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Contract to sell
exclusive right and privilege to purchase an
object.
a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of
the subject property despite delivery thereof to
1. Upon fulfillment of the 1. Upon fulfillment of the a. Existing goods goods owned or possessed by the
suspensive condition, the suspensive condition, which is seller.
contract of sale is thereby the full payment of the purchase b. Future goods goods to be manufactured, raised
perfected, such that if price, ownership will not or acquired by the seller after the perfection of
there had been previous automatically transfer to the
the contract.
delivery of the subject buyer although the property may
property to the buyer, have been previously delivered NOTES:
ownership thereto to him. The prospective seller A sale of future goods is valid only as an
automatically transfers still has to convey title to the executory contract to be fulfilled by the
to the buyer by prospective buyer by entering acquisition and delivery of goods specified.
operation of law without into a contract of absolute sale. While there can be sale of future property, there
any further act by the
can generally be no donation of future property
seller.
As to effect of sale of the subject property to 3rd persons
(Article 751 Civil Code)
Future inheritance cannot be sold.
1. Constructive /actual 1. Third person buying the A contract of sale or purchase of goods to be
knowledge on the part of property despite fulfilment of delivered at a future time, if entered into
the 2nd buyer of the defect the suspensive condition cannot without the intention of having any goods pass
in the sellers title renders be deemed a buyer in bad faith from one party to another, but with an
him not a registrant in and prospective buyer cannot understanding that at the appointed time, the
good faith. Such second seek the relief of reconveyance purchaser is merely to receive or pay the
buyer cannot defeat the of property. Exception: If There difference between the contract and the market
first buyers title. Ratio: was no previous sale of the
prices, is illegal. Such contract falls under the
Fulfilment of the property.
suspensive conditions definition of futures in which the parties
affects the sellers title to merely gamble on the rise or fall in prices and is
the property and previous declared null and void by law. (Art. 2018, NCC)
delivery of the property (Onapal Phil. Commodities, Inc. vs. CA [1993])
automatically transfers
ownership/title to the Instances when the Civil Code recognizes sale
buyer. of things not actually or already owned by the
seller at the time of the sale:
OBJECTS OF SALE 1. Sale of a thing having potential existence (Article
Requisites: 1461)
1. THINGS: 2. Sale of future goods (Article 1462)
a) determinate or determinable (Arts. 1458, 3. Contract for the delivery at a certain price of an
1460) article which the vendor in the ordinary course of
b) lawful (Arts 1347, 1409 [1,4] the business manufactures or procures for the
c) should not be impossible (Art. 1348) e.g. must general market, whether the same is on hand at
be within the commerce of man the time or not (Article 1467)
2. RIGHTS must be transmissible
Exceptions: Sale Agency to sell
-future inheritance 1. Buyer receives the goods 1. Agent receives the goods as
- service as owner goods of the principal who
retains his ownership over
Emptio rei speratae Emptio spei them
1. Sale of an expected 1. Sale of a mere hope or
2. Buyer pays the price 2. Agent delivers the price
thing expectancy that the thing will
come to existence; Sale of the which in turn he got from his
hope itself buyer
2. Sale is subject to the 2. Sale produces effect even if 3. Buyer, as a general rule, 3. Agent can return the goods
condition that the thing the thing does not come into cannot return the object in case he is unable to sell the
will exist; if it does not, existence, unless it is a vain sold same to a third person
there is no contract hope
4. Seller warrants the thing 4. Agent makes no warranty
sold for which he assumes personal
3. The uncertainty is with 3. The uncertainty is with regard liability as long as he acts
regard to the quantity and to the existence of the thing within his authority and in the
quality of the thing and not name of the seller
the existence of the thing
4. Object is a future thing 4. Object is a present thing
which is the hope or expectancy 5. Buyer can deal with the 5. Agent in dealing with the
thing sold as he pleases thing received, must act and is
NOTE: In case of doubt the presumption is in favor of
being the owner bound according to the
emptio rei speratae which is more in keeping with the instructions of the principal
commutative character of the contract
Goods which may be Object of Sale
part of the seller is the the extinguishment of the debt;
Contract for Piece of price; on the part of the on the part of the creditor, it is
Sale buyer is the acquisition of the acquisition of the object
Work
the object offered in lieu of the original
1. The thing transferred is 1. The thing transferred is one credit
one not in existence and which would have existed and
which never would have would have been the subject 4. Greater freedom in 4. Less Freedom in determining
existed but for the order of of sale to some other person, determining the price the price
the party desiring to even if the order had not
acquire it been given 5. Buyer still has to pay 5. The payment is received by
2. The services dominate 2. The primary objective of the price the debtor before the
the contract even though the contract is a sale of the contract is perfected.
there is a sale of goods manufactured item; it is a
involved sale of goods even though the
PRICE
item is manufactured by labor
furnished by the seller and The sum stipulated as the equivalent of the thing
upon previous order of the sold and also every incident taken into
customer consideration for the fixing of the price, put to
3. Not within the Statute of 3. Within the Statute of the debit of the vendee and agreed to by him.
Frauds Frauds
Requisites:
Rules to determine if the contract is one of Sale or 1. Certainty or ascertainable at the time of
Piece of work: perfection
a. If ordered in the ordinary course of business 2. Real, not fictitious
sale 3. In some cases, must not be grossly inferior to
b. If manufactured specially for the customer and the value of the thing sold.
upon his special order, and not for the market 4. Paid in money or its equivalent
piece of work
Certainty
SCHOOLS OF THOUGHT: It is not necessary that the certainty of the price
a) Massachusetts rule: If specifically done at the be actual or determined at the time of the
order of another, this is a contract for a piece execution of the contract. The price is certain in
of work. (Philippine application) the following cases:
b) New York rule: If thing already exists-SALE; if 1. If the parties have fixed or agreed upon a
not-WORK definite amount;
c) English rule: If material is more valuable- NOTE: The fixing of the price can never be left
SALE; if skill is more valuable-WORK to the discretion of one of the contracting
parties. However if the price fixed by one of the
BARTER parties is accepted by the other, the sale is
contract whereby one of the parties binds himself perfected.
to give one thing in consideration of the other's 2. If it be certain with reference to another
promise to give another thing. thing certain
NOTE: The only point difference between contract 3. If the determination of the price is left to the
of sale and barter is in the element which is present judgment of a specified person or persons
in sale but not in barter, namely: price certain in even before such determination
money or its equivalent 4. In the cases provided under Art. 1472 NCC
NOTE: If the consideration is partly in money and Effect when the price is fixed by the third person
partly in another thing, determine: designated:
a. The manifest intention of the parties GENERAL RULE: Price fixed by a third person
b. If the intent is not clear, apply the following designated by the parties is binding upon them.
rules: EXCEPTIONS:
1. If the thing is more valuable than money 1. When the third person acts in bad faith or by
barter mistake
2. If the money and the thing are of equal 2. When the third person disregards the specific
value sale instructions or the procedure marked out by
3. If the thing is less valuable than money the parties
sale
Effect when the price is not fixed by the third
Sale Dation in Payment person designated:
1. No pre-existing credit 1. Pre-existing credit 1. If the third person refuses or cannot fix the
2. Obligations are created 2. Obligations are extinguished price, the contract shall become ineffective,
3. Consideration on the 3. Consideration of the debtor is
unless the parties subsequently agree upon
the price PERFECTION OF SALE
2. If the third person is prevented from fixing GENERAL RULE: It is perfected at the moment there
the price by the fault of the seller or buyer, is meeting of the minds upon a determinate thing
the party not in fault may obtain redress (object), and a certain price (consideration), even if
against the party in fault neither is delivered. A choice between rescission and
fulfilment, with damages in either case)
Effect of Gross Inadequacy of Price:
1. Voluntary sales NOTE: Sale is a consensual contract; Hence, delivery
GENERAL RULE: Mere inadequacy of the price does and payment are not essential for its perfection
not affect validity of the sale. EXCEPTION: When the sale is subject to a
A valuable consideration, however small or suspensive condition by virtue of law or stipulation.
nominal, if given or stipulated in good faith is, in * The terms and conditions of payment are merely
the absence of fraud, sufficient.(Rodriguez vs. accidental, not essential elements of the contract of
CA, 207 SCRA 553) sale except where the partied themselves stipulate
Future inheritance cannot be sold. that in addition to the subject-matter and the price,
they are essential or material to the contract.
EXCEPTIONS:
a. Where low price indicates vice of consent, Requirements for perfection
sale may be annulled; or contract is a. When parties are face to face
presumed to be an equitable mortgage When an offer is accepted without conditions or
b. Where the price is so low as to be shocking qualifications
to conscience, sale may be set aside. NOTES:
A conditional acceptance is a counter-offer
2. Involuntary or Forced sales when negotiated thru phone it is as if it is
GENERAL RULE: Mere inadequacy of the price is not negotiated face to face
a sufficient ground for the cancellation of the sale if b. When contract is thru correspondence or thru
property is real. telegram
When the offeror receives or has knowledge of
the acceptance by the offeree
EXCEPTIONS: NOTE: If the buyer has already accepted but the
a. Where the price is so low as to be shocking to seller does not know yet of the acceptance, the
the moral conscience, judicial sale of seller may still withdraw
personal property will be set aside c. When a sale is subject to a suspensive
b. In the event of a resale, a better price can be condition
obtained From the moment the condition is fulfilled
* When can there be presumption as to Equitable Tender of payment is not necessary; offer to
Mortgage? redeem is enough.
1) Parties must have entered into a contract
denominated as a contract of sale PRE-EMPTION REDEMPTION
2) The intention of the parties was to secure an 1. arises before sale 1. arises after sale
existing debt by way of mortgage 2. no rescission because no 2. there can be rescission of
NOTE: In the cases referred to in Arts. 1602 and sale as yet exists the original sale
1604, the apparent vendor may ask for the 3. the action is directed 3. action is directed against
reformation of the instrument. against the prospective seller the buyer
Remedy of Reformation: To correct the instrument so
as to make it express the true intent of the parties. Instances of legal redemption:
A. Under the Civil Code (legal redemption):
Redemption Period 1. Sale of a co-owner of his share to a stranger
a. if there is an agreement: period agreed upon (Article 1620)
cannot exceed 10 years 2. When a credit or other incorporeal right in
b. if no agreement as to the period: 4 years from litigation is sold (Article 1634)
the date of the contract 3. Sale of an heir of his hereditary rights to a
c. the vendor who fails to repurchase the property stranger (Article 1088)
within the period agreed upon may, however, 4. Sale of adjacent rural lands not exceeding
exercise the right to repurchase within 30 days one hectare (Article 1621)
FROM the time final judgment was rendered in a 5. Sale of adjacent small urban lands bought
civil action on the basis that the contract was a merely for speculation (Article 1622)
true sale with right of repurchase B. Under special laws:
This refers to cases involving a transaction 1. An equity of redemption in cases of judicial
where one of the parties contests or denies foreclosures
that the true agreement is one of sale with 2. A right of redemption in cases of extra-
right to repurchase; not to cases where the judicial foreclosures
transaction is conclusively a pacto de retro 3. Redemption of homesteads
sale. Example: Where a buyer a retro 4. Redemption in tax sales
honestly believed that he entered merely into 5. Redemption by an agricultural tenant of land
an Equitable Mortgage, not a pacto de retro sold by the landowner
transaction, and because of such belief he
had not redeemed within the proper period.
NOTE: Tender of payment is sufficient to compel
redemption, but is not in itself a payment that ASSIGNMENT OF CREDIT
relieves the vendor from his liability to pay the a contract by which the owner of a credit
redemption price (Paez vs. Magno.) transfers to another his rights and actions against
a third person in consideration of a price certain
LEGAL REDEMPTION in money or its equivalent
The right to be subrogated, upon the same terms NOTE: Transfer of rights by assignment takes place
and conditions stipulated in the contract, in the
by the perfection of the contract of assignment
place of one who acquires a thing by (1) purchase
without the necessity of delivering the document
or (2) dation in payment, or (3) by any other
evidencing the credit.
transaction whereby ownership is transferred by
onerous title.
May be effected against movables or immovables.
this rule does not apply to negotiable 4. The right must be exercised by the debtor within
documents and documents of title which are 30 days from the date the assignee demands
governed by special laws. (judicially or extra-judicially) payment from him
Foreign Equity Participation: NOTE: All retail Trade enterprises under categories B
Foreign-owned partnerships, associations and and C in which foreign ownership exceeds 80% of
equity shall offer a minimum of 30% of their equity
corporations formed and organized under the
to the public through any stock exchange in the
laws of the Philippines may, upon registration
Philippines within 8 years from the start of the
with SEC and DTI, or in case of Foreign-owned
operations
single proprietorship with the DTI, engage or
invest in retail trade business, subject to the
Qualification of Foreign Retailers
following categories:
1. Minimum of $200,000,000 US Dollars net worth in
1. Category A:
its parent corporation for Categories B and C and
Paid-up capital of the equivalent in Philippine $50,000,000 net worth in its parent corporation
Peso of: < $2,500,000 US Dollars for Categories D
Reserved exclusively for Filipino citizens and 2. 5 retailing branches or franchises in operation
corporations wholly owned by citizens anywhere around the world unless such retailer
2. Category B: has at least 1 store capitalized at a minimum of
Minimum paid-up capital of the equivalent in $25,000,000 US Dollars
Philippine Peso of $2,500,000 US Dollars, 3. 5-year track record in retailing; and
but <$7,500,000 4. Only nationals from, or juridical entities formed
May be wholly owned by foreigners except for or incorporated in Countries which allow to
the first two years after the effectivity of this engage in retail trade in the Philippines
Act wherein foreign participation shall be
limited to not > 60% of total equity. PD 957 (SUBDIVISION AND CONDOMINIUM BUYERS
3. Category C: PROTECTIVE DECREE
Paid-up capital of the equivalent in Philippine
Peso of: $7,500,000 US Dollars or more Registration of Projects
May be wholly owned by foreigners The registered owner of a parcel of land who
NOTE: In no case shall the investments for wishes to convert the same into a subdivision
establishing a store in Categories B and C be project shall submit his subdivision plan to the
less than the equivalent in Philippine Peso of: HOUSING AND LAND-USE REGULATORY BOARD,
US $830,000 which shall act upon and approve the same, upon
4. Category D: a finding that the plan complies with the
Subdivision Standards' and Regulations
Enterprises specializing in high-end or luxury
enforceable at the time the plan is submitted.
products with paid-up capital of the
The same procedure shall be followed in the case
equivalent in Philippine Peso of: $250,000
of a plan for a condominium project except that,
US Dollars per store
in addition, said Authority shall act upon and
May be wholly owned by foreigners approve the plan with respect to the building or
buildings included in the condominium project in
accordance with the National Building Code (R.A.
NOTES: No. 6541).
Foreign investor shall be required to maintain in The subdivision plan, as so approved, shall then
the Philippines the FULL amount of the be submitted to the Director of Lands for
prescribed minimum capital, UNLESS the foreign approval in accordance with the procedure
investor has notified the SEC and the DTI of its prescribed in Section 44 of the Land Registration
intention to repatriate its capital and cease Act (Act No. 496, as amended by R.A. No. 440):
operations in the Philippines Provided, that it case of complex subdivision
Failure to maintain the full amount of the plans, court approval shall no longer be required.
prescribed minimum capital prior to notification The condominium plan as likewise so approved,
of the SEC and the DTI shall subject the foreign shall be submitted to the Register of Deeds of the
province or city in which the property lies and 1. Lease of things
the same shall be acted upon subject to the 2. Lease of service
conditions and in accordance with the procedure 3. Lease of work
prescribed in Section 4 of the Condominium Act
(R.A. No. 4726). NOTE: Since lease is consensual and is not imposed
by law, only the lessor has the right to fix the rents.
National Housing authority (now Housing and However, the increasing of the rent is not an absolute
Land Use Regulatory Board) has the exclusive right on the part of the lessor.
jurisdiction to regulate the real estate trade and
business. Characteristics or Requisites for Lease of Things
1. Consensual
License to sell 2. Principal
Such owner or dealer to whom has been issued a 3. Nominate
registration certificate shall not, however, be 4. Purpose is to allow enjoyment or use of a
authorized to sell any subdivision lot or thing (the person to enjoy is the lessee; the
condominium unit in the registered project unless person allowing the enjoyment by another is
he shall have first obtained a license to sell the the lessor
project within two weeks from the registration of 5. Subject matter must be within the commerce
such project. of man
6. Purpose to which the thing will be devoted
Exempt transactions should not be immoral
A license to sell and performance bond shall not 7. Onerous (there must rent or price certain)
be required in any of the following transactions: 8. Period is Temporary (not perpetual, hence,
1. Sale of a subdivision lot resulting from the the longest period is 99 years)
partition of land among co-owners and co-heirs. 9. Period is either definite or indefinite
2. Sale or transfer of a subdivision lot by the original If no term is fixed, we should apply
purchaser thereof and any subsequent sale of the Art.1682 (for rural leases) and Art. 1687 (for
same lot. urban leases)
3. Sale of a subdivision lot or a condominium unit by If the term is fixed but indefinite, the
or for the account of a mortgagee in the ordinary court will fix the term under the law of
course of business when necessary to liquidate a obligations and contracts
bona fide debt. 10. Lessor need not be the owner
Grounds for Revocation of registration certificate NOTE: A usufructuary may thus lease the
and license to sell of owners or dealers premises in favor of a stranger, such lease to end
1. Is insolvent; or at the time that the usufruct itself ends
2. Has violated any of the provisions of this Decree
or any applicable rule or regulation of the Rent
Authority, or any undertaking of his/its The compensation either in money,
performance bond; or
provisions, chattels, or labor, received by the
3. Has been or is engaged or is about to engage in
lessor from the lessee.
fraudulent transactions; or
4. Has made any misrepresentation in any
prospectus, brochure, circular or other literature NOTES:
about the subdivision project or condominium When a student boards and lodges in a dormitory,
project that has been distributed to prospective there is no contract of lease. The contract is not
buyers; or designated specifically in the Civil Code. It is an
5. Is of bad business repute; or innominate contract. It is however, believed that
6. Does not conduct his business in accordance with the contract can be denominated as the contract
law or sound business principles. of board and lodging.
There is a contract of lease when the use and
LEASE enjoyment of a safety deposit box in a bank is
given for a price certain. This is certainly not a
contract of deposit.
LEASE
A lease of personal property with option to buy
consensual, bilateral, onerous, and commutative (at a nominal amount) at the end of the lease can
contract by virtue of which one person binds be considered a sale.
himself to grant temporarily the use of the thing
or to render some service to another who
LEASE SALES
undertakes to pay some rent.
1. only use or enjoyment 1. ownership is
Kinds of Leases (From the view point of the subject is transferred transferred
matter
2. transfer is temporary 2. transfer is permanent EXCEPTIONS: Lease partakes of the nature of real
3. lessor need not be the 3. seller must be the right if:
owner owner at the time the a. Lease of real property is more than 1 year
property is delivered b. Lease of real property is registered regardless
4. the price of the object, 4. usually, the selling of duration
distinguished from the price is mentioned
rent, is usually not
mentioned
NOTE: Lease of personal property cannot be
registered. To be binding against third persons, the
parties must execute a public instrument.
Lease of Things Lease of Services
1. object of contract is a 1. object is some work * Lease may be made orally, but if the lease of Real
thing or service
Property is for more than 1 year, it must be in
2. lessor has to deliver 2. lessor has to
writing under the Statue of Frauds.
the thing leased perform some work or
service
3. in case of breach, there 3. in case of breach, no Persons Disqualified to be Lessees Because
can be an action for action for specific Disqualified to Buy
specific performance performance 1. A husband and a wife cannot lease to each other
their separate properties except:
Lease of Services Contract for a Piece of a. if separation of property was agreed upon
(locatio operatum) Work b. if there has been judicial separation of
(locatio operas) property
1. the important object 1. the important Persons referred to in Art. 1491 are disqualified
is the labor performed by object is the work done because of fiduciary relationships
the lessor
2. the result is generally 2. the result is SUBLEASE
not important, hence the generally important; A separate and distinct contract of lease wherein
laborer is entitled to be generally, the price is the original lessee becomes a sublessor to a
paid even if there is not payable until the sublessee.
destruction of the work work is completed, and
through fortuitous event said price cannot be Allowed unless expressly prohibited.
lawfully demanded if The sublessee is subsidiarily liable for any rent
the work is destroyed due. The lessor has an accion directa against the
before it is finished and sublessee for unpaid rentals and improper use of
accepted the object.
SUBLEASE ASSIGNMENT OF
LEASE
Lease of Services Agency 1. there are two leases and two 1. there is only one
It is based on It is based on distinct juridical relationships juridical relationship,
employment the lessor representation agent although immediately that of the lessor and
of services does not represents his principal connected and related to each the assignee, who is
represent his employer and enters into juridical other converted into a lessee
nor does he execute acts. 2. the personality of the lessee 2. the personality of
juridical acts. does not disappear the lessee disappears
Principal contract Preparatory contract 3.the lessee does not transmit 3. the lessee transmits
absolutely his rights and absolutely his rights to
obligations to the sublessee the assignee
Rule for Lease of Consumable Goods 4. the sublessee, generally, 4. the assignee has a
GENERAL RULE: Consumable goods cannot be the does not have any direct action direct action against
subject matter of a contract of lease of things. against the lessor the lessor
Why? To use or enjoy hem, they will have to be
consumed. This cannot be done by a lease since
RIGHTS OF LESSOR IF SUBLEASE PROHIBITED BUT
ownership over them is not transferred to him by the
ENTERED INTO BY LESSEE:
contract of lease.
1) Rescission and damages, or
EXCEPTIONS:
2) Damages only (Contract will be allowed to remain
a. If they are merely exhibited
in force)
b. If they are accessory to an industrial
3) Ejectment
establishment
Instances when sublessee is liable to the lessor:
RECORDING OF LEASE OF PERSONAL PROPERTY
a. All acts which refer to the use and
GENERAL RULE: Lease of real property is personal
preservation of the thing leased in the
right
manner stipulated between the lessor and the 2. Material injury to the premises
lessee 3. Actual, moral, or exemplary damages
b. The sublessee is subsidiarily liable to the
lessor for any rent due from the lessee. Immediate termination of lease under Art. 1660
NOTE: The sublessee shall not be responsible beyond applies:
the amount of rent due from him.
1. only to dwelling place or any other building
intended for human habitation
Accion Directa: direct action which the lessor may
2. even if at the time the contract was perfected,
bring against a sublessee who misuses the subleased
the lessee knew of the dangerous condition or
property.
waived the right to rescind on account of this
condition
OBLIGATIONS OF THE LESSOR (DnM)
Rules on Alteration of the Form of the Lease
a. Delivery of the object (cannot be waived)
b. Making of necessary repairs The Lessor can alter provided there is no
c. Maintenance in peaceful and adequate impairment of the use to which the thing is
possession devoted under the terms of the lease
Alteration can also be made by the Lessee so long
OBLIGATIONS OF THE LESSEE (R2EN2U) as the value of the property is not substantially
a. to pay rent impaired
b. to use thing leased as a diligent father of a
family, devoting it to the use stipulated Rules in case of Urgent Repairs
c. to pay expenses for the deed of lease The lessee is obliged to tolerate the work
d. to notify the lessor of usurpation or untoward although it may be very annoying to him and
acts although during the same time he may be
e. to notify the lessor of need for repairs deprived of a part of the premises
f. to return the property leased upon 1. If repairs last for more than 40 days: Lessee
termination of the lease cannot act for reduction of rent or rescission
2. If 40 days or more: lessee can ask for
Effect of Destruction of the Thing Leased: proportionate reduction
1. Total destruction by a fortuitous event NOTE: In either case, rescission may be availed of if
Lease is extinguished the main purpose is to provide a dwelling place and
the property becomes uninhabitable.
2. Partial destruction
a. Proportional reduction of the rent, or Effects if Lessor fails to make Urgent Repairs
b. Rescission of the lease 1. Lessee may order repairs at the lessors cost
When lessee may suspend payment of rent: 2. Lessee may sue for damages
1. lessor fails to undertake necessary repairs 3. Lessee may suspend the payment of the rent
2. lessor fails to maintain the lessee in peaceful and 4. Lessee may ask for rescission, in case of
adequate enjoyment of the property leased substantial damage to him