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Sale is a contract where one party

(seller) obligates himself to transfer


the ownership of and to deliver a
determinate thing, while the other
party (buyer) obligates himself to
pay for said thing a price certain in
money or its equivalent. (Tolentino,
p.1, 2000 ed.)
What is a contract of sale?

A: By the contract of sale, one of the


contracting parties obligates himself to
transfer the ownership of and to deliver
a determinate thing, and the other to
pay therefor a price certain in money or
its equivalent. (Art. 1458, NCC)
KINDS OF SALES
Q: What are the different kinds of
sales?
A: As to:
1. Nature of the subject matter:
a. Sale of real property;
b. Sale of personal property
2. Value of the things exchanged:
a. Commutative sale;
b. Aleatory sale
3. Whether the object is tangible or intangible:
a. Sale of property (tangible or corporeal);
b. Sale of a right (assignment of a right, or a credit or
other intangibles such as copyright, trademark, or good
will);
Note: An intangible object is a chose in action.
4. Validity or defect of the transaction:
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void
5. Legality of the object:
a. Licit object
b. Illicit object
6. Presence or absence of conditions:
a. Absolute
b. Conditional
7. Wholesale or retail:
a. Wholesale
b. Retail
8. Proximate inducement for the sale:
a. Sale by description
b. Sale by sample
c. Sale by description and sample
9. When the price is tendered:
a. Cash sale
b. Sale on installment plan
AS TO PRESENCEOR ABSENCE OF
CONDITION
ABSOLUTE SALE
Q: When is a sale absolute?
A: The sale is absolute where the sale is not subject to any
condition whatsoever and where the title passes to the
buyer upon delivery of the thing sold. (De Leon, p. 15)
Q: When is a deed of sale considered absolute in
nature?
A: A deed of sale is considered absolute in nature where
there is neither a stipulation in the deed that title to the
property sold is reserved in the seller until the full payment
of the price, nor one giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails
to pay within a fixed period.
CONDITIONAL SALE

Q: When is a sale conditional?


A: It is conditional where the sale contemplates a
contingency, and in general, where the contract is
subject to certain conditions, usually in the case of the
vendee, the full payment of the agreed purchase price
and in the case of the vendor, the fulfillment of certain
warranties. (De Leon, p. 15)
CONDITIONAL SALE ABSOLUTE SALE
One where the seller is One where the title to the
granted the right to property is not reserved
unilaterally rescind the to the seller or if the
contract predicated in seller is not granted the
the fulfillment or non- right to rescind the
fulfillment as the case contract based on the
may be, of the prescribed fulfillment or non-
condition fulfillment as the case
may be, of the prescribed
condition
Contract executed Contract to sell
between the seller and Deed of sale
the buyer
Q: What are the elements of a
contract of sale?
A: ANE
1. Accidental elements dependent on parties stipulations; Examples:
a. Conditions
b. Interest
c. time & place of payment
d. penalty
2. Natural elements those that are inherent even in absence of
contrary provision.
E.g. warranties
3. Essential elements for validity:
a. Consent
b. Determinate subject matter
c. Consideration
Q: What is the effect and/or consequence of the
absence of consent of the owner in a contract of
sale of said property?
A: The contract of sale is void. One of the essential
requirements of a valid contract of sale is the consent
of the owner of the property.
FORMALITIES REQUIRED
Q: Is there a formal requirement for the validity of
a contract of sale?
A:
GR: No form is required. It is a consensual contract.
(Pineda, p. 78)
XPN: Under Statute of Frauds, the following contracts
must be in writing; otherwise, they shall be
unenforceable:
Sale of personal property at a price not less than P500;
Sale of a real property or an interest therein;
Sale of property not to be performed within a year from the
date thereof;
When an applicable statute requires that the contract of sale
be in a certain form. (Art. 1403, par.2)
C. STAGES OF A CONTRACT OF
SALE
Q: What are the 3 stages involved
in the formation of a contract of
sale?
A:
Negotiation/ Policitation
Perfection
Consummation
B. OPTION CONTRACT

Q: What is an option contract?


A: A contract granting a privilege in one person, for
which he has paid a consideration, which gives him
the right to buy certain merchandise or specified
property, from another person, at anytime within the
agreed period, at a fixed price.
Note: Consideration in an option contract may be
anything or undertaking of value, unlike in sale where
it must be a price certain in money.
Q: What is the nature of an option
contract?
A: It is a preparatory contract in which one party
grants to another, for a fixed period and at a
determined price, the privilege to buy or sell, or 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 whom
the option was granted, if the latter should decide to
use the option. It is a separate and distinct contract.
Q: What is the period within
which to exercise the option?
A:
Within the term stipulated
If there is no stipulation, the court may fix the term

Notes: An action for specific performance to enforce the


option to purchase must be filed within 10 years from the
time the cause of action accrues.
The implied renewal of the lease on a monthtomonth
basis did not have the effect of extending the life of the
option to purchase which expired at the end of the original
lease period. The lessor is correct in refusing to sell on the
ground that the option had expired. (2001 Bar Question)
Q: How is an option exercised?
A: A notice of acceptance must be
communicated to offeror even
without actual payment as long as
payment is delivered in the
consummation stage.
Q: What is the effect of a separate consideration in an
option contract?

A:
1. With separate consideration:
a. Contract is valid
b. Offeror cannot withdraw offer until after expiration of
the option
c. Is subject to rescission & damages but not specific
performance

2. Without separate consideration:


a. the option contract is not deemed perfected
b. offer may be withdrawn at any time prior to acceptance
Q: What is the effect of acceptance and
withdrawal of the offer?
A: If the offer had already been accepted and such
acceptance has been communicated to before the
withdrawal is communicated, the acceptance creates a
perfected contract, even if no consideration was as yet
paid for the option.
In which case, if the offeror does not perform his
obligations under the perfected contract, he shall be
liable for all consequences arising from the breach
thereof based on any of the available remedies such as
specific performance, or rescission with damages in
both cases.
C. RIGHT OF FIRST REFUSAL
Q: What is the right of first refusal?
A: It is a right of first priority, all things and conditions
being equal; identity of the terms and conditions
offered to the optionee and all other prospective
buyers, with optionee to enjoy the right of first
priority. It creates a promise to enter into a contract of
sale and it has no separate consideration.

Note: A deed of sale executed in favor of a 3rd party


who cannot be deemed a purchaser in good faith, and
which is in violation of the right of first refusal granted
to the optionee is valid but rescissible. (Arts. 1380, 1381
[1])
Q: NDC and Firestone entered into a contract of lease
wherein it is stipulated that Firestone has the right of
first refusal to purchase the leased property "should
lessor NDC decide to sell the same. After the rumor
that NDC will transfer the lot to PUP, Firestone
instituted an action for specific performance to
compel NDC to sell the property in its favor. PUP
moved to intervene arguing that the Memorandum
issued by then President Aquino ordered the transfer
of the whole NDC compound to the Government,
which in turn would convey it in favor of PUP. Can
Firestone exercise its right of first refusal?
A: Yes. It is a settled principle in civil law that when a lease
contract contains a right of first refusal, the lessor is under
a legal duty to the lessee not to sell to anybody at any price
until after he has made an offer to sell to the latter at a
certain price and the lessee has failed to accept it. The
lessee has a right that the lessor's first offer shall be in his
favor. (PUP v. CA, G.R. No. 143513, Nov. 14, 2001)
Q: In a 20year lease contract over a building, the
lessee is expressly granted a right of first refusal
should the lessor decide to sell both the land and
building. However, the lessor sold the property to
a third person who knew about the lease and in
fact agreed to respect it. Consequently, the lessee
brings an action against both the lessorseller and
the buyer (a) to rescind the sale and (b) to compel
specific performance of his right of first refusal in
the sense that the lessor should be ordered to
execute a deed of absolute sale in favor of the
lessee at the same price. The defendants contend
that the plaintiff can neither seek rescission of
the sale nor compel specific performance of a
"mere" right of first refusal. Decide the case.
a. The action filed by the lessee, for both rescission of the
offending sale and specific performance of the right of first
refusal which was violated, should prosper. The ruling in
(Equatorial Realty Development, Inc. v. Mayfair Theater,
Inc., G.R. No. 106063, Nov. 21, 1996), a case with similar
facts, sustains both rights of action because the buyer in
the subsequent sale knew the existence of right of first
refusal, hence, in bad faith.
b. The action to rescind the sale and to compel the right of
first refusal will not prosper. (Ang Yu Asuncion v. CA, G.R.
No. 109125, Dec. 2, 1994). The court ruled that the right of
first refusal is not founded upon a contract but on a
quasidelictual relationship covered by the principles of
human relations and unjust enrichment (Art 19, et seq.
Civil Code). Hence, the only action that will prosper
according to the Supreme Court is an action for damages in
a proper forum for the purpose. (1998 Bar Question)
Q: May the right of first refusal be
waived?
A: Yes. Like other rights, the right of first
refusal may be waived or when a party
entered into a compromise agreement.
(Diaz, p. 55)
Q: Differentiate an option contract from a right of first
refusal.
A: An option contract is a preparatory contract in which one
party grants to another, for a fixed period and at a
determined price, the privilege to buy or sell, or 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 whom the option was granted, if the latter should decide
to use the option. It is a separate and distinct contract.
In a right of first refusal, while the object may be
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. (Diaz, p. 54)
OPTION CONTRACT RIGHT OF FIRST REFUSAL

Principal contract, stands on its Accessory, cannot stand on its own


own

Needs separate consideration Does not need separate


consideration

Subject matter and price must be There must be subject matter but
valid price not important

Not conditional Conditional

Not subject to specific performance Subject to specific performance


Q: What is policitation?
A: Policitation is defined as an unaccepted unilateral
promise to buy or sell. This produces no judicial effect
and creates no legal bond. This is a mere offer, and has
not yet been converted into a contract. It covers the
period from the time the prospective contracting
parties indicate interest in the contract to the time the
contract is perfected. (Villanueva, p. 6).
Q: Is there a legal bond already created in the
negotiation stage?
A: None. In negotiation (policitation) stage, the offer is
floated as well as the acceptance.
2. PERFECTION
Q: When is a contract of sale deemed perfected?
A:
GR: It is deemed perfected at the moment there is
meeting of minds upon the thing which is the object
of the contract and upon the price. (Art.1475, par.1)
XPN: When the sale is subject to a suspensive
condition by virtue of law or stipulation.
Q: Spouses Raet and Mitra negotiated with Gatus
about the possibility of buying his rights to
certain units at a subdivision developed by
PhilVille for them to be qualified to obtain loans
from GSIS. They paid an amount for which Gatus
issued them receipts in her own name. GSIS
disapproved their loan application. PhilVille
advised them to seek other sources of financing.
In the meantime, they were allowed to remain in
the subject premises. Is there a perfected and
enforceable contract of sale or at least an
agreement to sell over the disputed housing
units?
A: None. There was no contract of sale perfected
between the private parties over the said property,
there being no meeting of the minds as to terms,
especially on the price thereof. At best, only a
proposed contract to sell obtained which did not even
ripen into a perfected contract due at the first instance
to private respondents' inability to secure approval of
their GSIS housing loans. As it were, petitioners and
private respondents have not hurdled the negotiation
phase of a contract, which is the period from the time
the prospective contracting parties indicate interest on
the contract to the time the contract comes into
existence the perfection stage upon the concurrence of
the essential elements thereof. (Sps. Raet & Sps. Mitra
v. CA, G.R. No. 128016, Sept. 17, 1998)
Q: Severino executed two deeds when he sold his property to
Henry so that Henry can obtain a loan with Philam Life. He
also authorized Henry to file an ejectment suit against the
lessees and when the prayer for ejectment was granted,
Henry took possession of the property. Severino now claims
ownership over the property claiming that the sale is
fictitious therefore there was no sale to speak of. Is
Severinos contention correct?
A: No. There is a perfected contract of sale due to the second deed
of sale in this case. The basic characteristic of an absolutely
simulated or fictitious contract is that the apparent contract is not
really desired or intended to produce legal effects or alter the
juridical situation of the parties in any way. However, in this case,
the parties already undertook certain acts which were directed
towards fulfillment of their respective covenants under the second
deed, indicating that they intended to give effect to their
agreement. Further, the fact that Severino executed the two deeds,
primarily so that Henry could eject the tenant and enter into a
loan/mortgage contract with Philam Life, is a strong indication
that he intended to transfer ownership of the property to Henry.
For why (Hernando R. Penalosa v. Severino Santos, G.R. No. 133749,
Aug. 23, 2001)
Q: What is the effect of Severinos and Henrys
failure to appear before the notary public who
notarized the deed?
A: None. The nonappearance of the parties before the
notary public who notarized the deed does not
necessarily nullify nor render the parties' transaction
void ab initio. Article 1358, NCC on the necessity of a
public document is only for convenience, not for
validity or enforceability. Where a contract is not in the
form prescribed by law, the parties can merely compel
each other to observe that form, once the contract has
been perfected.
3. CONSUMMATION
Q: How does the consummation stage in a
contract of sale take place?
A: It takes place by the delivery of the thing together
with the payment of the price.
Q: A and PDS Development Corp. executed a contract
to sell a parcel of land. A died without having
completed the installment on the property. His heirs
then took over the contract to sell and assumed his
obligations by paying the selling price of the lot from
their own funds, and completed the payment. To
whom should the final Deed of Absolute Sale be
executed by PDS?
A: Having stepped into the shoes of the deceased with
respect to the said contract, and being the ones who
continued to pay the installments from their own funds, As
heirs became the lawful owners of the said lot in whose
favor the deed of absolute sale should have been executed
by vendor PDS. (Dawson v. Register of Deeds of Quezon
City, G.R. No. 120600 Sept. 22, 1998
OBLIGATIONS OF THE BUYER
Q: What are the obligations of the buyer?

A:
Payment of the price
GR: Seller is not bound to deliver unless the purchase
price is paid
XPN: A period of payment has been fixed
Accept delivery of thing sold
Pay for expenses of delivery
Q: What are the other obligations of the buyer?

A:
To take care of the goods without the obligation to return,
where the goods are delivered to the buyer and he rightfully
refuses to accept;

Note: The goods in the buyers possession are at the sellers risk.
2. To be liable as a depositary if he voluntarily constituted
himself as such;
3. To pay interest for the period between delivery of the
thing and the payment of the price in the following cases:
a. should it have been stipulated;
b. should the thing sold and delivered produces fruits or
income; or
c. should he be in default, from the time of judicial or
extrajudicial demand for the payment of the price.
OBLIGATIONS OF THE SELLER
Q: What are the obligations of the seller?
A: DDTWTP
Deliver the thing sold;
Deliver fruits & accessions/accessories accruing from
perfection of sale;
Transfer the ownership;
Warranties;
Take care of the thing, pending delivery, with proper
diligence;
Pay for the expenses of the deed of sale unless there is a
stipulation to the contrary
Q: What are the characteristics of a contract of
sale?

A:
Consensual
Bilateral
GR: Commutative

XPN: Aleatory In some contracts of sale, what one receives


may in time be greater or smaller than what he has given.
(Tolentino, p. 2, 2000 ed)
Principal
Title and not a mode of acquiring ownership
Onerous
Reciprocal
Nominate
Q: Is a contract of sale identified as such based on
the nomenclature given to the contract by the
parties?
A: No. Contracts are not defined by the parties but by
principles of law. To determine the nature of the
contract, the courts are not bound by the name or title
given to it by the contracting parties. It is the intention
of the parties which controls. (Diaz, Law on Sales as
expounded by Jurisprudence, 2006 ed., p.1)
Q: What are the factors to be considered in
determining the nature of the contract?
A:
Language of the contract
Conduct of parties
SALE DONATION
ONEROUS Gratuitous
Consensual Formal
Law on Sales Law on Donation
SALE BARTER

Consideration is giving of Consideration is giving of a


money as payment thing

If partly money and partly thing- look at the manifest


intention of the parties

Value of thing is equal or less Value of thing is more than


than amount of money = sale amount of money = barter

Both are governed by law on sales


SALE AGENCY TO SELL
Buyer pays for price of object Agent not obliged to pay for
price; must account for the
proceeds of the sale
Buyer becomes owner of the Principal remains the owner
thing even if the object delivered to
agent
Seller warrants Agent assumes no personal
liability as long as within
authority given
Not unilaterally revocable May be revoked unilaterally
Seller receives profit Agent not allowed to profit
Real contract Personal contract
SALE DACION EN PAGO
No pre-existing credit Contract where property is
alienated to extinguish pre-
existing credit
Buyer- seller relationship Novates creditor-debtor
relationship into seller-buyer
SALE LEASE
Obligation to absolutely Use of thing is for specified
transfer ownership of thing period only with obligation to
return

Consideration is the price Consideration is the rental


Seller needs to be the owner Lessor need not be the owner
of the thing to transfer
ownership
Q: What is a contract to sell?
A: It is one form of conditional sale where
ownership or title is retained by the seller
until the fulfillment of a positive suspensive
condition, normally the payment of the
purchase price by the buyer in the manner
agreed upon. (Gomez v. CA, et. al., G.R.
120747, Sept. 21, 2000)
CONTRACT OF SALE CONTRACT TO SELL

Ownership is transferred to the buyer Ownership is transferred upon full


upon delivery of the object to him payment of the purchase price

There is only one contract 2 contracts


Contract to sell
Deed of absolute sale

Non-payment of the price is a Full payment of the price is a positive


resolutory condition. Vendor loses suspensive condition.
ownership over the property and cannot
recover it until and unless the contract
is rescinded.

Specific performance Resolution


Rescission Damages
Damages
Q: What are the instances when what is
involved is a contract to sell?

A:
Where subject matter is indeterminate
Sale of future goods
Stipulation that deed of sale &
corresponding certificate of sale would be
issued only after full payment
Q: Who are the parties to a contract of
sale?

A:
Seller one who sells and transfers the thing
and ownership to the buyer
Buyer one who buys the thing upon
payment of the consideration agreed upon
Q: Who may enter into a contract of sale?
A:
GR: Any person who has capacity to contract or
enter into obligations, may enter into a contract of
sale, whether as partyseller or as partybuyer.
XPN:
Minors, insane and demented persons and deafmutes
who do not know how to write
Persons under a state of drunkenness or during hypnotic
spell
Husband and wife sale by and between spouses
XPN to XPN:
Where necessaries are sold and delivered to a minor or
other person without capacity to act, he must pay a
reasonable price therefor.
In case of sale between spouses:

a. when a separation of property was agreed upon in


the marriage settlements; or
b. when there has been a judicial separation of
property agreed upon between them
Q: Who are those absolutely incapacitated to enter
into a contract of sale?

A:
Unemancipated minors(Art. 1327, NCC);
Insane or demented persons, and deafmutes who do not
know how to write (Art. 1327, NCC)

Q: May a capacitated person file an action for


annulment using as basis the incapacity of the
incapacitated party?
A: No. He is disqualified from alleging the incapacity of the
person whom he contracts (Art. 1397, NCC);
Q: In a defective contract, where such defect
consists in the incapacity of a party, does the
incapacitated party have an obligation to make
restitution?
A:
GR: he incapacitated person is not obliged to make
any restitution.
XPN: insofar as he has been benefited by the thing or
price received by him. (Art. 1399, NCC)
Q: Who are those relatively incapacitated to enter into
a contract of sale?

A:
Spouses (Art. 1490, NCC)
Agents, Guardians, Executors and Administrators, Public
Officers and Employees, Court Officers and Employees,
and others specially disqualified by law. (Art. 1491, NCC)

Note: Under Art. 1490 of the NCC, spouses cannot sell


property to each other, except:
a. When a separation of property was agreed in the
marriage settlements; or
b. When there has been a judicial separation of property
agreed upon between them
Q : What is the status of the following contracts of
sale?

A:
1. That entered into by minors:
a. Merely voidable, subject to annulment or ratification
b. 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 (with partial restitution in so far as the
minor is benefited) where necessaries are sold and
delivered to a minor or other person without capacity
to act, he must pay a reasonable price (Art. 1489)
2. Sale by & between spouses (Art. 1490):
a. Status of prohibited sales between spouses:
GR: Null and void
XPN: In case of sale between spouses:
When a separation of property was agreed upon in the
marriage settlements; or
. When there has been a judicial separation of
property agreed upon between them

Reasons:
revent defrauding creditors
. Avoid situation where dominant spouse takes
advantage over the weaker spouse
. Avoid circumvention on prohibition of donation
between spouses
Between Common Law Spouses also null and void.
In CalimlimCanullas v. Fortun, the Court decided that
sale between common law spouses is null and void
because Art. 1490 prohibits sales between spouses to
prevent the exercise of undue influence by one spouse
over the other, as well as to protect the institution of
marriage. The prohibition applies to a couple living as
husband and wife without the benefit of marriage,
otherwise, the condition of those incurred guilt would
turn out to be better than those in legal union.
(CalimlimCanullas v. Fortun, et. al., G.R. No. L57499,
June 22, 1984)
But when the registered property has been conveyed
subsequently to a thirdparty buyer in good faith and
for value, then reconveyance is no longer available to
commonlaw spouseseller, since under the Torrens
system every buyer has a right to rely upon the title of
his immediate seller. (Cruz v. CA, G.R. No. 120122, Nov.
6, 1997)
Q: Who has the right to assail the
validity of the transaction
between spouses?
A: The following are the only persons who can
question the sale between spouses:
The 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
Q: Who are those persons specially disqualified
by law to enter into contracts of sale? A:
ALIENUnOS
ALIENs who are disqualified to purchase private agricultural
lands (Art. XII Secs. 3 & 7)
Unpaid seller having a right of lien or having stopped the
goods in transitu, is prohibited from buying the goods either
directly or indirectly in the resale of the same at
public/private sale which he may make (Art. 1533 [5]; Art.
1476 [4])
The Officer holding the execution or deputy cannot become
a purchaser or be interested directly or indirectly on any
purchase at an execution. (Sec. 21 Rule 39, Rules of Court)
In Sale by auction, seller cannot bid unless notice has been
given that such sale is subject to a right to bid in behalf of the
seller. (Art. 1476)
Q: Atty. Leon G. Maquera acquired his clients
property as payment for his legal services, then
sold it and as a consequence obtained an
unreasonable high fee for handling his clients
case. Did he validly acquire his clients property?
A: No. Article 1491 (5) of the New Civil Code prohibits
lawyers acquisition by assignment of the clients
property which is the subject of the litigation handled
by the lawyer. Also, under Article 1492, the prohibition
extends to sales in legal redemption. (In Re: Suspension
from the Practice of Law in the territory of Guam of
Atty. Leon G. Maquera, B.M. No. 793, July 30, 2004)
Q: What are the requisites of a proper object of sale?

A:
1. Things
a. Determinate or determinable
b. Lawful (licit), otherwise contract is void
c. Should not be impossible (within the commerce of men)
2. Rights
GR: Must be transmissible.
XPN:
a. Future inheritance
b. Service cannot be the object of sale. They are not
determinate things and no transfer of ownership is
available but it can be the object of certain contracts such
uas contract for a piece of work. (Pineda, Sales, 2002 ed., p.
13)
Q: Rodriguez first purchased a portion of a Lot A
consisting of 345 square meters located in the
middle of Lot B, which has a total area of 854
square meters, from Juan. He then purchased
another portion of said lot. As shown in the
receipt, the late Juan received P500.00 from
Rodriguez as "advance payment for the
residential lot adjoining his previously paid lot on
three sides excepting on the frontage. Juans heirs
now contests the validity of the subsequent sale,
alleging that the object is not determinate or
determinable. Decide.
A: Their contention is without merit. There is no
dispute that Rodriguez purchased a portion of Lot A
consisting of 345 square meters. This portion is located
in the middle of B, which has a total area of 854 square
meters, and is clearly what was referred to in the
receipt as the "previously paid lot." Since the lot
subsequently sold to Rodriguez 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. The fact that the exact area of these
adjoining residential lots is subject to the result of a
survey does not detract from the fact that they are
determinate or determinable. Concomitantly, the
object of the sale is certain and determinate. (Heirs of
San Andres v. Rodriguez, G.R. No. 135634, May 31, 2000)
Q: What may be objects of sale?

A:
1. Existing Goods owned/ possessed by
seller at the time of perfection
2. Future Goods goods to be manufactured,
raised, acquired by seller after perfection of
the contract or whose acquisition by seller
depends upon a contingency (Art. 1462)
3. Sale of Undivided Interest or Share
a. Sole owner may sell an undivided interest. (Art.
1463) Ex. A fraction or percentage of such property
b. Sale of an undivided share in a specific mass of
fungible goods makes the buyer a coowner of the
entire mass in proportion to the amount he bought.
(Art. 1464)
c. A coowner cannot sell more than his share
(Yturralde v. CA)
4. Sale of Things in Litigation
a. Sale of things under litigation is rescissible if
entered into by the defendant , without the approval of
the litigants or the court (Art. 1381)
b. No rescission is allowed where the thing is legally in
the possession of a 3rd person who did not acted in
bad faith.
5. Things subject to Resolutory Condition. Ex. Things
acquired under legal or conventional right of
redemption, or subject to reserva troncal. (Art. 1465)
6. Indeterminate Quantity of Subject Matter
a. 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
need of a new contract. (Art. 1349)
Q: Should the seller be the owner at the
time of perfection of the contract?
A:
GR: No. Seller must have the right to
transfer ownership at the time of delivery or
consummation stage. He need not be the
owner at the time of perfection of the
contract.
XPN: Foreclosure sale wherein the
mortgagor should be the absolute owner.
Q: EJ was subjected to a buybust operation where
police officers posed to buy 500 pesos worth of S.
She was then charged with a violation of the
Dangerous Drugs Act for trafficking drugs. EJ uses
as defense her lack of possession of the object of
the sale. Would her contention free her from
liability?
A: No. Though she was not in possession of the object
of sale, Article 1459 merely requires that the vendor
must have the right to transfer ownership of the object
sold at the time of delivery. In the case at bar, though
Beth is not the owner, she had the right to dispose of
the prohibited drug. Ownership was thereafter
acquired upon her delivery to the men in the alley after
her payment of the price. (People v. Ganguso, G.R. No.
115430, Nov. 23, 1995)
Q: What is the status of a sale by a person who
does not own the thing subject of the sale?
A: It depends upon the stage of the sale.
When seller is not owner at perfection stage the
sale is valid.
Ownership of the subject matter by the seller at this
stage is not an essential requirement for the validity of
sale. It is necessary at the time of delivery. Hence, a valid
contract of sale can cover subject matter that is not yet
existing or even a thing having only a potential existence
at the time of perfection; or even a thing subject to a
resolutory condition
2. When seller is not owner at consummation stage
a. Old view the contract of sale is valid, but the
transfer of title is void. (MindanaoAcademy, Inc. v.
Yap, G.R. No. L17681, Feb. 26, 1965)
b. New view the sale by a nonowner of the subject
property is void instead of treating the
tradition/delivery aspect as having no effect on
transferring ownership to the buyer. (DBP v. CA, G.R.
No. 110053, Oct. 16, 1995)
Q: What is the legal effect of sale by a
nonowner?
A:
GR: The buyer requires no better title to the goods
than the seller had; caveat emptor (buyer beware).
XPN:
Estoppel when the owner of the goods is by his
conduct precluded from denying the sellers authority to
sell
When the contrary is provided for in recording laws
3. When the sale is made under statutory power of sale
or under the order of a court of competent jurisdiction
4. When the sale is made in a merchants store in
accordance with the Code of Commerce and special
laws
5. When a person who is not the owner sells and
delivers a thing, and subsequently acquired title
thereto
6. When the seller has a voidable title which has not
been avoided at the time of the sale
7. Sale by coowner of the whole property or a definite
portion thereof
8. Special rights of unpaid seller
Q: What are the instances when the Civil Code
recognizes sale of things not actually or already owned
by the seller at the time of sale?

A:
Sale of a thing having potential existence (Art.1461, NCC)
Sale of future goods (Art. 1462, NCC)
Contract for the delivery at a certain price of an article,
which the seller in the ordinary course of business
manufactures/ procures for the general market, whether
the same is on hand at the time or not (Art. 1467, NCC)
Q: What is the effect of a sale made by the
seller with voidable title over the object?

A:
1. Perfection stage: valid buyer acquires title of goods
2. Consummation stage: valid If the title has not yet
been avoided at the time of sale and the buyer must buy
the goods under the following conditions:
a. In good faith
b. For value
c. Without notice of sellers defect of title
EMPTIO REI SPERATAE EMPTIO SPEI

Sale of thing having potential Sale of mere hope or


existence expectancy
Uncertainty is w/ regard to Uncertainty is w/ regard to
quantity & quality existence of thing

Contract deals w/ future Contract deals w/ present


thing thing hope or expectancy

Sale is valid only if the Sale is valid even though


expected thing will exist. expected thing does not come
into being
Q: Jose, as coowner, sold the entire land in favor of
his minor daughter, Ida. Alleging that Jose had
fraudulently registered it in his name alone, his
sisters, sued him for recovery of 2/3 share of the
property. Ida did not pay for the land. Is the sale valid?
A: No. Jose did not have the right to transfer ownership of
the entire property to petitioner since 2/3 thereof belonged
to his sisters. Also, Ida could not have given her consent to
the contract, being a minor at the time. Consent of the
contracting parties is among the essential requisites of a
contract, including one of sale, absent which there can be
no valid contract. Moreover, Ida admittedly did not pay any
centavo for the property, which makes the sale void. Article
1471 of the Civil Code provides: 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. (Labagala
v. Santiago, G.R. No. 132305, Dec. 4, 2001)
Q: What is a price?
A: 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. (Villanueva, p.
52)
Q: What are the requisites of price?
A: Must be:
Real
In money or its equivalent
Certain or ascertainable at the time of
the perfection of the contract
Q: When is price certain?

A:
If there is a stipulation
If it be with reference to another thing certain
If the determination of the price is left to the judgment
of specified person(s)
By reference to certain fact(s) as referred to in Art. 1472
(Art. 1469
Q: What is the effect of gross inadequacy of
price?
A:
GR: It does not affect the validity of the sale if it is
fixed in good faith and without fraud
XPN: CoRDS
If Consent is vitiated (may be annulled or presumed to
be equitable mortgage)
If the parties intended a Donation or some other act/
contract
If the price is so low as to be Shocking to the
conscience
If in the event of Resale, a better price can be obtained
Q: What is the effect if the price is simulated?
A:
GR: Contract of sale is void.
XPN: The act may be shown to have been in reality a
donation or some other act or contract.
Q: What is considered reasonable price?
A: Generally the market price at the time and place
fixed by the contract or by law for the delivery of the
goods.
Q: What is the effect on the contract of sale in case of a
breach in the agreed manner of payment?
A: None. It is not the act of payment of price that
determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract,
as it goes into the performance of the contract. Failure to
pay the consideration is different from lack of
consideration. Failure to pay such results in a right to
demand the fulfillment or cancellation of the obligation
under an existing valid contract. On the other hand, lack of
consideration prevents the existence of a valid contract.
(Sps. Bernardo Buenaventura and Consolacion Joaqui v. CA,
GR No. 126376, Nov. 20, 2003)
Q: Is payment of the purchase price essential to
transfer ownership?
A: Unless the contract contains a stipulation that
ownership of the thing sold shall not pass to the
purchaser until he has fully paid the price, ownership
of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof. (Diaz,
p. 48)
Q: What is the effect of failure to determine the
price?

A:
Where contract is executory ineffective
Where the thing has been delivered to and appropriated
by the buyer the buyer must pay a reasonable price
therefore

Note: The fixing of the price cannot be left to the


discretion of one of the parties. However, if the price
fixed by one of the parties is accepted by the other, the
sale is perfected
Q: What is the effect of a breach of the agreed manner
of payment to the contract of sale?
A: None. A contract of sale being a consensual contract, it
becomes binding and valid upon the meeting of the minds
as to price.
If there is such meeting of the minds as to price, the
contract of sale is valid, despite the manner of payment, or
even the breach of that manner of payment.
If the real price is not stated in the contract, then the
contract of sale is valid but subject to reformation.
If there is no meeting of the minds as to the price because
the price stipulated in the contract is simulated, then the
contract is void, in accordance with Article 1471 of the Civil
Code. (Sps. Buenaventura v. CA, G.R. No. 126376, Nov. 20,
2003)