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NATURE OF SALES
Article 1458: 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.

CONTRACT OF SALE
- This is contract wherein one party (seller)
obligates himself to deliver something to the other
(buyer), who on his part, bind himself to pay
therefor a sum of money or its equivalent.

ESSENTIAL ELEMENTS OF A CONTRACT OF SALE
a. Consent or Meeting of the Minds
This refers to the consent on the part of the
seller or vendor to transfer ownership of and to
deliver a determinate thing. And the consent
on the part of the buyer to pay a price certain.
b. Object or Subject Matter
Refers to the determinate thing which is the
object of the contract.
c. Cause or Consideration
Refers to the price certain in money or its
equivalent.

Robern Develoment Corp vs. Peoples Landless Association
Acceptance must be affirmatively and clearly made and must be
evidenced by some acts or conducts communicated to the offeror. It
may be made either in a formal or an informal manner and may be
shown by acts, conducts or words of the accepting party that clearly
manifest a present intention or determination to accept the offer to buy
or sell. Thus, acceptance may be shown by acts, conducts or words of
a party recognizing the existence of the contract of sale.

Alcantara-Daus vs. De Leon
A contract of sale is consensual. It is perfected by mere consent, upon
meeting of the minds on the offer and the acceptance thereof, based
on the subject matter, price and terms of payment. At this stage, the
sellers ownership of the thing sold is not an element in the perfection
of the contract of sale. It is during delivery that the law requires the
seller to have the right to transfer ownership of the thing sold.

Buenavetura vs. Court of Appeals G.R. No. 126376
A contract of sale is not a real contract, but a consensual contract. A
contract of sale becomes valid and binding upon meeting of the minds
as to price and subject matter.
If there is a meeting of the minds of the parties as to the price
- The contract of sale is valid despite the manner of payment or
even the breach of the manner of payment.
If the real price is not stated in the contract
- The contract of sale is valid but subject to reformation.
If there is no meeting of the minds of the parties as to the
price, because the price simulated
- The contract is void.

It is not the act of payment of price that determines the validity of a
contract of sale.
Failure to pay the consideration
- This results in a right to demand the fulfillment or cancellation of
the obligation.
Lack of Consideration
- Prevents the existence of a valid contract

CHARACTERISTICS OF A CONTRACT OF SALE:
[CBOCNP]
1) Consensual
It is perfected at the moment there is meeting
of minds upon a thing which is the object of the
contract and upon the price.
2) Bilateral
This is because both contracting parties are
bound to fulfill correlative obligations towards
each other.
3) Onerous
Thing sold is conveyed in consideration of the
price and vice versa
4) Commutative
The thing sold is considered the equivalent of
the price and vice versa.
5) Nominate
It is given a special designation of by the Civil
Code.
It is not important what the parties call the
contract, what is important is their intent on
transaction. Once it is established that the
intent of the parties is sale, then the provisions
of the Civil Code on Sale applies.
In this case, the name of the contract
designated by the parties is immaterial because
the Civil Code has already a name for it and
that contract of sale.
6) Principal
It does not depend its existence and validity
upon other contracts. It can stand on its own.

NOTE: In REAL CONTRACTS, the delivery of the thing gives rise to
the perfection of the contract. Meanwhile in CONSENSUAL
CONTRACT, the perfection of the contract gives rise to the
obligation to deliver the thing.

Santos vs. Court of Appeals
ISSUE: Was the agreement a contract of sale or a contract to sell?

It must be emphasized from the outset that a contract is what the
law defines it to be, taking into consideration its essential
elements, and not what the contracting parties call it. No valid
transfer of ownership was made by the Santos to the Casedas.
Absent this essential element, their agreement cannot be deemed as
a contract of sale.

Article 1475: The contract of sale is perfected at the moment there
is a meeting of minds upon the thing which is the object of the
contract upon the price.

From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.



PERFECTION OF CONTRACT OF SALE
Memory Aid in Sales
Midterm
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MOMENT OF CONSENT
- The contract of sale being consensual, it is
perfected at the moment of consent without the
necessity of any other circumstance.

NOTE: From the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price, the
reciprocal obligations of the parties arise even when neither has
been delivered.

CONSENT
Essence of Consent
- The conformity of the parties on the terms of the
contract, the acceptance by one of the offer made
by the other.
Mutual Consent
- This being a state of mind, its existence may only
be inferred from the confluence of two (2) acts of
the parties:
An offer certain as to the object of the contract
and its consideration.
An acceptance of the offer which is absolute in
that it refers to the exact object and
consideration embodied in said offer.

Paragas vs. Heirs of D. Balacano
The general rule is that a person is not incompetent to contract merely
because of advanced years or by reason of physical infirmities.
However, even when such age or infirmities have impaired the mental
faculties so as to prevent a person from intelligently protecting his
property rights, then such person is undeniably incapacitated.

FORM OF THE CONTRACT
General Rule:
A contract of sale is binding regardless of its
form.

Exception:
In case the contract of sale should fall within the
provisions of the Statute of Frauds or any other
applicable statue which requires a certain form
for its enforceability or validity, then that form
must be complied with.

CONDUCT OF THE PARTIES
a. While there may be instances where
interchanged correspondence does not disclose
the exact point at which the deal was closed, the
actions of the parties may indicate that a binding
obligation has been undertaken.
b. There is no perfected sale where is it conditional
and the condition is not fulfilled.
c. A letter of intent to buy and sell is just that --- a
manifestation of the intent of the owner to sell
his property and the intention of the other party
to acquire the same.

TRANSFER OF OWNERSHIP
- Sale by itself does not transfer ownership or affect
ownership, the most that sale does it to create the
obligation to transfer ownership.
RULES WITH RESPECT TO OFFER
(1) The offer must be certain
(2) The person making the offer may fix the time,
place and manner of acceptance, all of which
must be complied with
(3) When the offeror has allowed the offeree a
certain period to accept, the offer may be
withdrawn at any time before the acceptance by
communicating such withdrawal, except when
the option is founded upon a consideration, as
something paid or promised.
(4) An offer becomes ineffective upon the death,
civil interdiction, insanity or insolvency of either
party before acceptance is conveyed.

RULES WITH RESPECT TO ACCEPTANCE
(1) The acceptance of an offer must be unqualified
and absolute.
(2) Where a party sets a different purchase price
than that amount of the offer, such acceptance
was qualified which can be at most considered
as a counter-offer.
(3) The acceptance may be express or implied.
Except, where a formal acceptance is so
required under the terms of the offer.

INSTANCES WHEN A DEFINTITE OF AGREEMENT IS
REQUIRED
(1) If the parties intended that the purchase price
will be paid installment.

NOTE: In a contract to sell by installments it is not enough that
the parties agree on the price as well as the amount of the
downpayment. The parties have to agree on how and when the
downpayment and installment payments are to be made, it cannot
be said that a contract of sale has been perfected.

CONDITIONAL SALE vs. ABSOLUTE SALE
Absolute Sale or Contract of Sale
- The sale is absolute when the title of the property
passes to the buyer/vendee upon delivery of the
thing sold.
- A sale is also considered absolute when there is
stipulation in the contract that the title to the
property remains with the seller until full payment
of the purchase price.
- The sale is absolute if there is no stipulation giving
the vendor the right to cancel unilaterally the
contract the moment the vendee fails to pay within
a fixed period.
Conditional Sale or Contract to Sell
- The ownership remains with the vendor and does
not pass to the vendee until full payment of the
purchase price.
- The full payment of the purchase price partakes of
a suspensive condition and non-fulfillment of the
condition prevents the obligation to sell from
arising.

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Bian Steel Corporation vs. Court of Appeals
ISSUE: Who has a better right on the property, is it Bian Steel who
was able to register the levy in the Registry of Deeds on July 27, 1998
or The Garcias who were able to buy the property on Jun 29, 1998, 1
month ahead of the registration of levy?

Not all contracts of sale became automatically and immediately
effective. In sale with assumption of mortgage, the assumption of
mortgage is a condition to the sellers consent and therefore,
without approval of the mortgagee, the sale is not perfected.
When the Garcias bought the property on June 29, 1998, it was only
a private transaction.

BILATERAL
Polytechnic University of the Philippines [PUP] vs. CA
Aside from the fact that the intention of NDC and PUP to enter into a
contract of sale was clearly expressed in the Memorandum Order, a
close perusal of the circumstances of this case strengthens the theory
of that the conveyance between NDC and PUP was one of absolute
sale.

A contract of sale as defined in the Civil Code, is a contract where one
of the parties obligates himself to transfer the ownership of and to
deliver a determinate thing to the other/s for a sum certain in money or
its equivalent. It is therefore a general requisite for the existence
of a valid and enforceable contract of sale that it be mutually
obligatory, there should be concurrence of the promise of the
vendor to sell a determinate thing and the promise of the vendee
to receive and pay for the property so delivered and transferred.

A GOCC has a personality of its own, distinct and separate from that
of the government. The involvement of the Office of the President was
limited to brokering the consequent relationship between NDC and
PUP

In this case, all three essential elements of the a valid sale was
present, NDC conveyed a parcel of land it owned and transferred its
ownership to PUP, for a valid consideration of the extinguishment of
NDCs liabilities to the Government in the amount of P57,193,201,64.

RECIPROCAL
Anglo Conglomerates vs. Court of Appeals
A contract of sale is a reciprocal transaction. The obligation or
promise of each party is the cause or consideration for the
obligation or promise by the other. The vendee is obliged to pay
the price, while the vendor must deliver actual possession of the
land. In the instant case, the original plan was that the initial payments
would be paid in cash. Subsequently, the parties, with the participation
of the bank, execute an addendum providing instead, that the
petitioners would secure a loan in the name of Agro Conglomerates,
Inc. for the total amount of the initial payments, while the settlement of
said loan would be assumed by Wonderland.

The contract of surety between Wonderland and Anglo
Conglomerates was extinguished by the rescission of the contract of
sale of the farmland property. Thus, the addendum which was
dependent thereon was likewise extinguished. The contract of sale
between Anglo and Wonderland did not materialize but it was
admitted that Anglo received the proceeds of the promissory notes
obtained from the respondent bank.

Sec. 22 of the Civil Code provides that every person, who
through an act or performance by another, or any other means
acquires or comes into possession of something at the expense
of the latter without just or legal ground, shall return the same to
him.

Petitioner Anglo Conglomerate has no legal or just ground to retain
the proceeds of the loan at the expense of private respondent. Neither
could petitioner excuse themselves and hold wonderland still liable to
pay the loan upon the rescission of their sale contract.

ONEROUS
Gaite vs. Fonacier
A contract of sale is normally commutative and onerous, not only does
each one of the parties assume a correlative obligation, but each party
anticipates performance by the other from the very start.
COMMUTATIVE
Buenaventura vs. Court of Appeals
Article 1470 of the New Civil Code provides that gross inadequacy of
price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or
some other act or contract.

Petitioners failed to prove any of the instances mentioned in Article
1355 or Article 1470 of the Civil Code, which would invalidate or even
affect the Deed of Sale. Indeed, there is no requirement that the
price be equal to the exact value of the subject matter of sale. All
the respondents believed that they received the commutative value of
what they gave.

SALE DISTINGUISHED FROM OTHER
SIMILAR CONTRACTS
BARTER
Article 1458: If the consideration of the contract consist partly in
money and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such intention
does not clearly appear, it shall be considered a barter if the value of
the thing given as a part of the consideration exceeds the amount of
the money or its equivalent, otherwise it is a sale.

Article 1638: By the contract of barter or exchange one of the
parties binds himself to give one thing in consideration of the others
promise to give another thing.

Article 1641: As to all matters no specifically provided for in this
Title, barter shall be governed by the provisions of the preceding title
relating to sales.
Contract of Barter or Exchange
- This is a contract wherein one of the parties binds
himself to give one thing in consideration of the
others promise to give another thing.
- A contract whereby one person transfers
ownership of non-fungible things to another with
the obligation on the part of the latter, to give
things of the same kind, quantity or quality is
considered as a barter.

NOTE: If the intention of parties cannot be ascertained then it
shall be considered as a barter if the value of the thing given as a
part of the consideration, exceeds the amount of money or its
equivalent otherwise, it is a sale.

PERFECTION & CONSUMMATION OF THE
CONTRACT OF BARTER
PERFECTED from the moment there is a meeting
of minds upon things promised by each party in
consideration of the other.
CONSUMMATED from the time of mutual delivery
by the contracting parties of the things they promised.

CONTRACT FOR PIECE-OF-WORK
Article 1467: A contract for the delivery at a certain price of an
article which the vendor in the ordinary course of his business
manufacturers or procures for the general market, whether the same
is on hand at the time or not, is a contract of sale, but if the goods are
to be manufactured specially for the customer and upon his special
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order, and not for the general market, it is a contract for a piece of
work.

Article 1713: By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in consideration
of a certain price or compensation. The contractor may either employ
only his labor or skill, or also furnish the material.
Contract for a piece-of-work
- This is a contract wherein the contractor binds
himself to execute a piece of work for the
employer, in consideration of a certain price or
compensation.

TEST TO DETERMINE A CONTRACT OF PIECE-OF-
WORK
Whether the thing transferred is one not in the
existence and which would never existed but for the
order of the party desiring to acquire it.
Whether a thing would have existed and been a
subject of sale to some other person, even if the
order had not been given.
NOTE: A contract is for a piece of work if services dominate that
contract even though there is a sale of goods involved.
NOTE: Where the primary objective of a contract is a sale of a
manufactured item, it is a sale of goods even though the item is
manufactured by labor furnished by the seller and upon previous
order of the customer.

CONTRACT OF AGENCY TO SELL
Article 1466: In construing a contract containing provisions
characteristics of both the contract of sale and of the contract of
agency to sell, the essential clauses of the whole instrument shall be
considered.

Article 1868: By the contract of agency a person binds himself to
render some service or to do something in representation or on behalf
of another, with the consent or authority of the latter.
Contract of agency to sell
- This is a contract wherein a person binds himself
to render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.
Distinguish Contract of Agency from Contract of Sale
CONTRACT OF SALE
CONTRACT OF AGENCY TO
SELL
The buyer receives the goods
as an owner.
The agent receives the goods
of the principal who retains his
ownership over them and has
the right to fix the price and
terms of the sale and receive
the proceeds less the agents
commission upon the sale
made.
The buyer has to pay the price. The agent has to simply
account for the proceeds of the
sale he may make on the
principals behalf.
As a general rule, the buyer
cannot return the object sold.
The agent can return the object
in case he is unable to sell the
same to a third person.
The seller warrants the thing
sold.
The agent makes no warranty
for which he assumes personal
liability as long as he acts
within his authority and in the
name of the seller.
The buyer can deal the thing
sold as he pleases being the
owner.
The agent in dealing with the
thing received, must act and is
bound according to the
instructions of his principal.
DACION EN PAGO
Article 1245: Dation in payment, whereby property is alienated to
the creditor in satisfaction of a debt in money, shall be governed by
the law of sales.
Dation in Payment
- It is that mode of extinguishing an obligation
whereby the debtor alienates in favor of the
creditor, property for the satisfaction of monetary
debt.

CONDITIONS UNDER WHICH A DATION IN PAYMENT
WOULD BE VALID
a) If the creditor consents
b) If the dation in payment will not prejudice the other
creditors.
c) If the debtor is not judicially declared insolvent.

Sale Distinguished from Dation in Payment
SALE DATION IN PAYMENT
There is no pre-existing credit. There is a pre-existing credit.
This gives rise to obligations. This extinguishes obligations.
The cause or consideration here
is the price (viewpoint of seller);
of the object (viewpoint of the
buyer).
The cause or consideration
here, from the viewpoint of the
debtor in dation in payment is
the extinguishment of his debt,
from the viewpoint of the
creditor, it is the acquisition of
the object offered in credit.
There is a greater freedom in
the determination of the price.
There is less freedom in
determining the price.
The giving of the price may
generally end the obligation of
the buyer.
The giving of the object in lieu of
the credit may extinguish
completely or only partially the
credit.

Philippine Lawin Bus vs. Court of Appeals
In dacion en pago, as a special mode of payment, the debtor offers
another thing to the creditor who accepts it as equivalent of payment
of an outstanding obligation. The undertaking really partakes in one
sense of the nature of sale that is the essential elements of a
contract of sale must also be present.

In this case, there was no meeting of the minds between the parties
on whether the loan of the petitioners would be extinguished by dacion
en pago. The receipts show that the two buses were delivered to
respondent in order that it would take custody for the purpose of
selling the same. The receipts themselves in fact show that petitioners
deemed respondent as their agent in the sale of the two vehicles
whereby the proceeds thereof would be applied in payment of
petitioners indebtedness to respondent.

Lo vs. KJS Eco-Formwork Philippine
In order that there be a valid Dation in Payment the following
requisites should be followed:
1) There must be the performance of the prestation in lieu of
payment which may consist in delivery of a corporeal thing or a
real right or a credit against the third person.
2) There must be some difference between the prestation due and
that which is given in substitution.
3) There must be an agreement between the creditor and debtor
that the obligation is immediately extinguished by reason of the
performance of a prestation different from that due.

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As in other contract of sale, the vendor or assignor is bound by certain
warranties just like in dation in payment. Petitioner, as vendor or
assignor, is bound to warrant the existence and legality of the credit at
the time of the sale or assignment.

Vda. De Jayme vs. Court of Appeals
Dacion en pago is the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. The undertaking really partakes in one
sense of the nature of sale. As such, the essential elements of a
contract of sale must be present.

The alienation of the building by Asiancars in favor of MBTC for the
partial satisfaction of its indebtedness is, in our view, also valid. The
alienation was made via dacion en pago during the time when the
lease contract was still subsisting. At this point, the mortgagor,
Asiancars, could validly exercise rights of ownership, including right to
alienate it, since it was specifically stipulated in the lease contract and
agreed by the spouses Jayme.

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

Article 1478: The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid the price.
Contract to Sell
- This is a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of
the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said
property exclusively to the latter upon his
fulfillment of the conditions agreed upon.

NOTE: The payment in a contract to sell is a positive suspensive
condition, the failure of which is not a breach, casual or serious,
but simply an event that prevents the obligation of the
vendor/seller to convey title from acquiring a binding force.

NOTE: To say that there is a casual breach is to proceed from the
assumption that the contract is one of absolute sale, where non-
payment is a resolutory condition.

Lawyers Cooperative Publishing Co vs. Tabora
Where in a contract of sale the seller agreed that the ownership of the
goods shall remain with the seller until the purchase price shall have
been fully paid, merely to secure the performance by the buyer of his
obligation, such stipulation cannot make the seller liable in case of
loss of goods.
BPI vs. SMP, Inc.
A free on board stipulation in a contract can exist with the contract to
sell; ownership of the products sold is retained by the seller until after
the postdated checks evidenced by provisional receipts given as
payment by the buyer are cleared, with the stipulation that the loss or
destruction of the products during transit is for the account of the
buyer. This is a valid stipulation and can exist in conjunction with the
other.
David vs. Misamis Occidental II Electric Cooperative Inc.
ISSUE: Whether the parties entered into a contract to sell or contract
of sale?

In a contract to sell the prospective buyer explicitly reserves the
transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event,
such as payment. What the seller agrees or obliges himself to do is to
fulfill his promise to sell the subject when the entire amount of the
purchase price is delivered to him.

In a contract of sale the title to the property passes to the vendee
upon the delivery of the thing sold.

In a contract to sell, the first element of consent is present however is
it conditioned upon the happening of a contingent event which may or
may not occur. If the suspensive condition is not fulfilled, such as
payment, the perfection of the contract is completely cancelled.
However, if the suspensive condition is fulfilled the contract to sell now
becomes a perfected contract of sale, such that if there has been a
previous delivery of the object, the ownership completely conveyed to
the buyer.

In the case at bar, it would show that circumstances surrounding their
agreement is a contract of sale and not a contract to sell. It is settled
that it is not the title of the contract entered into by the parties that
determines what kind it is but the express terms and stipulations.
Ventura vs. Spouses Endaya
Given the contingent nature of a contract to sell, the failure of the
prospective buyer to make full payment and/or abide by his
commitments stated in the contract to sell prevents the obligation of
the prospective seller to execute the corresponding deed of sale to
effect the transfer of ownership to the buyer from arising.

A contract to sell is akin to a conditional sale where the efficacy or
obligatory force of the vendors obligation to transfer title is
subordinated to the happening of a future and uncertain event, so that
if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.

ESSENTIAL ELEMENTS
CONSENT or MEETING OF THE MINDS
CAPACITY TO BUY OR SELL
Article 1477: All persons who are authorized in this Code to obligate
themselves, may enter into a contract of sale, saving the modifications
contained in the following articles.

Where necessaries are sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price therefor.
Necessaries are those referred in article 290.

General Rule:
All persons, whether natural or juridical, who can bind
themselves with legal capacity to buy & sell may enter into
a contract.
Exception:
Those when the law determines that a party suffers from
either absolute or relative incapacity.

KINDS OF INCAPACITY
Absolute those persons who cannot bind themselves
Relative the incapacity exist only with reference to
certain persons or a certain class of property.

NOTE: There are no incapacities except those provided by law
and such incapacities cannot be extended to other cases by
implication for the reason that such construction would be in
conflict with the very nature of Article 1489.

PERSONS WHO CANNOT GIVE CONSENT [Art. 1327]
a. Unemancipated minors
b. Insane or demented persons
c. Deaf mute who cannot read or write
Contracts entered into by the persons mentioned above are
voidable or annullable. The contract is considered binding
unless annulled by the proper action in court.

NOTE: Contracts entered into by an insane person during a lucid
interval are valid.

NOTE: When the defect of the contract consists in the incapacity
of one of the parties, the incapacitated person is not obliged to
make any restitution except insofar as he has been benefited by
the thing or price received by him.
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NOTE: Incapacitated persons are only obliged to pay on
necessaries things sold and delivered to him/her.

Necessaries
- Those things which are needed for sustenance, dwelling,
clothing, medical attendance, education and transportation
according to the financial capacity of the family of the
incapacitated person.

Mercado vs. Espiritu
The Supreme Court held in this case held that the sale of real estate
contracted by minors, while pretending to be of legal age when they
contracted the same, and now who has reached the age of majority, is
valid, and they cannot be permitted afterwards to excuse themselves
from compliance with the obligations assumed by them or to seek their
annulment. The doctrine is entirely in accordance with the provisions
of estoppel.

EFFECT OF LACK OF CAPACITY
VOIDABLE
Article 1390: The following contracts are voidable or annullable,
even though there may have been no damage to the contracting
parties:
1) Those where one of the parties is incapable of giving
consent to a contract.
2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.

These contracts are binding, unless they are annulled by proper action
in court.

GROUNDS FOR ANNULMENT
Incapacity to give consent
Vitiated consent due to mistake, violence,
intimidation, undue influence or fraud. [MVIUIF]

UNENFORCEABLE
Article 1403: The following contracts are unenforceable, unless they
are ratified:
1) Those entered into the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his powers.
2) Those that do not comply with the State of Frauds as set forth in
this number. In the following cases an agreement hereafter made
shall be unenforceable by action, unless the same or some note or
memorandum thereof, be in writing and subscribed by the party
charged, or by his agent, evidence, therefore, of the agreement
cannot be received without the writing, or a secondary evidence of
its contents.
a) An agreement that by its terms is not to be performed within
a year from the making thereof.
b) A special promise to answer for the debt, default or
miscarriage of another.
c) A special promise to answer for the debt, default or
miscarriage of another.
d) An agreement made in consideration of marriage other than a
mutual promise to marry.
e) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action, or
pay at the time some part of the purchase money; but when
a sale is made by auction and entry is made by the auctioneer
in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it
is a sufficient memorandum;
f) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest therein.
g) A representation as to the credit of a third person.

3) Those where both parties are incapable of giving consent to a
contract.


KINDS OF UNENFORCEABLE CONTRACTS
Unauthorized Contracts
- Those entered into in the name of another person by
one who has been given no authority or legal
representation, or who has acted beyond his power.
The Statute of Frauds
- The purpose of which is to prevent fraud and not to
encourage the same. Thus, certain agreements are
required to be in writing, so that they may be enforced.
(1) Applies only to executory contracts (contracts where no
performance has yet been made) and not partially or
completely executed contracts.
(2) It cannot apply if the action is neither for damages
because of the violation of an agreement nor for the
specific performance of said agreement.
(3) It is exclusive, that is, it applies only to the agreements or
contracts enumerated herein.
(4) The defense of the Statute of Frauds may be waived.
(5) The statute of frauds is a personal defense, that is, a
contract infringing it cannot be assailed by third persons.
(6) Contracts infringing the State of Frauds are not void, they
are merely unenforceable.
(7) The Statute of Frauds is a rule of exclusion.
(8) The State of Frauds does not determine the credibility or
weight of evidence. It merely concerns itself with the
admissibility thereof.
(9) The Statute of Frauds does not apply if it is claimed that
the contract does not express the true agreement of the
parties. As long as the true or real agreement is not
covered by the Statute of Frauds, it is provable by oral
evidence.
Ace Foods Inc. vs. Micro Pacific Technologies
The Supreme Court held that the agreement between Ace Foods and
Micro Pacific Technologies (MPT) is in the nature of a contract of sale.
The contract of sale has been perfected from the time Ace Foods sent
the purchase order to MPT which then delivered subject products
covered by the invoice and subsequently installed and configured
them in Ace Foods premises.

A contract of sale is classified as a consensual contract, which means
that the sale is perfected by mere consent. No particular form is
required for its validity. Upon perfection of the contract, the parties
may reciprocally demand performance.
Domingo vs. Court of Appeals
General Rule:
A person is not incompetent to contract merely because of advanced
years or by reason of physical infirmities.
Exception:
However, when such age or infirmities have impaired the mental
faculties so as to prevent the person from properly, intelligently and
firmly protecting her property rights then she is undeniably
incapacitated.
Calimlim-Canullas vs. Fortun
The Supreme Court ruled in this case that the house as object of the
contract of sale in this case is a conjugal property. Thus, the
husbands power to alienate must be with the wifes consent.
However, the wife in this case did not gave her consent to the sale.
Furthermore, the sale was made by the husband in favor of his
paramour after he had abandoned his family and left the conjugal
house.
7


The New Civil Code provides that contracts whose cause, object or
purpose is contrary to law, morals, good custom, public order or public
policy are void and inexistent from the very beginning. [Article 1409]





Guiang vs. Court of Appeals
The Supreme Court held in this case that the sale of a conjugal
property requires the consent of both and the husband and wife. The
absence of the consent of on renders the sale void, while the vitiation
thereof makes it merely voidable.

In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the other
spouse may assume sole powers of administration. However, these
power do not include the powers of disposition or encumbrance which
must have the authority of the court or the written consent of the
spouse. In the absence of such authority or consent, the disposition or
encumbrance is void. Nonetheless, the transaction shall be construed
as a continuing offer on the part of the consenting spouse and the
third person, and may be perfected as a binding contract upon the
acceptance by the other spouse or authorization by the court before
the offer is withdrawn by either or both offerors.
Olaguer vs. Purunggan
The Supreme Court ruled that the prohibition against purchasing
property in their hands for sale or management is not absolute. It does
apply an exception wherein the principal consents to the sale of the
property in the hands of the agent or administrator.
Philippine Trust Co. vs. Roldan
The Supreme Court held that one of the red flags of the sale done by
Roldan is the fact that if she sold to Dr. Ramos for only P14,700 and
bought it after one week for P15,000, why would she sell the land in
the first place when in fact she can get it for a higher price.

Even without proof that she had connived with Dr. Ramos,
remembering the doctrine that guardianship is a trust of the highest
order, and the trustee cannot be allowed to have nay inducement to
neglect his wards interest.
Macariola vs. Asuncion
The Supreme Court held in this case that Judge Asuncion did not
violate RA 1491, paragraph 5 of the NCC since the prohibition only
applies to sale or assignment of the property which are subject of
litigation to the persons disqualified in the law.

For the prohibition to operate, the sale or assignment of the property
must take place during the pendency of the litigation involving the
property. When Respondent Judge purchased the property, the
decision he rendered already became final and executory because
none of the party filed an appeal within the reglementary period, thus
the lot in question was no longer subject to litigation.
Director of Lands vs. Ababa
Petitioners in this case contend that a contract of contingent fee
between a lawyer and his client is void because it violates Article 1491
of the NCC since it involves an assignment of a property subject of
litigation.

The Supreme Court held that for the prohibition under art. 1491 to
operate, the sale or assignment of the property must take place during
the pendency of the litigation involving the property. The contract for a
contingent fee being valid, vested upon Atty. Fernandez an interest or
right over the lots in question.
Rubias vs. Bastiller
Article 1491 of the Civil Code prohibits certain persons, by reason of
the relation of the trust or their peculiar control over the property, from
acquiring such property in their trust or control either directly or
indirectly and even at a public or judicial auction:
1) Guardians
2) Agents
3) Administrators
4) Public Officers and Employees
5) Judicial officers and employees
6) Prosecuting attorneys and lawyers
7) Others specifically disqualified by law.

The nullity of such prohibited contracts is definite and permanent and
cannot be cured by ratification. The public interest and public policy
remain paramount and do not permit of compromise or ratification.

However, public and judicial officers and lawyers are different from
guardians, agents and administrators in this case since their
transactions may be ratified by means and in the form of a new
contract, in which case its validity shall be determined only by the
circumstances surrounding the execution of the new contract. The
causes of nullity which have ceased to exist cannot impair the validity
of the new contract. However, the validity of the new contract, does
not retroact to the date of the first contract.

SUBJECT MATTER of a CONTRACT OF SALE
a) The subject matter may be personal or real
property.
b) The subject matter of the sale may be present or
future.
c) The subject matter must be licit and must be
within the commerce of man.
A contract whose object is outside the commerce of
man is void.

d) An impossible thing cannot be the object of a
contract.
A contract whose object is impossible is void.

e) The Civil Code allows:
The sale of credit
The sale of the whole of certain rights, rents
or products
The sale of inheritance already acquired
The sale of possession.

NOTE: The Civil Code prohibits, among others the sale of
easements independent of the estate to which they belong and
the sale of contagious animals.

REQUISITES CONCERNING THE OBJECT
THINGS
a. Determinate
b. Licit or Lawful
- It should not be contrary to law, morals, good
custom, public order or public policy.
c. Not be impossible
- The thing must be within the commerce of
men

If the subject matter of the sale is illicit, the contract is void and cannot,
therefore, be ratified. In such a case, the rights and obligations of the
parties are determined by applying the following of the Civil Code:
Article 1411: When the nullity proceeds from the illegality of
the cause or object of the contract, and the act constitutes a
criminal offense, both parties being in pari delicto, they shall
have no action against each other, and both shall be
prosecuted.
- This rule shall not be applicable when only one of the
parties is guilty; but the innocent one may claim what he
has given, and shall not be bound to comply with his
promise.

Article 1412: If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following
rules shall be observed.
1) Both are at fault
- Neither may recover what he has given by virtue of the
contract or demand performance of the others
undertaking.
8

2) Only one is at fault
- The one at fault cannot recover what he has given or
ask the fulfillment of what has been promised him.
- The other one who is not at fault, may demand the
return of what he has given without any obligation to
comply with his promise.


RIGHTS
- All rights which are not transmissible or personal
may also be the object of sale:
Example:
The right of conventional redemption
Right of usufruct
credit

Example of Intransmissible Right
Right to vote
Right to public office
Marital and Parental rights

Example of Personal Right
Right to be a partner in a partnership
The right to act as an agent of another
The right of the bailee to use the thing loaned in a contract of
commodatum

NOTE: While services may be object of a contract, they cannot be
the object of a sale.

KINDS OF ILLICIT THINGS
Illicit Per Se of its nature
Illicit Per Accidens because some provisions of
the law declaring it to be illegal.

RIGHT OF VENDOR TO TRANSFER OWNERSHIP
1. Seller must be owner or authorized by owner of the
thing sold
It is essential in order for a sale to be valid that the
vendor must be able to transfer ownership and
therefore, he must be the owner or at least must be
authorized by the owner of the thing sold.
Nemo Dat Quod Habet: One cannot transmit or dispose of that
which does not belong to him.
NOTE: One can only sell only what he owns or is authorized to
sell and the buyer cannot acquire no more than what the seller
can transfer legally.
A sale of paraphernal property of the deceased wife by the
husband who was neither an owner nor an administrator of the
property at the time of the sale is void ab initio. Such sale cannot be
subject of ratification by the administrator or the probate court.
Only so much of the share of the vendor-co-owner can be validly
acquired by the vendee even if he acquired such property with
good faith.

2. Right must exist at time of delivery
Although the vendor does not require to have the right
to transfer ownership at the time of the perfection of
the sale, it is however indispensable at the time of the
delivery.
REASON: Since future goods or goods whose acquisition by the
seller depends upon contingency may be the subject matter of
sale, it would be inconsistent of the article to require that thing
sold must be owned by the seller at the time of the sale inasmuch
as it is not possible for a person to own a thing or right not in
existence.

NOTE: Perfection per se does not transfer ownership which
occurs upon the actual or constructive delivery of the thing sold.
Sale, being consensual contract it is perfected by mere consent,
and ownership by the seller of the thing sold is not an element for
its perfection.



3. Where property sold registered in name of seller who
employed fraud in securing his title
Although generally forged or fraudulent deed is a
nullity and conveys no title, there are instances when
such a document may become the root of a valid title.
4. Where property sold in violation of a right of first
refusal of another person
The prevailing doctrine is that a contract of sale
entered into a violation of right of first refusal of
another person, while valid is rescissible.
5. Where the real property, subject of unrecorded sale,
subsequently mortgaged by seller which mortgage was
registered
The mortgagees registered mortgage right over the
property is inferior to that of the buyers unregistered
right.
The unrecorded sale between the buyer and the seller
is preferred for the reason that if the seller as original
owner, had parted with his ownership of the thing sold
then, he no longer has ownership and free disposal of
that thing so as to be able to mortgage it again.

SUBJECT MATTER MUST BE DETERMINATE
Article 1460: A thing is determinate when it is particularly
designated or physically segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the
contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further agreement
between the parties.
When is the thing determinate
- A thing is determinate or specific when it is
particularly designated or can be physically
segregated from all other of the same class.
Sufficient if subject matter capable of being made
determinate
- It is not necessary that the thing sold must be in
sight at the time the contract is determinable or
capable of being made determinate without the
necessity of a new or further agreement between
the parties.

Crabeo vs. Dingco
The Supreme Court held that the fact that another agreement is
needed to ascertain the subject matters identity, quantity or quality
constitutes an obstacle to the existence of the contract and renders it
void.

SALE OF THINGS HAVING POTENTIAL EXISTENCE
Article 1461: Things having a potential existence may be the object
of the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed
subject to the condition that the thing will come into existence.

The sale of vain hope or expectancy is void.

9

NOTE: Under contract law, the object of the contract must exist at
the time of the transaction. Contracts whose object did not exist at
the time of the transaction are inexistent and void from the
beginning. However, with respect to a sales contract, the object of
a contract need not be existing at the time the contract is entered
into.


Emptio Rei Speretae: Sale of Thing Expected
- This is the sale of a thing not yet in existence
subject to the condition that the thing will exist.
- If the thing does not come into existence, the
contract of sale will become effective, as such,
the buyer will have no obligation to pay.

Emptio Rei Spei: Sale of Mere Hope or Expectancy
- The sale of the hope itself that the thing will come
into existence, where it is agreed that the buyer
will pay the price even if the thing does not
eventually exist.

Rule that Recognizes Emptio Spei
a. The efficacy of the sale of a mere hope or
expectancy is made subject to the condition that the
thing contemplated or expected will come into
existence.
b. The sale of a vain hope or expectancy is valid even
if the thing or hoped does not come into existence,
unless the hope or expectancy is vain in which case,
the sale is void.

Emptio Rei Speretae vs. Emptio Rei Spei
The sale is subject to the
condition that the thing will
come into existence, whatever
its quantity or quality.
It is not certain that the thing
itself will exist, much less its
quantity and quality
The contract deals with a sale of
a future thing.
The contract relates to the sale
of the hope or expectancy
The sale is subject to the
condition that the thing should
exist, so that if it does not, there
will contract by reason of the
absence of an essential
element.
This produces effect even
though the thing does not come
into existence because the
object of the contract is the
hope itself, unless it is a vain
hope or expectancy.

IN CASE OF DOUBT: The presumption is in favor of emptio rei
speretae which is more in keeping with the commutative character
of the contract.

GOODS WHICH MAY BE THE OBJECT OF SALE
Article 1462: The goods which form the subject of a contract of sale
may be either be existing goods, owned or possessed by the seller or
goods to be manufactured, raised or acquired by the seller after the
perfection of the contract of sale, this is called Future Goods.

There may be a contract of sale of goods, whose acquisition by the
seller depends upon a contingency which may or may not happen.

1. Existing Goods goods owned or possessed by
the seller.
2. Future Goods goods to be manufactured, raised
or acquired.

SALE OF FUTURE GOODS
(1) Valid as an executory contract to be fulfilled
NOTE: A contract of the future sale and delivery of goods, which
the seller does not have in his possession but which he intends to
acquire by producing, manufacturing or purchasing before the day
of delivery, is valid as an executory contract to be fulfilled by
acquiring and delivering the goods specified in the contract, even
though the acquisition of the goods by the seller depends upon
the contingency which may or may not happen.
NOTE: It does not apply to a transaction where there was no such
delivery, neither was there any intention to deliver a determinate
thing.

NOTE: This does not apply if the goods to be manufactured
especially for the buyer, and not readily saleable to others in the
manufacturers regular course of business. The contract, in such
cases, must be considered as one for a piece of work.
SALE OF AN UNDIVIDED SHARE OF SPECIFIC MASS
Article 1464: In the case of fungible goods, there may be a sale of
an undivided share of a specific mass, though the seller purports to
sell and the buyer to buy a definite number, weight or measure of the
goods in the mass, and though the number, weight or measure of the
goods in the mass is undetermined.

By such sale the buyer becomes the owner in common of such a share
of the mass as the number, weight or measure bought bears to the
number, weight or measure of the mass.

If the mass contains less than the number, weight or measure bought,
the buyer becomes the whole owner of the whole mass and the seller
is bound to make good in any deficiency from goods of the same kind
and quality, unless a contrary intent appears.

Fungible Goods
- It means goods of which any unit is, from its
nature or by mercantile usage, treated as the
equivalent of any other unit.
- Those which cannot be used without being
consumed.

NOTE: The owner of a mass of goods may sell only an undivided
share thereof, provided that the mass is specific or capable of
being made determinate.
RESOLUTORY CONDITION
Article 1465: Things subject to a resolutory condition may be the
object of the contract of sale.
Resolutory Condition
- An uncertain event upon the happening of which
the obligation or right subject to it is extinguished.
For failure to pay his debt, the land of S was sold to B, the highest
bidder and purchaser in an extra-judicial foreclosure of a real estate
mortgage.

Under the law, the mortgagor may redeem the property at any time
within 1 year from and after the date of registration of the sale. If S
redeems the property, then the sale to B is extinguished.

Sibal vs. Valdez
Borrowing the words of Melchem, the Supreme Court held that a valid
sale may be made of a thing, which although not yet actually in
existence, is reasonable certain to come into existence as the natural
increment or usual incident of something already in existence. Things
of this nature are said to have potential existence.
Melliza vs. City of Ilo-Ilo
Supreme Court held in this case that the requirement of the law that a
sale must have for its object a determinate thing is fulfilled as long as,
10

at the time the contract is entered into, the object of the sale is
capable of being made determinate without the necessity of a new or
further agreement between the parties. The specific mention of the
some lots plus the statement that the lots object of the sale are the
ones needed for city hall site, avenues and parks, the Arellano Plan
sufficiently provides a basis, as of the time of the execution of the
contract, for rendering determinate said lots without the need of a new
and further agreement of the parties.

National Grains Authority vs. IAC
The Supreme Court held that the quantity being indeterminate does
not affect the perfection of the contract. There was no need to make
another contract so as to determinate the exact number or amount of
the subject matter of the sale.

Article 1349 of the NCC provides that the fact that the quantity is not
determinate shall not be an obstacle to the existence of the contract,
provided that it is possible to determine the same, without the need of
a new contract between the parties.
Heirs of Severina San Miguel vs. Court of Appeals
The Supreme Court held that in a contract of sale, the vendor need
not possess the title of the thing sold at the perfection of the contract.
However, the vendor must possess the title of ownership at the time of
delivery. To insist that Dominador in this case to the price of the
untitled lot, would result in Severinas unjust enrichment. The essence
of a sale is the transfer of title or an agreement to transfer it for a price
actually paid. If the vendor cannot deliver the object of the sale to the
vendee, such contract may be deemed inoperative.
Quijada vs. Court of Appeals
The Supreme Court held in this case that ownership by the seller on
the thing sold at the time of the perfection of the contract of sale is not
an essential element for its perfection. What the law requires is that
the seller has the right to transfer ownership at the time the thing sold
is delivered

In this case, the contract of sale made by Quijada to Mondejar is valid
as Quiajada retained an inchoate interest on the lots by virtue of the
automatic reversion clause in the deed of reversion.

At the time the sale was made, Quijada could not validly transfer
ownership of the lots since it was donated to the Municipality.
However, when the donee-Municipality brought to the donors
knowledge its non-fulfillment of the donations resolutory condition, the
ownership of the land reverted back to the donor. Thus, at the time
when Mondejar was demanding for delivery of the subject lot, Quijada
can validly transfer the same and thus the contract of sale is
consummated.

PRICE & OTHER CONSIDERATION
Article 1469: In order that the price may be considered certain, it
shall be sufficient that it be so with reference to another thing certain,
or that the determination thereof be left to the judgment of a specified
person or persons.

Should such person or persons be unable or unwilling to fix it, the
contract shall be inefficacious, unless the parties subsequently agree
upon the price.

If the third person/s acted in bad faith or by mistake, the courts may
fix the price.

Where such third person/s are prevented from fixing the price or terms
by fault of the buyer or the seller, the party not in fault may have such
remedies against the party in fault as are allowed the seller or the
buyer, as the case may be.

NOTE: In a contract of sale, the buyer pays a price certain in
money or its equivalent. However, even if the buyer does not pay
a price certain in money or its equivalent, there may be a valid
contract of sale if there was some other consideration for the sale.

WHEN PRICE IS CONSIDERED CERTAIN
(1) No sale if the price is not certain or ascertainable
- The price in a contract of sale ought to be
settled for there can be no sale w/out a price.

a. The price must be certain or capable of being
ascertained or its equivalent.
Money currency
Equivalent promissory notes, checks & other
mercantile instruments generally being accepted as
representing money
b. The fact that the exact amount to be paid for the
thing sold is not precisely fixed, is no bar to an
action to recover the purchase price, provided
the contract, by its terms furnishes a basis or
measure for ascertaining the amount agreed
upon.

(2) Cases when price considered certain
The parties have fixed or agreed upon a definite
amount.
The following are only applicable when no specific amount has
been stipulated by the parties:
It be certain with reference to another thing
certain.
The determination of the price is left to the
judgment of a specified person/s.

(3) Price certain with reference to another thing
certain
The price is certain if the purchase price is the total amount of the
debt of the seller to the buyer. In this case, the amount of debt as
of the date of the sale can be determined.
Similarly, the price is certain if the purchase price is the appraised
value of a specific thing, when such appraised value was
previously known to the contracting parties.

McCullogh vs. Aenille & Co.
ISSUE: Under the terms of the agreement, may the price be fixed at
10% below the price in the inventory, at the invoice price and in
accordance with the price list less 20% discount.

HELD: The SC held that in this case, the price may be considered
certain. The articles which were the subject of the sale were definitely
and finally agreed upon. The price could be made certain by a mere
reference to these invoices.
Mitsui Bussan Kaisha vs. Manila BRR and L. Co.
ISSUE: Is the price certain within the meaning of the law when it is
fixed at a certain amount subject to modifications based on known
factors.

HELD: By stipulation, the price could be made certain by the
application of known factors, and for the purposes of this case, it may
be assumed that the price was fixed at P9.45.

EFFECT WHEN THE PRICE IS FIXED BY A THIRD PERSON
General Rule: The price fixed by a third person
designated by the parties is binding upon them.
Exception:
a) When the 3
rd
person acts in bad faith or by
mistake as when the third person fixed the price
of another thing, which is not the object the sale,
but another analogous or similar thing ---
In this case, the court may fix the price.
Mere error in judgment cannot serve as a
basis for impugning the price fixed.

11

b) When the 3
rd
person disregards specific
instructions or the procedure marked out by the
parties or the data given him, thereby fixing an
arbitrary price.
S sold to B a diamond ring. The determination of the price was
left to C whom the parties thought was a jeweler. If C acted by
mistake, as when he is incompetent to know the price of the
diamond ring, or in bad faith, as when he connived with S, the
court may fix the price.
EFFECT WHEN THE PRICE IS NOT FIXED BY A THIRD
PERSON DESIGNATED
If the 3
rd
person designated by the parties to fix the
price refuses or cannot fix it, w/o fault of the seller &
the buyer:
The contract shall become ineffective, as if no
price had been agreed upon unless, of course,
the parties subsequently agree upon the price.

If such 3
rd
person is prevented from fixing the price
by the fault of the seller or the buyer
The party not in fault may obtain redress against
the party in fault, which consists of a choice
between rescission or fulfillment, with damages
in either case.
If the innocent party chooses fulfillment, the
court shall fix the price.

GROSS INADEQUACY OF PRICE
Article 1470: Gross inadequacy of price does not affect a contract of
sale, except as it may indicate a defect in the consent, or that the
parties really intended donation or some other act or contract.

NOTE: Under Article 1355, lesion or inadequacy of case will not
invalidate a contract, unless there has been fraud, mistake or
undue influence.
NOTE: While a contract of sale is commutative, mere inadequacy
of the price or alleged hardness of the bargain generally does not
affect its validity when both parties are in position to form
independent judgment concerning the transaction. In determining
whether the price is adequate or not, the price obtaining at the date of
the execution of the contract, not those obtaining a number of years
later, should be considered.

Where low price indicates a defect in the consent:
The inadequacy, however, may indicate a defect
in the consent such as when fraud, mistake or
undue influence is present in which case the
contract may be annulled not because of the
inadequacy of the price but because the consent
is vitiated.

Where price so low so as to indicate that the parties
intended another contract:
While it is true that mere inadequacy of price is
not a sufficient ground for the cancellation of a
voluntary contract of sale, it has been held that
where the price is so low that a man in his
senses and not under a delusion would not
accept it, the contract may be shown to be a
donation or some other contract.
Where the price paid is much higher than the
assessed value of the property and the sale is
effected by a father to his daughter in which filial
love must be taken into account, the price is not
to be construed as so inadequate to shock the
courts conscience.

SIMULATED CONTRACTS
Article 1471: If the price is simulated, the sale is void, but the act
may be shown to have been in reality a donation or some other act or
contract.
Simulation of Contract
Absolute/Fictitious Simulation of Contract
- This happens when the parties do not intend to be
bound at all.
- This is void and the parties may recover from each
other what they have given under the contract.
Relative Simulation of Contract
- When the parties conceal their true agreement.
- When it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good
customs, public order or public policy binds the parties
to their real agreement.

False Price
- This is where the parties agreed on the price but
the true price is not reflected in the contract of
sale.

NOTE: A false price is not a simulated contract. However, if the
parties do not intend to be bound by the purchase price and not
pay at all, then the false price becomes a simulated price.

False Price/ Relative Simulated Price the contract
is valid but subject to reformation.
Absolute Simulated Price the contract is void

Article 1472: The price of securities, grain, liquids and other things
shall also be considered certain, when the price fixed is that which the
thing sold would have on a definite day, or in a particular exchange or
market or when an amount is fixed above or below the price on such
day or in such exchange or market, provided said amount be certain.

Article 1473: The fixing of the price can never be left to the
discretion of one of the contracting parties. However, if the price fixed
by one of the parties is accepted by the other, the sale is perfected.

FIXING OF THE PRICE BY ONE OF THE
CONTRACTING PARTIES, NOT ALLOWED
- However, where the price fixed by one party is
accepted by the other, the contract is deemed
perfected because in this case, there exists a true
meeting of minds upon the price.

EFFECT OF FAILURE TO DETERMINE PRICE
Article 1474: Where the price cannot be determined in accordance
with the preceding articles, or in any other manner, the contract is
inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer, he must pay a reasonable
price therefor. What is a reasonable price is a question of fact
dependent on the circumstances of each particular case.

(1) Where contract is executory
12

- If the price cannot be determined in accordance
with art. 1469 and 1472 or in any other manner,
the contract is without effect.
- The price certain is an essential element of the
contract of sale, there is no obligation of the
vendee to pay.

(2) Where delivery has been made
- The buyer must pay a reasonable price thereof.

Concept of Reasonable Price
- The reasonable price or value of goods is
generally the market price at the time and place
fixed by the contract or by law for the delivery of
the goods.
Market Value
- The reasonable sum which property would bring
on a fair sale by a man willing but not obliged to
sell to a man willing but not obliged to buy.

Ureta vs. Ureta
For lack of consideration, the Deed of Sale is void. It states that
Policronio paid and Alfonso received P2,000 purchase price. Although
on its face, the Deed of Sale appears to be supported by valuable
consideration, there was no money involved in the sale.
Felix ho vs. Vicente Gui
The Supreme Court held in this case that there was no valid sale
because the sale entered into by the father were all simulated. Article
1471 of the NCC provides that 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. However, the law requires positive proof of
donation. But there were no evidence presented to support it.
Macapagal vs. Remorin
The fact that the deed of sale between respondents Corazaon and
Laureila did not accurately reflect the true consideration thereof is not
cause for declaration of its nullity. When the parties intended to be
bound by the contract except that it did not reflect the actual purchase
price of the property, there is only a relative simulation of the contract
which remains valid and enforceable. It cannot be declared null and
void since it does not fall under the category of an absolutely
simulated or fictitious contract. The contract of sale is valid but subject
to reformation.
Macapagal vs. Remorin
The fact that the deed of sale between respondents Corazaon and
Laureila did not accurately reflect the true consideration thereof is not
cause for declaration of its nullity. When the parties intended to be
bound by the contract except that it did not reflect the actual purchase
price of the property, there is only a relative simulation of the contract
which remains valid and enforceable. It cannot be declared null and
void since it does not fall under the category of an absolutely
simulated or fictitious contract. The contract of sale is valid but subject
to reformation.
Sanchez vs. Sanchez
When the deed of sale states that the purchase price has been paid
but in fact has never paid, the deed of sale is null and void ab initio for
lack of consideration. In this case, when the deed of sale is declared
to be paid but in fact is not, this is considered a badge of simulation
and would also render the contract void. Both of the instances would
mean it cannot be attacked by prescription or laches since it is
imprescriptible.
Penalosa vs. Santos
The Supreme Court held that the contract was not simulated because
in the first place the basic characteristics of a simulated is that it is not
intended to produce legal effects or alter judicial situation of the
parties in any way.

However, in this case, both parties already took certain acts which
were directed towards the fulfillment of their respective agreements,
indicating that they intended to give effect to the second sale they
made.

FORMATION OF SALE
STAGES IN THE LIFE OF SALE
Generation or Negotiation
- This covers the period from the time the prospective
contracting parties indicate the interest in the contract to
the time the contract is perfected.
Perfection
- Takes place upon the concurrence of the essential
elements of the sale which are the meeting of the minds
of the parties as to the object of the contract and upon
the price.
Consummation
- This begins when the parties perform their respective
undertakings under the contract of sale, culminating in
the extinguishment thereof.

OPTION CONTRACTS
KINDS OF PROMISE
Article 1479: A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price.

Article 1324: A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.

1) An accepted unilateral promise to sell in which the
promisee (acceptor) elects to buy.
2) An accepted unilateral promise to buy in which the
promise (acceptor) elects to sell.
3) A bilateral promise to buy and sell reciprocally
accepted in which either of the parties chooses to
exact fulfillment.
Policitacion a unilateral promise or offer to sell or
to buy a thing which is not accepted creates no
juridical effect or legal bond.
Option
- Consideration for sale.
- Part of purchase price.
Earnest Money
- A contractual privilege existing in one person for
which he has paid a consideration which gives him
the right to buy/sell

If the option is founded by a contract
- The offeror cannot withdraw his offer before the
lapse of the period agreed upon.
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.

NOTE: An accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promissor
if the promise is supported by a consideration distinct from the
price.

13

Great people do things before they're ready
They do things before they know they can do it
Doing what youre afraid of,
Getting out of your comfort zone,
Taking risks like that...that's what life is.
You might be really good.
You might find out something about yourself
Thats really special
And if you're not good
Who cares?!
You tried something
And now you know something about yourself.

~Amy Poehler~