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SALES PRE-MID 2013

Nature and Form of the Contract

Who are the parties of a contract of sale?


- seller and buyer (not seller and sellee)
- vendor and vendee
What are the Obligations created in a contract of sale?
- 2 with respect to the vendor:
o deliver
o transfer of ownership of the determinate thing
- on the part of the buyer:
o to pay a price certain in money or its equivalent
is sale a contract?
- yes. So necessarily elements of a contract should be present.
So what are ELEMENTS of a contract?
- essential, natural and accidental
So what are the ESSENTIAL ELEMENTS of a contract?
- consent, object and consideration

so sales is a contract so esseatial elements of a contract must be present. So what are the ESSENTIAL ELEMENTS of a
contract of SALE?
- consent, object or subject matter and price which is the cause or the consideration.

CONSENT:

So what is consent?
- is manifested by the meeting of the offer and the acceptance of the thing.
- The offer must be accepted and the acceptance must be absolute. Otherwise, it would constitute a counter
offer and the counter offer is not accepted by the first who offered, there could be no meeting of the
minds.

CASE of MANILA

There was no meeting of the minds between manila metal (M) and pnb (P) because M offered first to purchase back
the property which was forclosed by the bank for 1.5 M.

The bank countered offer for 1.9 M. then another offer by the bank for 3M. For almost 10 yrs there was an offer-
counteroffer-offer-counteroffer. Until bank finally said Okay! We will sell this for 30M. BUT manila metal insisted on
the 1.5 M because it claims that because the bank accepted the 725K as DP so there was a perfected contract.

The court said NO. it was not a manifestation of the perfected contract because you have not agreed on the price.
There is an absence of consent. Thats why there is not perfected contract in this particular case.

OBJECT:

It is a thing considered determinate, can be physically segregated or certain agreement among others of the same
class.

Does it means to say that RICE a generic thing cannot be an object of sale?
- when the law says that the obligation of the vendor is to transfer ownership and to deliver a determinate
thing it also includes generic things which are capable of being made determinate or is its determinable.
o so what is the test?
if the parties do not have to enter into another agreement of being determinate the subject
matter.
If I purchase from you 50 kilos or rice. Do we still need to enter to another contract to
make it determinate?
o No. imo ranang timbangon nya i-lain. Determinate nah.
Even if the law says determinate, it includes generic things that can be determinable.
PRICE CERTAIN IN MONEY or ITS EQUIVALENT:

No problem if the price is certain in money. But, what is price in equivalent of money? (Dont tell me
checks or promissory notes)
- in what case do you have this?
- Example: A the decedent was indebted to X and to constitute his obligation to X he constituted a
mortgage to X on this particular land. Then he died and the obligation was not yet paid, he is survived by
B,C,D, and E and when they settled the estate of A they found out that A was indebted to X. Here comes Y
a stranger, who promise the obligation of A to X.
When they partitioned the estate they executed a document that they renounced or waived whatever
rights they have over the property in favor of Y.
o Did they receive anything from Y?
o No.
o what was the consideration?
Y was going to pay X.
So Y wanted the delivery of the property. So court said this is akin to a contract of
sale. Consideration is Ys undertaking to pay the obligation of X. there is
consideration.

In another case:
Some heirs executed a similar document renunciation waiver of rights over a certain property owned by the
decedent in favor of Y who is not an heir. They just stated there that they renounce or waive any rights they have
over this property in favor of Y. Y is claiming ownership of the property in lieu of the document executed by the heirs.
SC said NO. it cannot be considered as a contract of sale because there is no consideration. The heirs also cannot
renounce their hereditary right in favor of Y because when an heir renounces his right it must be in favor of another
heir. And Y is a stranger and there is no separate consideration for the waiver of rights in favor of Y. Therefore Y
cannot validly acquire any rights over the property.

This is different from the other case because there was a consideration Ys undertaking to pay the obligation.

Payment of Accounts Receivable can be a consideration.

If you have all essential elements of a sale are present of course you have a valid contract of sale.
What if one essential element is missing?
NO CONTRACT AT ALL because all essential elements need to be present for it to be valid.
What if one essential element is defective?
IF one is ILLEGAL - VOID CONTRACT
If DEFECT in consent of one of the parties VOIDABLE

The characteristics of the contract of sale are that this contract is


a. Consensual, since it is perfected by consent;
i. delivery of the thing is not required to perfect the contract, payment of the price is not
necessary to perfect the contract of sale.
b. Bilateral, since the parties are bound to reciprocal prestations;
i. Because both parties are obliged to perform, one is to transfer ownership the other is
payment of a price
c. Onerous, since there is an exchange of equivalent values;
i. There is an exchange of consideration, I deliver this to you because I expect to receive
something from you,
d. Nominate, since it has a special designation;
i. Has a designated name Contract of Sale
e. Principal, since the contract may exist alone;
i. Not accessory because by definition an accessory contract one whos existence and
validity depend on existence and validity of another contract which we call a principal
contract
ii. Ex. I am borrowing from you 50k pesos, you tell me that before I will lend you the money
give me a collateral. Then I say okay ill give you this as a security and you give me the
money.
1. What is the principal contract here? CONTRACT OF LOAN
2. Accessory is the? Pledge
3. Can I constitute a pledge in you favor without a principal contract. You as me para
asa mana? Bstah pledge lang. NO YOU CANNOT DO THAT THERE MUST BE
PRINCIPAL CONTRACT
4. SO if CONTRACT of SALE you dont need to look for a prior contract so
that the contract will be valid.
f. Commutative, since fulfillment is predetermined in advance.
i. What the seller receives is more or less what he gave. Unlike alietory
contracts where what you give is not necessarily what you receive. Like a contract of
insurance.
REMEMBER:
o perfection does not transfer ownership, it is only upon delivery.
o SALE IS NOT A MODE OF ACQUIRING OWNERSHIP. It is merely a TITLE. The mode of acquiring
ownership is DELIVERY.

SALE vs AGENCY TO SELL

What is agency?
- in the contract of agency one person binds himself to render service or to do something in representation
or on behalf of another with the consent or authority of the latter.
- Translate this to an agency to sell the agent undertakes to sell goods or things belonging to the owner
or the principal in representation or on behalf of the principal with the consent of or the authority of the
principal.
- Therefore in an agency to sell you have a PRINCIPAL (in a contract to sell one person binds himself to do
something for another in representation of this another person with his authority or consent) so what the
AGENT does is to represent the principal in selling the thing belonging to the principal. So you have this
particular THING here which the principal DELIVERS to the AGENT. Remember that delivery transfers
ownership in SALE. So here is the AGENT the owner after delivery?
o NO. why? Because it is a contract OF AGENCY not a contract of SALE.
- So then AGENT enters a contract with BUYER. So agent delivers the thing to the buyer. Now, does the buyer
become the owner? YES.
- From whom does the buyer acquire ownership? AGENT or PRINCIPAL? The buyer DIRECTLY acquires ownership
from the PRINCIPAL not from the agent.
- Also it is the obligation of the agent to remit the proceeds of the sale to the principal less whatever commission
is obliged to him.

CASE of QUIROGA vs PARSONS HARDWARE:

- Parsons was being sued by quiroga for breach of their agency agreement. According to Quiroga, Parsons was
just his agent in the visayas and there was a breach in there agreement that parsons would order a certain
number of beds every so often and to pay the price within 60 days from the date of shipment. On top of that
parson was entitled to 25% commission after quiroga pays the beds. So why do we need to distinguish if
there is a contract of sale? Or agency to sell?
- Because in the case if Parsons was an agent an it committed a breach in the agreement he would be liable to
damages or if it failed to remit the proceeds from the sale then the responsible officers of parson might be
held liable for estafa for misappropriation.
- Parson said NO. we do not have an agency to sell here. We have a contract of sale. Why?
o Because parson was req. to purchase order a certain number of beds. And to PAY REGARDLESS
whether if the beds are sold or not. Because the agreement was payment was 60 days from shipment.
If it req. to pay the price less the discount or commission the contract is sale. If it were an agency to
sell then parson was only req. to remit the proceeds from actual sale not the price less discount of ALL
beds delivered to parsons.

The Supreme Court declared that the contract by and between the plaintiff and the defendant was one of purchase and
sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant,
either by agreement or by law.

In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was
essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner
stipulated. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant,
to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or
agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the
sale of the thing to a third person, and if he does not succeed in selling it, he returns it.
SALE vs CONTRACT of PIECE of WORK

- I order from you a particular sofa, this sofa is very different from what you usually manufacture, I
order this from you as a special order not usual furniture you manufacture. If I fail to pay the
price you will sue me for the price, If I delay in delivery I will sue you for specific performance. So there is
really no difference in a contract of sale or piece of work. Because if this was the usual furniture that you
manufacture if I fail to pay I will still sue you for the price if I delay I will still sue you for specific performance.
No difference. But still why do we need to distinguish?
- CASE of CIR vs ENGINERRING, you need to distinguish to determine the correct TAX LIABILITY.

SALE vs BARTER

- sale a party delivers a determinate thing the other party a sum certain in money.
- Barter one party delivers a determinate thing the other party delivers another determinate thing
- What if I deliver to you one sack of organic black rice from the mountain province (exotic) you promise to deliver
me the same quantity and quality or rice two months from now. Have we entered to a contract of barter? This
is a contract of LOAN (MUTUUM not COMMODATUM, the latter is you return the exact same thing, the former
you return the same kind and quality) in barter one determinate thing is give another is give in return.
- What if the consideration is partly money and partly another thing? Barter or sale?
o 1st agreement of the parties
o 2nd if you cannot determine the agreement, if the value of the thing exceeds the amount of money
given then it is barter, other than that it is sale.
- So why distinguish?
o 1st if sale it is covered by the statue of frauds the other is not.
o 2nd if sale and involves a RURAL property and involves ONE HECTARE and the buyer has ANOTHER
RURAL PROPERTY and there is a ADJACENT PROPERTY which is NOT divided by any brooks, trees,
river, ocean, lake, whatever; this ADJACENT OWNER has the right of redemption and can retain the
property from the buyer. IF BARTER THIS DOES NOT APPLY

SALE vs DATION in PAYMENT

- dation there is a pre- existing contract or obligation to pay a sum of money, instead of the debtor paying the
sum in money he delivers a determinate thing to the creditor and that obligation will be extinguished to the
value of the thing, unless the party agree that the obligation is totally extinguished.
- In sale there is no pre-exisitng obligation, this is a fresh contract of the parties.

SALE vs LEASE of THINGS

- there is no transfer of ownership only the temporary use and possession is transferred

SALE vs DONATION

- donation is gratuitous, if it involves a real property it needs a formal contract it is not a consensual contract.
- Why distinguish?
o For tax puposes, sale if it is a CAPITAL asset not an ORDINARY asset you are only taxed a 7.5% tax. If
you DONATE a certain property to another person who is not related to you is not a member of your
family as contemplated in the tax code. You will be slapped with a tax of 30%. So if sale capital gains
tax of 7.5%, on the other hand if donation 30%.
- If in a donation there is a burden placed or imposed on the donee and the burden is more onerous than the
value of the thing given by the donation then the law considers the donation as a SALE. So what is it is a sale?
If the law considers it as a sale then you dont need to comply with the formal requirements of the donation
because it is already a sale.

- If you have a simulated contract of sale, no consideration paid the intention was only to transfer ownership to
the pretended buyer. So the sale is VOID for lack of one essential element, which is CONSIDERATION or
PRICE. But there underlying agreement of th parties which is a donation. So, then it must comply with the
formal req. of the donation.

WHAT is a bilateral PROMISE to sell?

- one where one party promises to sell, the other promises to buy. Perfected contract here? Yes. It is an executor
contract ex. Is a contract to SELL.
- Where the owner reserves the right of ownership and promises to transfer the ownership only on
the fulfillment of a positive suspensive condition which is usually full payment of the price.
- It is binding as an executory contract
- CASE ANG YU ASUNCION:
o Court said that an unconditional promise to buy and sell as long as the object is made determinate
and the price is fixed can be obligatory on the parties and compliance therewith maybe accordingly
exacted.

What about a UNILATERAL Promise to SELL?

- Is it binding upon the promisor? No. it is not binding on the promisor unless it is supported by a separate value
or consideration. You usually call this unilateral promise to sell as OPTION CONTRACT.
- In a lease contract there is a stipulation that the lessee the option to purchase the property for 3M pesos during
the period of the lease. Before the period expired, the lessee signified his acceptance of the offer. Can he
compel the lessor to sell him the property in fact the consideration is in writing and included in this lease
contract? NO, he cannot because there is NO SEPARATE VALUABLE CONSIDERATION. The lease contract
cannot be considered as a separate consideration.
- In other words, if the option is not supported by a separate consideration, even if the offeree has accepted the
promisor or offeror can withdraw. He is not bound. In the CASE of YUL something.

In an option contract is the promisee obligated to purchase?


- no. because the essence of the contract is to give the optionee the exclusive privilege whether to buy or not. no
- must the option be a SUM CERTAIN in MONEY? What can be an acceptable consideration in an option contract?
o Besides money or jewelry or tangible things. AN UNDERTAKING THAT CAN BE QUANTIFIED.
o In one case, A sells one half portion of a property to B. it is stated in their contract, in consideration of
3K per square meter (spell out during the exam ayaw shortcut kay patay mung judge) considering the
market value is only 1K. it is stipulated that in consideration of 3k per square meter A is giving B the
other half also for 3k. do you have a valid option contract here?
The court said yes. The consideration is actually the difference between the market value and
the price. The court considers this as acceptable valuable consideration for the option.
o Now the contract was entered somewhere in the 1990. In the year 2003, B has retired from his
job, and received a substantial amount of money; he remembered that in this contract with A he
was given this option to purchase this property for 3k. After 13 yrs the value is now 7k. can B
exercise the option now? Is there a valid option contract?
o Unfortunately NO. Prescription of action based on a written agreement prescribes in 10
yrs. unless there was a period that after 10 yrs he can still exercise in the contract. The
basis for the court to refuse the buyer from exercising the option contract is on the
grounds that his action has prescribed.

In an option contract can the offer be withdrawn anytime?


- Yes as long as no consideration has been given.

Can the offeror unilaterally extend the period of offer?


- Yes.

If you have a valuable offer contract, and the buyer signifies his intention to purchase the property subject to the
option and the offeror refuses to sell the property. He has changed his mind. Can he do that? He is selling the
property in a much higher price. You are the offeree. What will you do?
- sue for specific performance and/or damages

what if instead of selling to you during the period of the option, the offeror sells it to another person? Could you still
recover the property?
- yes.

So is option the same as right of first refusal? Why?


- there is definite offer on the part of the owner to sell the property. What he undertakes to do is merely to give
the recipient of the right. The right to decide or offer first to this person cause if this other person decides not
to buy thats the time you can offer it to third persons. There is no definite price, it is just that if he decides to
sell the property he should offer first to this person.
- Right now, I am the owner of the property and I am telling you. Cge if I decide to sell my property ako I offer sa
imo. Then I decide to sell the property but I did not offer it to you but to another person. Do I have a cause of
action? Can you sue me?
o In one case, the court said it is covered by the statute of frauds, it cannot be enforced unless if it is in
writing.
- you usually see a right of first refusal in a contract of lease. That if the lessor decides to sell the
property he will first offer it to the lessee.
- Now you have this stipulation of the lease the right of first refusal. In fact, he stated the price. You
are the lessee so you decide to purchase the property. You right me a letter that you are
exercising your right under the lease contract. You are purchasing the property to me. Can you compel me to
sell my property to you?
o NO. I because I have not decided to sell the property yet. You have no cause of action against me.
o If I do decide to sell the property without offering first to you despite this clear provision in the lease
contract to another person? Is there a cause of action? Can you sue for the rescission?
Depends. If the other party is aware of the right to first refusal that means he acted in bad
faith. In one case the court said, because there is bad faith you can sue for the rescission of
the contract. Otherwise, good faith, only damages under art. 19.

The Contract of Sale may be


a. Absolute
o RAMOS vs ??? Case: the sale maybe absolute when the title passes to the buyer upon delivery of the
thing and there is no stipulation in the contract that property remains under ownership of the seller
until full payment of the price or that no stipulation that the vendor can unilaterally cancel the sale if
the buyer fails to pay the price.
o The crucial thing to remember here if there is reservation of title on the part of the vendor regardless
of the payment of the price.
o If there is no reservation of title then the sale is considered as absolute.
o If you have this stipulation in your contract of sale where the seller the right to unilaterally cancel the
sale if the buyer fails to pay the price within a certain period. What would be the remedy of the seller
if the buyer fails to pay within period and demand? Sue for rescission of the contract. He cannot just
tell the buyer I am rescinding the contract.
b. Conditional,
o When there is a condition
o Two kinds of condition:
1. Resolutory
a. Positive resolutory
b. Negative resolutory
2. Suspensive
a. Positive suspensive
b. Negative suspensive
o In the case of RAMOS, was it an absolute sale? No. the court said it was not an absolute sale in
fact it was a contract to sell.
o In many cases the court would interchange contract to sell and conditional sale. But in the
CORONEL CASE the court distinguished the two.
o However in the RAMOS case, the court allowed the respondents to pay the balance after so many
years, the last time they paid was dec. 1981. Then they were made to pay on Jan 1998. Decide on
2005. And they were charged to pay interest only from 1998-2005. Do you think this is fair? It
would seem not fair. But there was never any demand on the RAMOS for respondents to pay. No
demand there is no Delay. And debtor is only liable to pay only upon default and there was no
default unless there is extrajudicial or judicial demand. 1998 was when demand was made so that
it is why interest started to accrue from that date.
o A sale is conditional if its subject to a negative resolutory condition. Example: I sale the property
now but you promise the price after a year. But after a year you fail to pay the price, your failure
to pay the price results in the rescission of the contract. Non-payment was a negative resolutory
condition that causes the extinguishment of the contract.
o Can also be subject to a suspensive condition. A contract subject to a suspensive condition can be
liken to a contract to sell where the non-fulfillment of that positive suspensive condition will not
give rise to the obligation of the seller to transfer ownership of the property. The court said that
the obligation of the seller to transfer title acquires no obligatory force. In fact, if you have a
contract to sell subject to suspensive condition and you fail to pay the price there is NO BREACH
OF THE CONTRACT. No sue for rescission of the contract.
o In ONG vs CA. why did the court say it was a contract to sell not a contract of sale? When physical
possession was already delivered to ONg?
o Not only was the Certificate of title retained by the seller but they agreed that the deed of
absolute sale will be executed only upon full-payment of the price. This is indication that
title is reserved by the seller.
o In CORONEL, the court said this is a contract of sale but a conditional contract of sale. What was
the condition? That patricia will only pay the balance of the purchase price once the coronel heirs
can show that title has been transferred in their name. Just a few days before the
title was transferred in their name they did not show it to patricia but sold it to
another buyer. Court said that, you cannot sell that because you already sold that
to her. You contract to patricia was NOT A CONTRACT TO SELL but a CONDITIONAL
CONTRACT OF SALE. Because had it been a contract TO SELL, can the seller still sell the property?
Yes because the seller is still the owner.
o AGAIN, if the contract is a contract OF SALE, and the price not yet paid, non-payment of the price
does not entitle the seller to sell the property to another person. Even if the buyer here has
defaulted on the payment he still has to sue for the rescission of the contract.
o In a contract TO SELL, where the full payment is a suspensive posititve condition that will obligate
the seller to transfer title. Pending fulfillment of that suspensive condition the seller can sell the
property. Why? Because the seller is still the owner but of course subject to any liability with
respect to the 1st buyer in the contract to sell.
o Ong vs. CA, G.R. No. 97347, July 6, 1999:

- In a contract of sale, the title to the property passes to the vendee upon the delivery of
the thing sold; while in a contract to sell, ownership is, by agreement, reserved in the
vendor and is not to pass to the vendee until full payment of the purchase price. In a
contract to sell, the payment of the purchase price is a positive suspensive condition, the
failure of which is not a breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force.
o Carrascoso vs. CA, G.R. No. 123672, December 14, 2005

In a contract of sale, the title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, ownership is not transferred upon delivery of the property
but upon full payment of the purchase price. In the former, the vendor has lost and
cannot recover ownership until and unless the contract is resolved or rescinded; whereas
in the latter, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from becoming effective.

In a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale
is thereby perfected, such that if there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the seller. Whereas in
a contract to sell, upon fulfillment of the suspensive condition, ownership will not
automatically transfer to the buyer although the property may have been previously
delivered to him. The prospective seller still has to convey title to the prospective buyer
by entering into a contract of absolute sale.

EXECUTED vs EXECUTORY CONTRACT:

An executed contract, which property (ownership) in the thing is transferred from seller to buyer, and
nonpayment of the price is a negative resolutory condition; or

An executory contract (an agreement or contract to sell) when ownership does not pass until
Some future time, or
The fulfillment of some condition, such as full payment of the purchase price when said payment
then becomes a positive suspensive condition
Distinctions

o Executory Contract
o Executed Contract

o No property is conveyed
o Property (ownership) is conveyed

o If buyer defaults, seller is only


o If buyer defaults, seller may sue entitled to damages
for the price
o Risk of loss is generally borne by
o Risk of loss is generally borne by the seller
the buyer
OBJECT

Can things be the object of sale?


- Of course. Definitely things can be the object of sale.

What about rights? Can rice be an object of sale? But a contract of sale says that the obligation is to deliver a
DETERMINATE thing, or something which is determinable, you cannot see rights, this are intangible assets, and yet
we say rights can be an object of sale. Why?
- Because by specific provision of law, all rights which are not in transmissible or transmissible can be sold

Can services be an object of sale?


- cannot be of sale. Only a service contract or employer contract. But not a contract of sale. You dont buy
services.

You say that things can be object of sale. So can ALL things be an object of sale?
no. Thats why malacat vs CA, the court declared as void the sale over the tiny2x portion land. Why void
because the subject matter was not considered lawful because the sale was made under the 5-year
prohibitory period under CA 141 subject of a free patent.
if you have this sale in the 5-year period, can you execute a confirmatory deed of sale after 5 years?
o No. because you cannot ratify a VOID CONTRACT
o But you can enter a fresh contract after the 5-year period.

The thing must be determinate and determinable.


in the case of NGA vs IAC, the court said that the fact that the quantity is nit determinate shall not be an
obstacle in the existence of the contract provided it can be made determinate without creating a new contract
within the parties. Why? Because here NGA agreed to buy 2600 cavans of palay from Soriano. But Soriano
was only able to deliver a little over 600 cavans, but Soriano demand payment of this 600+ cavans of palay.
The real reason that NGA would not pay is that there was no perfected contract because there was no
determinate subject matter.
The court said, do you really need to enter to another contract to know how much you are really liable to
Soriano? NO. because the 2600 was the ceiling of how much Soriano can offer to deliver anything less than
that is can still be considered and therefore was a perfectly valid sale.

There is no problem if the thing or object of the sale exists now. Can I sell to you a mac book that I dont own yet?
YES. For as long as it has POTENTIAL EXSTENCE.

Then why enter to contract of sale when I the seller am not the owner of the thing yet?
because the existence of the thing is not important at the perfection of the contract. What is important is that
at the TIME of DELIVERY it must exist and I own that thing because it is at DELIVERY I TRANSFER
OWNERSHIP.

Can you sell HOPE? (not the cigarette). Yes, hope or expectancy.

So if you say that future things can be the object of sale, can all future things be the subject matter of sale?
No. because by provision of law, future inheritance cannot be sold.

I have a brother here and my father owns two parcels of lands A & B. I expect to inherit A from my father, so I sell A
to my brother during the lifetime of my father, upon the death of my father I execute a confirmation sale of the sale I
made during the lifetime of my father.

1st question: was the first contract valid?


No. definitely not because it was a sale of future inheritance.

2nd question: after the death of my father, after I confirm the sale I made during the lifetime of my father. Is this
valid?
No. again you cannot ratify a void sale.

3rd question: after that I sale the same property to my brother. Is this valid now? This new fresh contract after the
death?
Yes.
CASE of Adolfo guansing.

He forged the signature of his father or represented that his father died, and got an affidavit that he was
the sole heir. He was able to transfer a property in the name of his father during the lifetime of his
father. He used the property to loan a money from cavite development bank, using the land as security. He executed
a real estate mortgage over this land which is now registered in his name in favor of CDB. Kay dili man iya ang yuta,
wala nya bayre ang loan. Kay wamn sya ni byad ide gi forclose sa bangko. And the bank was the highest bidder, it
then sold this land to mrs. Lim. So mrs. Lim asked that the property be delivered to her. CDB however could not
deliver the property because in the meantime the father found out what his son did. He filed a case in court for the
reverse of the title in his name. of course, the ungrateful son did not contest, so judgment was rendered in favor of
the father and the ROD was asked to revert the title in favor of the father. It became final and executory. The
Property now is registered in the father.

What property can CDB deliver to mrs. Lim? Nothing.

The question is, initially did CDB and mrs. Lim have a valid contract of sale?

Court said YES. Only the reversion of the title prevented cdb from transferring title to mrs. Lim.
The effect of the reversion is that the son had no right to constitute a mortgage over the property and if he
had no right, cdb had no right to foreclose the mortgage. No right to foreclose then no right to transfer it to the
highest bidder, which was itself and could not transfer it to a next sale.

MANLAPAT CASE: subject matter here was considered illegal bec. In violation of the prohibition of conveyance during
the pendency of application of under Housing Project in a particular locality. Void because of the specific prohibition in
the IRR.

In Reyes vs Beltran CASE: I have a sister who died without issue, so my brother and I are the forced heirs. We are
owners upon her death. I sell this particular parcel to you under a contract TO SELL, the condition is I will execute the
deed of absolute sale of this will be adjucated to me. When my brother and I finally executed the estate of my sister,
the other land was adjucated to me not the one I was hoping for.

Question: can you compel my brother to deliver his land to you? No. Because he is not the seller.
Question: can you compel me to sale my land executed to you? No. Because this was not the subject matter of our
contract to sell.

This is what happened in the Reyes case.

PRICE

BOSTON:

- it is not enough to perfect a contract of sale to agree on the object and price, it is also important to agree on
the manner of the payment of the price. Thats why in this case the court said that there was no perfected
contract because the parties did not agree on the manner of the payment of the price.

What are the requisites of having a valid price?

1. it must be real
o what is this? There must be legal intention on the buyer to pay and the part of the seller to receive the
price
o if there is no legal expectation to pay and no legal expectation to receive the price is considered
simulated. Therefore you have a non-existing contract, because absence one essential element that is
the price.

CRUZADO vs BUSTOS:

- the court said that the price was simulated because there was really no intention to pay the price, no legal
expectation to receive the price because what happened here is that this ungrateful agapito borrowed a parcel
of land from his friend estefania because he was applying for the position of prosecutor. Before you were
required to put up a bond of 800 pesos so he borrowed the land of his friend. Incidentally agapitos family was
allowed to leave in the house owned by estefania in the poblacion. While estefania and her family were living
in the barrio.
- Then agapito died without returning the land to estefania. The meantime, his son Santiago,
married the daughter of estefania. Then Santiago admittedly discovered a paper, which stated
that his mother in law sold this parcel of land to his father so he tried to recover it because
esfefania was selling it to another person. It was established that estefania only lent the
property to his father so his father can work as a prosecutor.
- So that is why the court denied his petition to recover the property.

DOLES vs ANGELES

- why did the court say there was no consideration?


o Doles and friends wanted to secure a loan, and angeles had a financer, so it was really doles friends
and the financer who were attributed to the contract. It was angles who was demanded payment. In
return she threated doles of lawsuit and so doles was constrained or forced to execute a deed of sale
over a parcel which she did not own which was registered in the name of her father in favor of angels.
o Now it would have been valid if the sale if it was in favor of kua(read sa case dont know kinsa ni) it
would have been a dation in pago. Because a third person can fulfill or perform an obligation of
another person. And this third person with the consent of the principal debtor would be subrogated
with the rights of the creditor. So it would have been valid if the sale was in favor of the creditor, but
it was in favor of another agent and both of them had no part in the contract.
o So what is the consideration of the sale of doles to angeles? It did not extinguish the loan.
o So the court said there was absence of consideration here. Sale is invalid.

2. It must be in money or its equivalent.

- Remember: equivalent of money example where the consideration was the payment of the loan by an
assignee of a right.

TORRES vs CA
- what was the consideration of the sale? They expected profits of the subdivision where of course did not
materialize because of lawsuits filed. They cannot claim that there was no consideration because the
consideration was not in cash but in the form of expectation of profits from the subdivision project.

3. Must be CERTAIN or ASCERTAINABLE


- the court said that it is sufficient if in the BOSTON CASE: if it is capable of being ascertained with certainty in
the said contract
- in the same case the court also said that the price is considered certain if be its term the contract furnishes a
measure for ascertaining the amount agreed upon. In other words, there is no need to enter into a new
contract in determining the price. Therefore in a contract where the parties agreed for a third person to
determine the price and they agreed to be bound by the determination of the third person that is perfectly
valid.

BARRETO vs STA. MARINA


- The appraisers did not determine the price, they determined the value of the business. Because they agreed
that the price would be the value of barretos interest in the business. Which is a fraction of the entire
business. So how do you determine the value of his business? So that is what the appraisers did. They
determined the value of the entire business. Since they already knew the ratio between barretos share as
against the entire business so it is not easy to determine the value of his interest, it was not the appraisers
themselves who determine the amount of the value.

What if the third person is unable to fix the price?


- No contract. Because there is no price to speak off.
- If prevented by one of the parties of determining the price:
o The court may determine the price

Price can also be ascertained by reference to a definite day, certain market or exchange especially if you are sharing
shares of stock.

Price can also be determined by reference to invoices which was what happened in McCulough vs Aenlle.
McCulough vs Aenlle
- The issue here is that the buyer said you make references to the invoice price of that tobacco
leaf but actually the tobacco was of a lesser grade than indicated.
- The court said it does not matter the price does not depend on the quality of the leaf tobacco
where just making reference to the invoice as basis for the determining the price of the entire business.

What if I sale this mac for 5000.00 only. And the sale is perfected and I deliver it to you and is consummated. Then
later in I realize I sold it for less so I should sue for rescission for gross inadequacy of price. Can I do that?
- no. because mere inadequacy of the price is not a ground invalidation of the contract unless you can prove
vice of consent.
- How can consent be vitiated in relation to you?
o This is what ASKAY was invoking in the case. I am an old man. Askay was complaining because
several years back he sold his mining claim to a relative. Later on maybe somebody offered to buy it
at a higher price. So askay sued for nullity of the contract on the grounds of gross inadequacy of
price, he claim he was only paid 1.00 by his relative but it was really not there was consideration paid
not just one peso. Totality of the consideration was still little compared to the value of the property.
o Court said that is not enough for you to complain. When you entered into the contract both of you
were in a position to bargain. Infact before you sign on the document the contents of the contract
were explained and you understood but still proceeded with the contract.
o Just because you were disadvantaged now you cannot claim that you were prejudiced in the sense
that you can ask the court to bail you out of this disadvantageous situation.
o Again, mere inadequacy of price does not affect the contract.
- this is however different in Aguilar vs Rubiato:
o here rubiato, person of average intelligence according to the court. He owned 8 parcels of land worth
26000 pesos. There was this manuel who shove to him Oh sign this, its a spa authorizing you to
borrow money from me. Because he wanted to borrow 1000 pesos. Using this SPA what manuel did
was enter contract of sale with right to repurchase with aguilar for 800.00 compared to the 26000
pesos. It was not known when the 800 pesos were eventually given to rubiato. But what is not
disputed is the fact that aguilar gave to him. Aguilar did not even bother to conduct an ocular
inspection to determining if the property really existed.
o After 1 yr redemption stopped so she is now suing for the consolidation of her title. This was the 1 st
time that rubaito learned that parcel of land he owned were already sold. So the court said, because
the price was so low as TO BE REVOLTING this could not be sale. But since there was money that
changed hands the court concluded that this was merely a loan and not a sale because of the gross
inadequacy of the price and aside from the fact that the SPA was a sham.

What is there was consideration agreed but not paid? There is failure of consideration; does it affect the validity of the
contract?
- failure of consideration is not absence of consideration, because lack of consideration is absence of
consideration, failure is there is an agreed consideration but failure on the part of the buyer to pay.
- The court ruled in Buenaventura that it is not the act of paying the price that determines the validity of a
contract of sale, failure in consideration only results to the right to demand the fulfillment of the payment,
meaning demand for the payment of the price or cancelation of the obligation under an existing valid contract.
Does not affect the validity. So if the buyer fails to pay the price the seller cannot automatically consider the
contract as canceled or rescinded. If the seller wants to rescind then he has to sue for the rescission of the
contract.

What is an option money again?


- consideration given in a separate contract called an option contract whereby the offeree or optionee is given
the option to certain period of time to signify his acceptance to purchase a certain property in a certain period.
- Now what if the optionee decides not to buy the property half way through the period if the optionee is given
the one month decide. He says on the 15th return to me the option money because I decide not to buy.
o No. he cannot do that.
- what if I agree to sell you this computer and you said okay and to signify my intention to buy ill pay you
100.00 now. Then ill pay you later. That is considered as an EARNEST MONEY.

EARNEST MONEY:
- is paid when a contract of sale is already perfected.
- If the buyer fails to pay because it is part of the purchase price, the seller can now sue him for specific
performance or for the rescission of the contract because there is already a perfected contract of sale.
- It is proof of the perfection of the contract, it is given when the contract is already perfected. On the other
hand, option money is given before the contract of sale is perfected.
- When earnest money is paid the buyer is obliged to pay the purchase price, if option money is paid the buyer
is not obliged to pay the purchase price.
- Since the earnest money is part of the purchase price, if the parties mutually agree to desist in
the contract, mutually ha, can the buyer return of the money?
o Yes. Because rescission entails mutual restitution.

We enter to a contract TO SELL the seller reserves the right to the ownership of the property until full-payment of
the price, you sell to me a land, we agreed that you will make the deed of sale and transfer the tct to me once fully
paid. I fail to pay the price within the period, but I made partial payments, because I failed to pay the price, can you
sue me for the cancellation of the contract?
- no. because there is no contract of sale yet. This is still a CONTRACT TO SELL. Because if I fail to fulfill to do
the suspensive condition your obligation to transfer title does not get any obligatory force.
- Can I demand for the return of my money?
o No. this is not an earnest money because earnest money supposes only that there is a perfected
contract of sale not TO SELL.
o Earnest money is only material in a contract of sale in order to compel performance of the other party.
Serves as evidence of the perfected contract of sale.
o So if I fail to pay the price in this example, if I fail to pay the price you cannot compel me to pay the
balance by claiming that we have a perfected contract.

MANILA METAL vs PNB


- here manila was claiming there was a perfected contract because it deposited 750k with PNB for the
repurchase of the property.
- Court said that is not earnest money; there was no perfected contract of sale. Merely a deposit in the legal
sense of the world.

RULES IN ORDINARY SALES

Sales is a consensual contract there is no particular form required for its validity.

Verbal agreement of sale:

CAOILI vs ca

- so a widow entered into a contract of lease with the caoili, eventually they agreed that the property the house
and lot. So what was the evidence of the agreement? Just a piece of paper where she acknowledge the
payment of a certain amount for the sale of the land. Nang hambog pajud ning widow na she would pay the
balance once she can get a clean title in her name. apparently wala pa settle ang estate sa iya bana. She
promised to show the clean title on or before a certain date if I cannot do that I will return the amount you
paid times 2. And so the period arrived and she was not able to present a clean title to the caoili spouses. So
the caoili demanded the return of their money times 2. She said there is no document there is no sale.
- Court said a sale is a consensual contract, form is not necessary for the validity of the contract. Here even
there is no formal deed executed by the seller it was still established that there was a contract of sale agreed
between both parties.

I sale to you a parcel of land, you say okay, you went to the location an you were satisfied and so we drew the
contract of sale. Problem is in the deed of sale executed there is no technical description of the property. Can I now
refuse to deliver physical possession of the property because the sale was invalid for lack of technical description?
Does it affect the validity of the contract?
- the court said no. absence does not affect the validity of the contract for as long as parties have determined
the object of the contract. Have we determined? Yes! Kabalo nta una imo gi baligya ug ako gi palit. Absence of
technical description does not affect the validity of the contract. It might give you problem later on the
transferring of title but does not affect validity.

Form however is required for enforceability of the contract. But enforceability is not the same as validity. Because
here you are talking of a valid contract even though it may not be enforceable especially if covered over the statute of
frauds. Ex. Sale of real property. must be in writing to be enforceable.
- but if you already paid a peso. Does not anymore fall under the statute of frauds because it ceases to be an
executory contract and therefore not covered under the statute of frauds.
- Also if this pertains to a contract of sale of land through an agent, the authority of the must be in writing.

PERFECTION

When is the contract again perfected?


- at the moment agreement between parties to deliver a determinate thing for a payment of a price in a certain
manner.
- Because this is a consensual contract again there is no performance required just like in
CORONEL vs CA.
- The evidence here of the contract of sale receipt of downpayment only.
- Although in many cases the court said this evidence of the contract then this is indication rather
a absence of a formal deed of sale then it is a contract to sell not a contract of sale but in this case the court
said this is a contract of sale although a CONDITIONAL CONTRACT OF SALE. Thats why the court said here
that the sibings can no longer sale the property to another buyer. Because there was already a perfected
contract between them an patricia altaraz.

MANILA MINING vs TAN


- court said invoices are not necessary for the perfection of the contract for as long as the seller has accepted
the purchase order and pursuant to the purchase order they deliver the goods to the buyer and there was no
denial here that the buyer received the goods but because the buyer refused to receive the price it made this
fantastic defense of absence or lack of perfection of the contract because no invoices represented by the seller
- court said the purchase order constituted accepted offers when done supply of direct materials to MMC. Hence
MMC cannot evade its obligation on lack of consent on the perfected contract of sale, the invoices merely
furnished the details of the sale and such they are not essential to the perfection of the sale.

Just like the NGA case:


-PBPA here refused to pay the farmers for the tobacco delivered to the plant because while nag pila pa sa
plant ang mga truck na sunog ang plant burning the tobacco leaves inside the compound and PBPA said there was no
perfected contract because they did not accepted the tobacco yet.
- the court said why would you say that you did not accept the tobacco yet when you sent your field men to the farm,
they graded the tobacco they approved the shipment of the tobacco they chose which drying plant the tobacco will be
brought for drying and you say no perfected contract? Naunsa ka.
- where the facts and records show that PBPA field man certified the weight and grain of the tobacco that shipments
were thereafter processed by its agents, that clearance had been given after requirements have been met. It is futile
to deny that the contract has been perfected.

So where is the contract deemed perfected?


- generally: wherever the meeting of the minds took place
- exception: if place of the offer and acceptance is different then place where the offer was made.
- For purposes of where to file a case or venue of the case for breach of the contract.

Who bears the expenses in the execution and of the document and registration?
- if no agreement: seller who bears the expenses, execution and registration of the sale and also placing the
goods in a deliverable state.
- This causes the disagreement of parties, so when you make a contract please state who bears the expenses.

RULE IN SPECIAL SALES:

Auction Sales
- If there are several items sold in an auction sale, each group of items are called a lot.
- So each lot shall be subject to a different contract of sale. So sale we say is a consensual contract, there is no
problem if there are only two parties. But in an auction sale there are several buyers and the seller might not
be even the one conducting the auction, so how do you know that it is perfected and now the seller is obliged
to deliver and the highest bidder is obliged to pay the price?
o Upon the fall of the hammer or any customary manner.
- after the fall of the hammer the contract is perfected, none of the parties can change the contract. The seller
can no longer retract the goods or sale and the buyer cannot refuse to pay the price because the time the
hammer has fallen or any customary manner the sale is perfected or respective obligations of the party arises.
No more changes in the terms of the contract.

DIZON vs DIZON

- where during the execution sale the highest bid was for more than 100k. so bidding was closed the judgement
creditor won. 30 min after the lawyer went to the sheriff we are changing our bid to 1M to cover the entire
amount of the judgment credit. So the sheriff prepared the supplemental papers then asked the judgement
debtor to sign the new document kay good news daw the creditor is paying the entire utang I dont need to
levy anything anymore from you to satisfy the debt. Judgement debtor said NO WAY. Was he justified in doing
so?
o Yes. Because once the bidding the close you cannot change the terms of the contract or sale. This was
changed after the bidding was closed.
o Considering the auction sale had already been perfected, the supplemental sale of a
higher consideration of only one party should no longer be validly executed. This means
that I both consents then no problem.
o What would the reason be that the judgment debtor refused?
Because of the right of redemption and if it sold at a lower price then it would be easier for
him to redeem after a year.

Can the seller bid as a general rule as a matter of right?


- no he can only bid if the right is EXPRESSLY RESERVED

what if he did not reserve the right but participated in the bid through a dummy?
- highest bidder will consider the sale as fraudulent VOIDABLE, the consent was vitiated because the price here
was rigged.

If the seller cannot participate in the auction sale unless he EXPRESSLY reserves the right, can he reject any of all
bids as a matter of right?
- yes. Unless the auction is to be announced without reserve the seller may reject any bids BEFORE the fall of
the hammer.

What do you mean when the law says unless the auction be announced without reserve?
- Regardless of the amount the bid he cannot reject the bid.
- Example I sell laptop in a bid. Nya sabot mo tanan na 100 rajud ang highest and I announce na without
reserve and auction. If the highest bid is 100, I am compelled to deliver it to you regardless of the price is
grossly inadequate because I announced that the bid is without reserve. I have to go through with the auction
sale no matter what the price is.

LEOQUINCO vs POSTAL SAVINGs

- postal announced an auction sale for a land. Here comes leo to make a bid. In the advertisement postal
expressly reserves it right to reject any and all bids. Redundant na kayo kay it is a right granted automatically
to the seller but still announced. Leo made a bid and claimed to be the highest bidder but was reject by the
BOD of the bank and he was given a notice of the rejection but he insisted that a deed of sale be made in his
name because he was the highest bidder. Is his correct?
- Court said No. he is bound by the terms an condition of terms of the seller. The owner of the property of the
auction has the right to prescribe the manner, conditions and terms of the sale and where this is reasonable
and made known to the buyer they binding upon him and he cannot acquire a title in a position to them and
against the consent of the owner.
- This provision does not apply to execution sale and foreclosure sales because these are not voluntary sales. In
these sales the seller who is the creditor can participate in the bid. The seller in this case of sales are NOT the
owner they are creditors so the above rule does not apply to execution and foreclosure sales.

SALE BY SAMPLE OR DESCRIPTION

If it is sale by sample the bulk of the goods must correspond to the sample.
If it is sale by description, the thing delivered must correspond to the description.
If it is sale by sample & description then the bulk must not only correspond to the sample but must also correspond to
the description.

I order from you a certain table, an aka specs kay 8ft ka taas. Naa nah sa ato contract. Then pag deliver nimu di diay
ma igo sa ako office so I cannot use it. Can I refuse to accept the table?
- no. I cannot because this is sale by description what you delivered is exactly according to the description in
our contract. This is what happened in PACIFIC COMMERCIAL vs ERMITA.

PACIFIC COMMERCIAL vs ERMITA

- ermita ordered a ref. machine gi specify na niya ang specs. Pacific delivered to ermita what rely was specified
in their contract, but ermita could not use it for the purpose intended that why ermita refused to pay the
balance of the purchase price in fact he demanded the cancellation of the contract.
- The Court said you cant do that. The mere fact that you cannot use the thing for the purpose intended does
not cause the cancellation of the contract for as long as the thing corresponds to the description.
RECTO LAW

- refers remedies of the seller in case of sale of personal properties in installment


- its counterpart as to sale of real properties in installment is the MACEDA LAW
- RECTO LAW is the older law civil code C. Recto dili si R. Recto
- MACEDA LAW is the latter law RA 6552 former sen. Maceda

Remedies
1. specific performance
2. if the buyer fails to pay atleast 2 installments the seller can sue for the rescission of the contract
3. is to foreclose the mortgage constituted on the thing that was sold if the buyer fails to pay atleast 2
installments if foreclosure is resorted to by the seller, seller can no longer recover the deficiency.
a. This is an exception to the Chattel Mortgage Law where the mortgagee can recover for deficiency.

what is the danger that the law seeks to avoid?


Because the seller forecloses the mortgage, an it may be that he is the only bidder, it
can be for just for 1 peso and recover the deficiency from the buyer.
Pwede nya ma rig ang prize

If there is a stipulation in the contract that should the buyer fail to pay 2 installments and the seller opts for the
rescission of the contract then the seller has no obligation to return what the buyer pays. Meaning he gets to retain
possession of the thing and retain the installment paid by the buyer. is that a valid agreement?
- The law says yes it is valid. Unless it is unconscionable which is a question of fact.

What if the parties agree that if the seller decides to foreclose the mortgage the buyer agrees to pay whatever is the
deficiency after the proceeds of the foreclosure sale are applied to the unpaid obligation. Can the buyer waive the
right granted to him under the law?
- no. because the stipulation is void.

MACONDRAY vs Santos

- why the court allowed recovery of the deficiency?


o Because this is not a sale of personal property in installments, there is no mention of a sale. What
was mention was that the principal obligation was that indicated in the promissory note and the
promissory note was secured by a chattel mortgage. And the condition in the chattel mortgage that if
the car damaged then the creditor has the right to foreclose the mortgage and apply the proceeds to
the payment of the obligation under the promissory note, and techinically the car was totally wrecked
thats why the creditor foreclosed the mortgage and sold the car for only 50 pesos and the debt was
for ambot pila, so creditor sued for the deficiency. Debtor said im invoking RECTO LAW!
Court said No no no. you cannot invoke recto law because this does not involve a sale of
personal property in installments.

LEVY vs GERVACIO

- this was a sale of car, the conditions were the mode of payment was dp and the balance be paid on or before
a certain date. A chattel mortgage was instituted on the car, when the period arrived and the date arrived,
there was no payment of the price after demand, so seller foreclose the mortgage, but the proceeds of the
sale was not sufficient to pay the unpaid price so the seller sued for recovery of the deficiency. Buyer said im
invoking the RECTO LAW!
o Court said you cannot. While this is a sale of personal property, this however is a straight sale not an
installment sale.

DELA CRUZ vs ASIAN CONSUMER

- cruz is a sale of personal property on installments cruz defaulted in payment of more than two installments.
So Asian which was not the seller but assignee initiated proceedings to foreclose the mortgage and since this
is personal property the mortgagee has to take possession first of the movable before it can foreclose the
mortgage to precede the mortgage. While the court issued a writ of replevin, cruz ignored the writ and refused
to surrender the vehicle. The truck was surrendered after one month nyah gi scavenge gi cannibalize nah ug
maayo. So Asian desisted with the foreclosre and sued cruz for specific performance. Naka analyze si Asian
na kung mu padayon sya sa 3rd na remedy gamay ra syag makuha. So he opted for specific performance.
Cruz said there is no question you have the right to foreclose what we are questioning is your act of changing
the rules of the game in the middle of the game.
- Well court said you can change because there timely desistance in the part of cruz.
o Maybe the court allowed specific performance because of the act of the buyers of
resisting the writ of replevin and surrendering the vehicle only after a month. There was
initial resistance on the buyer to surrender the vehicle to the sheriff. (Opinion ni judge.)

MAGNA vs COLARINA

- another sale of vehicle on installment and secured by a mortgage. Here when colorina was sued for recovery
of the car she immediately surrendered the vehicle, but the problem here is that magna sued for foreclosure
and at the same time it was asking for the balance of the purchase price.
- The court said you cannot do that you have consistently pursued foreclosure of the mortgage and now your
asking for specific performance, you CANNOT ASK FOR BOTH REMEDIES you can avail only OF ONE REMEDY.
- So proceed with the foreclosure and no recovery of the unpaid price.

MACEDA LAW

What is Maceda Law?


- maceda law is the law that governs sale of real property in installments

Does the maceda law cover contract to sell or installment only? Does the law cover all sales of realty provided they are payable in
installents?

- The rule is if the buyer has failed to pay atleast 2 yrs of installments.
- Whether it is atleast 2 yrs or less than 2 yrs the seller cannot automatically rescind the contract
- Then we ask what if it is a contract to sell? We discussed previously that if it is a contract to sell there is no requirement of
rescission of the contract because failure of the buyer to comply with the positive suspensive condition of payment of the
purchase price results to the obligation of the seller to convey title from the acquiring an obligatory force.
- And yet under the maceda law it is provided that the seller cannot consider the contract rescinded. How do you reconcile the
inconsistency here? Because we said earlier that the maceda law does not only cover contracts of sale but also contracts to
sell. Here there is a need to rescind the contract but in the civil code there is no need to rescind the contract because there is
no contract in the first place. Is this an exemption to the general provisions of the civil code? What is the rule because this law
is for the protection of the buyer?
If the buyer has paid atleast 2 yrs of installment and they default in subsequent installments he is entitled to a
grace period of 1 month for every year of payments.
o Ex. Pays for 4 yrs but falls in the subsequent, he is entitled to a grace period of 4 months.
If he does not pay the UNPAID installments not pay the entire balance ONLY THE DEFAULTED PAYMENTS
without interest during the grace period the seller can now rescind. It is not mandatory to rescind but the
seller can NOW opt to do so.
Is it enough for the seller to notify the buyer that he is rescinding the contract?
o NO. there are 2 mandatory requirements. There must be:
NOTARIAL NOTICE OF RESCISSION or NOTARIAL DEMAND FOR RECISSION
(can be a form of action in court for the recission*), AND
FULL PAYMENT OF THE CASH SURRENDER VALUE (50% of all the amount paid
by the buyer)
If paid MORE THAN 5yrs of installment, the buyer is entitled to an
additional 5% on top of the 50 for every year he has paid BUT IN NO
CASE MORE THAN 90% of the total payments made.
If the buyer has paid LESS THAN 2 YRS he is entitled to a 60 days grace period within which to pay the UNPAID
INSTALLMENTS.
o If he fails to pay within the grace period the seller again opt to RESCIND the contract again with the same
req of.
NOTARIAL NOTICE OF RESCISSION or NOTARIAL DEMAND FOR RECISSION, AND
FULL PAYMENT OF THE CASH SURRENDER VALUE (50% of all the amount paid by the buyer)

*In the notarial notice of rescission you can do this by filing an ACTION FOR RECISSION IN COURT not an action for
ejectment which was done in one of the case. The court said that NOTICE OF EJECTMENT is not the same as and is not
sufficient to be a NOTARIAL NOTICE OF RESCISSION. Thats why in this case the court said there was no valid rescission and
therefore the buyer was allowed to pay the unpaid balance of the contract even if the buyer failed to pay for 10 yrs.

- if the buyer here has failed to pay less than 2 yrs worth of installments, is he entitled to the return of the cash surrender value
of all payments made?
o NO. he is only entitled if it is at least 2 yrs of installment. Less than 2 yrs no right.
- the issue always brought to the court if whether or not there was a valid rescission. Because what happens is
that while there is a notice of rescission sometimes it is a mere letter sent to the buyer but SADLY this is not
valid it must be a notarial notice or demand for rescission.
- There are instances that the seller may send a notarial notice of rescission but pay the cash surrender value.
So again the court renders the rescission as invalid and therefore the buyer is allowed to pay the unpaid installments.
- LET us look at a scenario where the buyer has failed to pay within the grace period, and so the seller opts to rescind the
contract so the seller sends a notarial notice of rescission to the buyer, which is then received. Is the contract now considered
rescinded?
o It is not enough that the demand was received by the buyer, the buyer must also receive the cash surrender value.
o But when does rescission really take effect?
After 30 days from rescission
o But remember the buyer was already afforded a grace period. And yet he failed to pay within the grace period,
and yet the law says that rescission takes place after 30 days. So what will happen for the meantime between
the lapse of the grace period and before the lapse of the 30 day period. Can the buyer still pay the instalment?
Are you telling me that the period is extended to include the 30 day period from rescind with the notarial
demand?
o The court said YES. If you think about it the grace period is not a period granted to the buyer by law, it
does not extend to 30 days only. Because from the lapse of the grace period the seller will not
automatically send the notarial notice of rescission. So much is now if the seller sends notarial by mail it
takes forever.
o QUESTION: zzzzzzzzz
o My opinion that it is from demand, because section 3 is silent, but sec. 4 states from the time
installment is due, but in the CASE OF RAMOS the buyer failed to pay the installments for more than
10 yrs or rather the last installment payment was 10 yrs ago, the court said because there was no
demand, it is the trial court who should fix the 60 grace period.
o In another case, where failed to pay less than 2 yrs worth of installment although there was no
interpretation with respect to section 4 it was adapting an interpretation that the 60 day period should
run the moment the fell due. BUT it did not categorically state that the grace period started to run
when the installment fell due.
o BUT MY OPINION IS THAT TO BE CONSISTENT because the law is silent we will go to the general
provision of obligations and contracts where YOU ARE DEEMED DEFAULTED IN THE TIME OF DEMAND.
o But this has never an issue in the SC. What is always an issue is whether is valid rescission, either there
was no grant of the grace period or no return of the cash surrender value or demand for rescission was
defective.
o In another case, where the court mentioned that the seller afforded the buyer with more than grace
period because it mentioned several occasions the seller sent demand letters giving the buyer 15 days
grace period and if you add up all it would be more than the grace period provided under the law, so
here the court was counting from the time of demand and not the time when payments stopped.
There is really no clear rule.
o If this is ask in the exam WELL DEPENDS ON YOUR ANSWER.
o IN one case, in was not even a sale of real property, it was a compromise agreement in a civil case, the
agreement was that the defendant was supposed to pay for the property in installments. Which was
approved by the court, pero dili jud ni sale it was a compromise. Failed to pay once man. What the
plaintiff did was file an action for execution. Which was in the provisions of the compromise agreement
that in case of failure of payment kay execution. The defaulting party then invoked the maceda law.
NOT SURE.
o In the ACTIVE REALTY CASE:
The buyer here paid substantial amounts of installment almost to finish the entire obligation
when she defaulted. There was no demand, but after several of months she offered to pay the
balance, it was no longer accepted by active because for him it was already canceled and he
has already sold to another buyer because there contract was a contract to sell.
But ordinarily if it is a contract to sell the seller is entitled to sell the property because ownership is
still reserved with the seller. In this case there was no valid of cancellation of the contract here for
failure to cancel the contract in accordance with the procedure provided in the maceda law so the
sale remains valid and subsisting because there was no proper cancellation of the contract.
Ordinarily the buyer would be allowed to pay the unpaid installments but the court said its useless
to require the buyer to pay the balance of the purchase price because the property was already
sold to the buyer. What was the solution?
Since you cannot deliver the property, deliver current value of the property that you
have sold in the tune of 875,000.00
PD 957

In relation to the maceda law you have PD 957:

- that if an owner of a parcel of land wishes to convert the land into a subdivision project, he shall submit a subdivision plan
with the approval and registration of and with the HOUSING AND LAND USE REGULATORY BOARD. Now if you register this
with the HLURB can you now sell?
o NO. You have first to obtain a license. In one case the issue as to whether the lack of license to sell on the part of
the developer reached the SC. Because HLURB ruled that the sale was void for having lack of license to sell on the
part of the developer. The court said, this does NOT AFFECT the validity of the contract. The mere fact that the
seller is not licensed to sell the subdivision lots does not affect the intrinsic value of the contract but it may subject
the seller to administrative or criminal liability. AGAIN, EMPHASIZE that it DOES NOT AFFECT THE VALIDITY OF THE
SALE.

- another thing to remember in this PD is the mortgage of either the entire subdivision project or particular lots or the
subdivided lots in the project. Before the owner can constitute a mortgage over the subdivision lots (FAR EAST BANK CASE) it
must first obtain the approval of the HLURB AND it must notify the buyer of the fact that property purchased by
the buyer is mortgaged so the buyer has the option to directly pay to the creditor the amount of the loan corresponding to
the subdivision lot that he is purchasing.
- If the buyer opts to pay directly to the creditor and he has fully paid for the subdivision lot, then he is entitled to the release
of the property that he is purchasing. This is exception to the mortgage law, which states that a mortgage is one whole
indivisible contract therefore can no be partial release. PD 957 is an exception because if the buyer has fully paid for the
property he is buying he is entitled to the release of the part he paid for or partial release.
- What is the effect if the seller does not notify the buyer of the mortgage?
o The buyer is entitled to the nullification of the mortgage. Like in the case of FAR EAST BANK what the seller
mortgage was the entire property, si marquez kay ni aplit ug town house na 52.5 sq mters. Na shock ra sya na ni
slacken man ang construction project and in fact diay the site was mortgaged and was already foreclosed by the
bank.
o So he sued for the nullity of the entire mortgage. The court said while we can grant you for the nullification of the
entire mortgage but it would only be with respect to the portion you were buying. In so far as you are concern we
can nullify the mortgage on the property of your concern or the property you are filing.

- how do sellers go around this prohibition?


o Is they do not mortgage the property but instead assign the receivables. So example gi subdivide na ang loan, obtain
sila ug loan, dili sila mu execute og mortgage, execute a deed of assignment of their receivables over the land, we
assign our rights to collect the receivables from the buyers in your favor. Pero ang bangko dipud satisfied ana.
o In an actual case, ang bangko ana cge we will accept the assignment but deliver to us the title, so kung di mu bayad
sila dili I release sa bangko ang title.
o I had a client before he already fully paid for it, so he wrote the developer to immediately execute the deed of
absolute sale and offered to remit the amount for doc. Stamp tax. But the developer sAid dont pay first kay gi gunit
pa sa bank as leverage ang title.
o What was the rulling of the hlrub?
This is tantamount to mortgage. Security japon to. We won until the CA. now it is pending in the SC. I now
we will be upheld in the SC but the problem is we cannot collect because we were demanding for the
installments made, we cannot execute however because the corporation is in a state of suspension of
payments under rehabilitation.
But the consistent ruling is that this is circumvention to the PD.

- another salient part of this law is that if the developer fails to develop the project in the plan according to the period stated in
the plan the buyer is entitled to suspend payment of installments. But the buyer cannot just do this unilaterally, he has still to
notify the seller because it might be that the reason was that he really defaulted on the payment and will now fall under the
maceda law. So if you want to suspend payment because of the failure of the developer to develop the subdivision it must
send notice to the seller or opt for the return of your payments. This is what happened in the TAMAYO CASE.
PARTIES & THEIR CONSENT

CAPACITY TO CONTRACT

- because it is a contract then both parties has to have the capacity to contract and to give consent.
- What is the seller is incapacitated to sell? Does that affect the validity of the contract? We know that the contract is defective
but is it valid?
o Valid. But it may affect performance because you cannot compel the seller to comply. You cannot compel and
incapacitated person to comply.
o But there are certain situtations where the parties or a party is incapacitated or disqualified. Example a spouse
cannot buy for the other spouse, whether they are govern by conjugal partnership of gains or absolute. UNLESS
THEY ARE GOVERN by COMPLETE SEPARATION of property regime.

Between husband and wife, they cannot purchase property to each other because its like taking money from one pocket and
putting it in another pocket.
o IN CASE OF UY SIU PIN
The court said the sale of the husband to the wife was invalid, the property here was sold to a non-Filipino,
but what we are interested here is that the sale between the spouse was void.
The prohibition against spouses selling properties extends to common-law relationship or couple living as
husband and wife without the benefit of marriage. It extends to a husband who made it appear he was
selling the property to his mistress.
The court said that the prohibition between spouses of purchasing property and selling property to each
other applies too to this kind of relationship.
THE PROHIBITION APPLY TO A COUPLE LIVING AS HUSBAND AND WIFE WITHOUT BENEFIT OF
MARRIAGE OTHERWISE THE CONDITION OF THOSE INCURRED GUILT WOULD TURN OUT TO BE BETTER
THAN THOSE IN LEGAL UNION
who can assail the transaction as void?
o Not just anybody. But the heirs of either the spouses who are prejudiced, prior creditors and the state when it comes
to taxable transactions.
o Who else are prohibited?
Persons in trust relationship such as guardians
A guardian cannot purchase the property of the ward.
o PHILIPPINE TRUST CO. VS ROLDAN. The guardian directly purchased the property from
the ward, the guardian here was the stepmother, the information in the court is that
several parcels of land owned by the ward. What she did was sell it to here brother. Then
after a few days the brother in law sold it back to her at a higher price. The court said this
was really a clean transaction. Why did she purchase it for 15000 and then sell it for
14000? But the court still said that she violated the clear prohibition under the law that
the guardian cannot acquire the property of the ward.
o Because the court concluded here that she was really buying the property for herself. The
court did not buy the argument that she bought the property so that the ward can
repurchase it to preserve his interest.

The condition applies to AGENTS also. The agent cannot acquire the property of the principal.
PELAYO CASE
o The principal themselves signed the deed of conveyance in favor of the agent. The wife
claimed that she did not give her consent because she signed only as witness. The court
said if you sign there that means that you consented to the sale. Unless, there is really no
signature, you signed as the witness and you are the spouse of the seller. You must have
given your consent because you were aware of the transaction.

PUBLIC OFFICERS cannot acquire property that belongs to the state and this extends to the spouses of the
public officers.
MAHARLIKA CASE
o Tagle here was an officer of the GSIS, then the property was being auction off, and tagle
was disqualified. So it was the wife who purchased the property. The court said this is
void.
o the point is that he is a public officer and his wife acts for and in his name in any
transaction with the GSIS. If he is allowed to participate in the public bidding of properties
foreclosed or confiscated by the GSIS, there will always be the suspicion among other
bidders and the general public that the insider official had access to information and
connections with his fellow GSIS officials as to allow him to eventually acquire the
property.
o It is precisely the need to forestall such suspicions and to restore
confidence in the public service that the Civil Code now declares such
transactions to be void from the beginning and not merely voidable

Sale to a LAWYER, careful mo, even if you are really entitled to the property as your attorneys fee as
of in the case of GURREA vs SUPLICO.
o Suplico acted as counsel for some of the heirs, the agreement was that he was entitled to as
his attorneys fee certain shares of property in the estate. After the court issued the decree of
partition, before the court declared that the case be terminated suplico was able to obtain
conveyance from the client in payment of his services. This is questioned by the survivor heirs
of the client.
o The court said this is prohibited because the case was still pending.

o Having been established that the subject property was still the object of litigation at the time
the subject deed of Transfer of Rights and Interest was executed, the assignment of rights
and interest over the subject property in favor of respondent is null and void for being
violation of the provisions of Article 1491 of the Civil Code which expressly prohibits lawyers
from acquiring property or rights which may be the object of any litigation in which they may
take part by virtue of their profession.

o Article 1409 of the same Code provides, among others, that contracts, which are expressly
prohibited or declared void by law, are considered inexistent and void from the beginning.

o Anent the second issue, the Court has already held that the said property is still the object of
litigation at the time the subject Manifestation and Transfer of Rights and Interest were
executed and, thus, may not be acquired by respondent pursuant to the provisions of Article
1491 of the Civil Code.

But if the lawyer merely demands delivery of the property during the pendency of the
case then it does not cover under the prohibition.
The condition applies only if the sale or assignment of the property dates during the
pendency of the litigation involving the clients property, MERE DEMAND FOR THE
DELIVERY OF THE LITIGATED PROPERTY not the transfer of ownership, hence the
not a prohibited transaction of 1491.
PROHIBITION OF SALE TO THE ATTORNEY DURING PENDENCY of the case extends
to mortgages not just absolute conveyances, mortgages executed during the
pendency of the case before termination of the proceeding.
During the pendency of the case the mortgage was executed in favor of the lawyer to
secure the payment of his attorneys fee ( NILDA vs RTC )

Now who are incapacitated to sell?

- Homesteaders under CA 141 are prohibited to sell within a five-year period. But in one case, sale prior to issuance of the
patent during the 5 yr period from the issuance of the patent the grantee can actually sell.

Now if real properties are sold to aliens, and we know that aliens are incapacitated or disqualified to acquire private lands in the
Philippines and the aliens subsequently sold the property to a bona fide Filipino citizen. The defect is cure. Even if from the Filipino to
the alien is void, and we know that no rights can be acquired under a void contract, if the property is subsequently sold to a qualified
Filipino the sale to the Filipino buyer is valid. Even if it stems from a void contract.

LOSS

The problem with Philippine law, is that we take it from several sources, kung aha nindot kuhaon nto.

Under ROMAN LAW principle, from the moment of perfection of the contract of sale the risk is borne by the buyer but ownership is
transferred to the buyer upon delivery.

o So RISK transferred upon PERFECTION


OWNERSHIP upon DELIVERY

Under COMMON LAW, res perit domino, the owner bears the risk of loss, so who ever is the owner bears the loss, but ownership is
transferred upon perfection of the contract.

Under CIVIL CODE, we follow res perit domino owner bears the risk of loss (COMMON), BUT ownership is transferred from the
moment of delivery (ROMAN).
Which brings us to the matter of conflict of laws, what are the rules.

BEFORE AT THE TIME AFTER PERFECTION BEFORE DELIVERY AFTER


PERFECTION OF (dinhi ntah) DELIVERY
PERFECTION
Seller bears Total Loss If the obligation consist of the delivery of a determinate thing the SELLER Buyer
the loss the contract shall bear the loss if he was in: bears the
RES PERIT is inoperative 1. delay loss
DOMINO at the time of 2. assumes the loss - Res perit
the perfection 3. promises the same thing to two or more persons domino
of the (no problem who ever is at fault is liable)
contract, void
because no what if fortuitous event? (mao nani ang poblema)
subject matter
there are two theories:
Partial Loss
option is I. look at 1262: obligation which consist in the delivery of a
with the buyer determinate thing shall be extinguished if it should be lost or
whether to destroyed without the fault of the debtor(seller) and before he has
proceed with incurred in delay so based it here it would be THE BUYER WHO
the contract BEARS the risk of loss. So in case of loss due to Fortuitous event the
seller obligation to deliver but the buyer is still obliged to pay the
Substantial price. Interpretation of PARAS and PADILLA. Consistent with
deterioratio OBLICON.
n o BUT My interpretation is that maybe this is a unilateral
contract; this would be unfair to the buyer. Paying the
- equivalent to money without ever acquiring ownership over the property.
LOSS, TOTAL o TOLENTINO says that if it is due to fortuitous event,
LOSS. obligation of the seller is extinguished likewise the
obligation too of the buyer should be extinguished.
o Sale is a bilateral contract, if the seller cannot perform then
it is unjust to require the buyer to perform.
o This second is more equitable.
II. The more equitable rule is that of TOLENTINO that RES PERIT
DOMINO, because before delivery after perfection, the seller is the
owner of the thing. Before the ownership the risk is borne by the
SELLER.
o But there are instances that property is already transferred to the
buyer although ownership is retained by the seller ONLY FOR THE
PURPOSE of insuring the payment of the purchase price. But the
property is already delivered to the buyer. Again the purpose of
RESERVING OWNERSHIP is to secure payment of the purchase
price. Now if the thing is lost, the court has ruled that the loss is
borne by the buyer. (GAISANO CASE)

TYPE of EXAM:

1. MCQ
2. ESSAY
3. OPINION
(only modified essay daw, only that you have to write it in a formal way)
write a letter to like MR. X.
AYAW JUD MU UG SUWAT UG HI MS X!, HI Ms. BEAUTIFUL!, you know my dear, I am really grateful that you have chosen
our prestigious law firm

LOOK AT THE BOOK OF JUSTICE ALBANO IN THE LIBRARY FOR EXAMPLE OF LEGAL OPINION

- THE END OF PRE-MID TRANSCRIPT; GOD BLESS-