLUTE OWNER; LOPEZ MUST PAY
SBC P1,700
ALSO, NCC 1505 PARAGRAPH 3 (ON MERCHANT STORE) SHOULD BE
APPLIED

The lower court erred in applying the first paragraph of NCC 1505. It is true that
Lopez never had title since it would only be vested on him upon full payment of
the purchase price. As regards JV Trading, it did not acquire any better right than
what Lopez had. The Court also found that he was not a purchaser in good faith.

Since he was purchasing a ref from a private person who is not engaged in such
business, he should have inquired WON Lopez has paid for the ref in full.
Paragraph 3 should be applied since Co Kang Chiu purchased the ref from JV
Trading, which is a merchant store. Co Kang Chiu should be declared to have
acquired a valid title, although his predecessors-in-interest did not have any right
of ownership thereto. Here is a case where an imperfect or void title ripens into a
valid one, because of some intervening causes.
The rights and interests of an innocent buyer for value should be
protected when it comes into clash with the rights and interests of a vendor. This
is embodied in NCC 1505 (3) to facilitate commercial sales of movables and to
give stability to business transactions.
SBCs recourse should be a claim for indemnity against Lopez, and not
recovery upon reimbursement, since SBC did not lose ref nor was the company
unlawfully deprived of it.
Cannot find original. Source:
http://lawcasedigestbank.blogspot.com/2012/07/sun-brothers-co-v-velasco.html

Bautista vs. Sioson G.R. No. L-13125

Facts:

February 11, 1919