Sales and Lease

AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Part 1 the obligation, parties)

1. Essential Requirements of Contractual special – present only in
Obligations certain contracts
(Art. 1305, 1306, 1316, 1318, 1356) (delivery in real
contracts, form in
ARTICLE 1305. A contract is a meeting of solemn contracts)
minds between two persons whereby one binds
himself, with respect to the other, to give extraordinary – unique
something or to render some service. (1254a) to a specific contract
(price in a contract of
Contract (cum traho)- meeting of the minds sale)
between 2 persons whereby one binds himself, Natural elements derived from the nature
with respect to the other, to give something or to of the contract and
render some service. ordinarily accompany
– agreement the same
– limited exclusively to those agreements
which produce patrimonial obligations presumed by law
– specie although can be
– juridical convention manifested in legal excluded by the
form, by virtue of which one or more contracting parties
persons bind themselves in favor of Accidental elements Exist only when the
another or others, or reciprocally to the parties expressly
fulfillment of a prestation to give, to do, or provide for them for the
not to do. purpose of limiting or
modifying the normal
convention – includes any kind of agreement effects of the contract.
which may create,modify, or extinguish patrimonial
and even family relations auto-contract – there is only one party involved
but said party merely acts in the name and for the
– genus
account of two distinct contracting parties.
1. When a representative of another contracts
Contract distinguished from other terms:
with himself
Source of rights Contract – agreement of the 2. when as representative of 2 persons brings
and obligations parties about contract with himself and the
principals
Others – law
Nature of the rights Contract- concrete, limited, characteristics of contracts (OMAR)
and obligations and transitory 1st: obligatory force or character
– contracting parties are bound, not only to
others- elastic, absolute, the fulfillment of what has been expressly
permanent stipulated, but also to all of the
consequences thereof.
Elements of contracts: 2nd mutuality of contracts
– contracts are binding upon both of the
Essential elements- Common – present in all
parties
without which there can contracts (consent of
3rd autonomy of contracts
be no contracts both parties, object of
the contract, cause of – parties may establish such agreements as
they may deem convenient, provided they

Jmvdg 1 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

are not contrary to law, morals, good Accdg. To • Things

customs, public order, or public policy. subject matter • services
4th relativity of contracts
– take effect only between the parties, their Nature of the • Unilateral – gives rise to
assigns and heirs. vinculum an obligation for only one
which they of the parties
3 phases or stages of the life of contract produce • bilateral – gives rise to
1st stage:GENERATION reciprocal obligation
– preliminary preparation, conception of Accdg. To • Onerous – 1 of the
generation, period of negotiation, ending at cause parties aspire to procure
the moment of agreement of the parties for himself a benefit
through the giving of an
2nd stage: PERFECTION equivalent or
– moment when parties come to agree on compensation
the terms of the contracts • gratuitous – 1 of the
parties proposes to give
3rd stage: CONSUMMATION to the other a benefit
– fulfillment or performance of the terms without equivalent or
agreed upon in the contract compensation.
Classification of contracts: Accdg. To risk • Commutative – each of
involved the parties acquires an
Accdg to their • Preparatory – necessary
relation to equivalent of his
as a preliminary step
other prestation and such
towards the celebration of
contracts equivalent is pecuniarily
another subsequent
appreciable and already
contract
determined.
• principal – can subsist
• aleatory – which each of
independently
the parties has to his
• accessory – can exist
account the acquisition of
only as a consequence of
an equivalent of his
another prior contract.
prestation although
Accdg. to their • Consensual – perfected pecuniarily appreciable
perfection by mere agreement of the and such is not yet
parties determined.
• real – perfected with the Accdg. to • Nominate – have their
consent of the parties and norms own individuality,
the delivery of the object regulated by special
by one party to the other. provisions of law
Accdg. To • Common or informal – • innominate – lack
form no particular form individuality, not regulated
• special or formal – by special provisions of
require some particular law
form
Accdg. To their • Transfer of ownership
purpose • conveyance of use
• rendition of service

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 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

ARTICLE 1306. The contracting parties
may establish such stipulations, clauses, terms
and conditions as they may deem convenient,
provided they are not contrary to law, morals,
good customs, public order, or public policy.
(1255a)
***right of the contracting parties to establish any
stipulation, clause, term or condition as they may
deem convenient. (constitutional and statutory
right)
limitations: stipulation, clause, term or condition
established must not be contrary to:
• law
– mandatory or prohibitive in character
– expressive of fundamental principles of
justice
– impose essential requisites
• morals
– principles which are incontrovertible
and are universally admitted and which
have received social and practical
recognition
• good customs
– includes even those moral precept not
recognized universally but is
sanctioned by the practice of a certain
community
• public order
– safety, peace and order of the country
or of any particular community
• public policy
– no person can lawfully do that which
has a tendency to be injurious to the
public or against public good.
test: WON restraint is reasonably necessary for
the protection of the parties
with respect to the object or cause of the contract.
– signifies the birth of the contract as
obligatory tie, resulting from the
concurrence of the wills of the contracting
parties.- Manresa
General rule: Perfection of a contract is produced
by mere consent.
Exception:
• contracts of commodatum, pledge, and
deposit are perfected upon delivery of the
object by one of the contracting parties.
consensuality – some submit that this is one of
the fundamental characteristic of a contract But
this does not hold water in those Real contracts
which requires delivery before its perfection.
Consensual contracts – perfected by mere
consent of the parties
real contracts – perfected after delivery of the
object (pledge, commodatum, depositum, mutuum)
It is only when there is a complete
manifestation of the meeting of the offer and
the acceptance upon the thing and the cause
which are to constitute the contract.
ARTICLE 1318. There is no contract
unless the following requisites concur:
(1) Consent of the contracting parties; cdtai
(2) Object certain which is the subject matter
of the contract;
(3) Cause of the obligation which is
established. (1261)
bases of contract:
elements law will of the
contracting
parties

ARTICLE 1316. Real contracts, such as Essential are... Imposed Conformed to.
deposit, pledge and commodatum, are not Natural are... presumed Accepted or
perfected until the delivery of the object of the repudiated
obligation. (n)
Accidental are... Authorized established
perfection of contracts – moment in the life of the
contract where the parties come to an agreement

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 Sales and Lease
AUF School of Law
ARTICLE 1356. Contracts shall be
obligatory, in whatever form they may have been
entered into, provided all the essential requisites
for their validity are present. However, when the
law requires that a contract be in some form in
order that it may be valid or enforceable, or that a
contract be proved in a certain way, that
requirement is absolute and indispensable. In
such cases, the right of the parties stated in the
following article cannot be exercised. (1278a)
spiritual system of the Spanish Code – the law
looks more at the spirit/intent rather than at the
forms of the contract.
General Rule: contracts shall be obligatory,
provided all the essential elements of a contract
are present.
Exceptions:
• when the law requires that the contract
must be in a certain form in order to be
valid
◦ must appear in writing
▪ donation and acceptance of
personal property whose value
exceeds P5,000.00
▪ sale of a piece of land or any
interest therein through an agent
▪ agreements regarding payment of
interest in contract of loan
▪ antichresis
◦ must appear in public document
▪ donations of immovable properties
regardless of value
▪ partnerships where immovable
property or real rights are
contributed to the common fund
◦ must be registered
▪ chattel mortgages
▪ sales or transfer of large cattle
• when the law requires that the contract
must be in a certain form in order to be
enforceable.
◦ Covered by the Statutes of Frauds
Case: BF Corp vs CA – contract may not be limited
in a single document or writing
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
forms of contracts:
• necessary for the convenience of the
contracting parties or for the efficacy of the
contract (Arts. 1356-1358)
• necessary for the validity of the contract
(scattered provisions of the Code and
some special laws)
• necessary for the enforceability of the
contract (Statute of Frauds)
2. Sales distinguished from other contracts
a. Sale vs. Piece of work
contract for a piece of work – contractor binds
himself to execute a piece of work for the
employer, in consideration of a certain price or
compensation; the contractor may either employ
only his labor or skill, or also furnish the material.
(Art. 1713)
Similarity between sale & piece of work
“Transfer of title or an agreement to transfer it for a
price paid or promised to be paid is the essence of
sale. Ineluctably, whether the contract be one of
sale or one of piece of work, a transfer of
ownership is involved and a party necessarily
walks away with an object. (CIR vs CA & ADMU)
Statutory rule on distinguishing sale for
contact-for-piece of work (Art. 1467)
 Sale - Manufacturing in the ordinary course
of business
- workman or contractor furnishes both
labor and the materials (Tolentino, Civil
Code Book V, pp. 11)
 Contracts for piece-of-work –
manufacturing upon special order of
customers.
“Special order” under Art. 1467 is not one of
timing, or habit, but actually must be drawn from
the nature of the work to be performed and the
products to be made; it must be of the nature that
the products are not ordinary products of the
manufacturer, and they would require extraordinary
skills or equipment, if to be performed by a
manufacturer. (Celestino Co. vs Collector of
4 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Internal Revenue) b. Sale vs. Agency to Buy and Sell

the main distinguishing factor between a sale and Agency – a person binds himself to render some
a contract for a piece-of-work is the essence of service or to do something in representation or on
why the parties enter into it, if the essence is: behalf of the principal, with the consent of authority
• object – sale of the latter (Art. 1868)
• service, knowledge or even reputation of - a principal, nominate, bilateral, preparatory,
the person who executes or manufactures commutative, and generally onerous contract.
the object – piece-of work
Sale Agency to sell/Buy
practical needs for being able to distinguish Not unilaterally Essentially revocable
sale and piece-of-work: revocable even in the presence of
Aspect Sale Piece-of-work an irrevocability clause
The buyer himself The agent is not obliged
warranty of the Covered by Art. pays for the price of to pay the price, and is
contractor 1714 the object which merely obliged to
tax Higher Much lower constitutes his main deliver the price which
obligation he may receive for the
Type of Real obligation Personal buyer
obligation (to give) obligation (to After delivery, the The agent does not
do) buyer becomes the become the owner of
Action for proper Not allowed owner of the subject the thing subject of the
specific (against matter agency.
performance involuntary The seller warrants The agent who effects
servitude) the sale assumes no
apply Art. 1715 personal liability as long
as he acts within his
Applicability of Only when the
authority and in the
Art. 1165 subject matter
name of the principal.
is
indeterminate Contract of sale is Must comply with the
or generic valid and enforceable Statute of Frauds for its
in whatever form it enforceability
Applicability of Covered by Not covered by may be entered into.
the Statute of Statute of Statute of Exception: Sale of a
Frauds Frauds Frauds piece of land or any
interest therein
Schools of Thought: through an agent (Art.
• Masschusetts Rule – if especially done at 1874)
the order of another, this is a contract for a The buyer who The agent must account
piece of work. (we follow this rule in the obtains a discount for all benefits or
Philippines) does not have to discounts received from
• New York Rule – if the thing already exists, reveal such facts to the seller.
it is a SALE; if not, WORK its own buyer.
• English Rule – if material is more valuable,
SALE; if skill is more valuable, WORK ***because of the highly fiduciary nature of agency,
the agent is disqualified from receiving any
personal profit from the transaction covered by the
agency, and any profit received should pertain to

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 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

the principal of money given or its equivalent

o Sale – where the value of the thing
***the essential clauses of the whole instrument given as part of the consideration
shall be considered in construing contracts equals or is less than the amount of
containing provisions characteristic of both sales money given
and agency to sell. (Art. 1466)
***It is legally impossible for an agent or a broker to Article 1641 provides that barter shall be governed
voluntarily bind himself to the warranties of the by the Law on Sales.
seller. (Schmid & Oberly, Inc. vs. RJL Martinez) - if one party fails to perform, the other can
demand resolution of the contract.
***The essence of an agency to sell is the delivery
to an agent, not as his property, but as a property Where difference between barter and sales is
of the principal, who remains the owner and has critical:
the right to control the sale, fix the price and terms,  Rules on Statute of Frauds which apply to
demand and receive the proceeds less the agent's the sale of real or personal property bought
commission upon sales made. (Tolentino, Civil at P500.00 or more, do not apply to barter
Code Book V pp.10 quoting Kerr & Co. vs Lingad)  The right of legal redemption granted by
law to an adjoining owner of an urban land
c. Sale vs. Barter or Exchange covers only resale and does not cover
exchanges of properties.
Sale Barter
One of the parties One of the parties d. Sale vs. Dacion en Pago
binds himself to deliver binds himself to give
a thing in consideration one thing in Dation in payment – property is alienated to the
of the other’s consideration of the creditor in full satisfaction of a debt in money.
undertaking to pay the other’s promise to - constitutes the delivery and
price in money or its give another thing transmission of a thing by the debtor to the
equivalent (Art. 1638) creditor as an accepted equivalent of the
performance of an obligation.
Barter - Governed by the Law on Sales since it
• consensual contract essentially involves the transfer of
• consummated only from the time the ownership of a subject matter.
parties mutually take possession of the - Consent of both the debtor and creditor
things exchanged in this special mode of payment to
e.g. extinguish the existing obligation is an
bills of local currency to coins – barter essential requisite.
local currency for foreign currency – sale - As a special mode of payment, dacion
en pago falls on the stage of
Rules to determine whether contract is sale or consummation of the contract.
barter: (Art. 1468)
 Manifest intention of the parties Requisites:
• performance of the prestation in lieu of
 When Intention does not appear and payment (animo solvendi) which may
consideration consists partly in money and consist in the delivery of a corporeal thing
partly in another thing or a real right or a credit against 3rd person.
o Barter – when the value of the • Some differences between the prestation
thing given as part of the due and that which is given in substitution
consideration exceeds the amount (aliud pro alio)

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 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

• agreement between creditor and debtor

that the obligation is immediately Sale vs. Loan
extinguished by reason of the performance in a loan, the amount is substantially smaller than
of a prestation different from that due. the value of the security given.

Sale Dacion En Pago

Sale vs. Lease
There is no pre-existing There is a pre-existing in sale, the seller transfers ownership; in a lease,
credit credit the lessor or landlord transfers merely the
Gives rise to obligations Extinguishes the temporary possession and use of the property.
obligation
3. Definition
The cause or The cause or a. Contract of Sale
consideration here is consideration here, from
the price, from the point the viewpoint of the sale – venditio; do ut des
of view of the seller; or person offering the
ARTICLE 1458. By the contract of sale one
the obtaining of the dation in payment, is the
of the contracting parties obligates himself to
object, from the extinguishment of his
transfer the ownership and to deliver a
viewpoint of the buyer debt; from the viewpoint
determinate thing, and the other to pay therefor a
of the creditor, it is the
price certain in money or its equivalent.
acquisition of the object
A contract of sale may be absolute or conditional.
offered in lieu of the
(1445a)
original credit.
2 obligations of the Seller:
There is greater There is less freedom in  Transfer the ownership
freedom in the determining the price  Deliver the possession of the subject
determination of the matter
price
The giving of the price The giving of the object Obligation of the Buyer:
may generally end the in lieu of the credit may  accept the delivery
obligation of the buyer extinguish completely or  Pay the price
partially the credit
(depending on the ***Both are real obligation which can be the proper
agreement) subject of actions for specific performance

e. Sale vs. Chattel Mortgage ***in the delivery of a determinate thing, the buyer
in addition to the right to recover damages may
compel the seller to make the delivery.
Sale Chattel Mortgage
Principal contract or Accessory contract, Essential characteristics of sale (npcbroct)
obligation Security for the 1. nominate and principal
performance of an nominate – it has been given a particular
obligation name by law; governed by a set of rules in
the Civil Code
Does not require Must be registered in
principal – it can stand on its own and does
registration to be the Chattel Mortgage
not depend on another contract for its
binding upon 3rd Register
validity or existence
persons; entry in the
***the Court looks at the intent not the
Book of Entry will suffice
nomenclature to determine the nature of

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 Sales and Lease
AUF School of Law
the contract
***all other contracts which have or their
objective the transfer of ownership and
delivery of possession of a determinate
subject matter for a valuable consideration
are governed necessarily by the Law on
sales.
2. consensual
- contract of sale is perfected by mere
consent (Art. 1475)
- contract of sale becomes a valid and
binding contract upon the meeting of the
minds as to the price. (Buenaventura vs
CA)
– Art. 1358 (requirement for certain
contracts to be in a public instrument) is
only for convenience and registration only
affects 3rd persons. Non-compliance to
formal requirements does not adversely
affect the validity of the contract nor the
contractual rights and obligations of the
parties thereunder (Fule vs CA)
 modalities that affect the
characteristic of consensuality
o suspensive term or condition
o incomplete meeting of the
minds
3. bilateral and reciprocal
sale imposes obligations on both parties…
the obligation or promise of each party is
the cause or consideration for the
obligation or promise of the other
obligations in a contract of sale are to be
performed simultaneously such that the
performance of one is conditioned upon the
simultaneous fulfillment of the other.
Effects:
 The power to rescind is implied
 Neither party incurs delay if the other
party does not comply, or is not ready to
comply in a proper manner with what is
incumbent upon him
 From the moment one of the parties
fulfill his obligation, the default by the other
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
begins, without the need of prior demand
**A party cannot simply just choose not to
proceed with the sale by offering also the
other party not to be bound by his
obligation
**Each party has the remedy of specific
performance
**rescission or resolution cannot be
enforced by defaulting party upon the other
party who is ready and willing to proceed
with the fulfillment of his obligation
4. onerous
contract of sale imposes a valuable
consideration as a prestation, which ideally
is a price certain in money or its equivalent
5. commutative
equivalence
in contract of sale, a thing of value is
exchanged for equal value
commutativeness is an essential
characteristics of a sale, but the test for
compliance therewith is not objective but
rather subjective (Gaite vs Fonacier)
belief of the parties that they are receiving
the appropriate and proper value for what
they each in turn gave up is enough to
comply with the characteristics of
commutativeness.
Inadequacy of price does not affect
ordinary sale
Inadequacy of price may show vice of
consent, in which case the sale may be
annulled, but such annulment is not for
inadequacy of price but rather for vitiation
of consent. (Art. 1470)
6. sale is title and not mode
delivery or tradition – mode to transfer
ownership and possession to the buyer
mode- legal means by which dominion or
ownership is created, transferred, or
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 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

destroyed
***It is not the bulk or quantity of the goods sold but
title- transfer of ownership rather, the use to which the goods sold is put by
the buyer, that should control
**Sale does not by itself transfer or affect
ownership, the most that sale does is to create the contracts to sell:
obligation to transfer ownership, it is tradition or • power of the promisor to refuse the
delivery as a consequence of sale, that actually conveyance and retain the sums of
transfers ownership. installments already received
• positive suspensive condition not
Essential Elements of contract of sale happening is not breach, but simply an
 consent- meeting of the minds to transfer event that prevented the obligation of the
ownership in exchange for the price vendor to convey title
 determinate subject matter • property may be delivered with the
 price- certain in money or its equivalent understanding that the title thereto shall not
pass until the performance of some
Natural elements of contract of sale: condition, and such understanding or
• warranty against eviction intention must be given effect as between
• warranty against hidden defects parties.
• Reservation of ownership (pactum
***perfected/valid contract of sale – all 3 elements reservati dominii)
are present
***void contract of sale – some of the essential Contract of sale Contract to sell
element are not present; or
– as mandated by Article 1409 Non-payment of the payment in full of the
***voidable contract of sale – vitiation of consent price is a resolutory price is a positive
condition suspensive condition
Stages in the life of Sale Title over the property Ownership is retained
 policitacion – negotiation or preparation passes to the buyer by the seller, regardless
stage; upon delivery of delivery and is not to
o time the prospective contracting pass until full payment
parties indicate their interests in the of the price.
contract to the time the contract id
perfected After delivery has been Since the seller retains
 perfection – conception or birth made, the seller has ownership, despite
o takes place upon the concurrence lost ownership and delivery, he is enforcing
cannot recover it unless and not rescinding the
of the essential elements of the
the contract is resolved contract if he seeks to
sale
or rescinded oust the buyer for failure
 consummation – death
to pay.
o parties perform their respective
undertaking under the contract of Jus in rem is created Jus in personam is
sale, culminating in the created
extinguishment thereof
Option Contract
wholesale vs retail sale: ➢ accepted unilateral promise supported by a
wholesale – if to be resold for a profit the goods consideration distinct from the price
being unaltered when resold, the quantity being ➢ preliminary contract to a contract of sale.
large ➢ Consideration in an option contract is just

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 Sales and Lease
AUF School of Law
as important as the consideration for any
other kind of contract.
➢ Does not pass title or dominion over the
property but only gives a right to demand
the fulfillment of the contract in proper
cases or damages for a breach where it is
not possible to carry it out.
➢ In the event of breach, the injured party
cannot sue for the delivery of the thing or
the payment of the price because the
obligations arising from the contract are to
do hence, the obligation is converted into
one for indemnity for damages.
➢ “A contract granting privilege to buy or
sell within an agreed time and at a
determined price. It is a separate and
distinct contract from that which the
parties may enter into upon the
consummation of the option. It must be
supported by a consideration.” (Limson
vs CA, 375 SCRA 209)
Option contract Sale
onerous
Consideration may be Consideration must be
anything of value the price certain in
money or its
equivalent, or
essentially a “valuable
consideration.
Consensual
Unilateral contract Bilateral contract
Subject matter is the Subject matter is the
option to purchase subject matter of the
the subject matter sought sale.
(accepted promise to
sell or the accepted
promise to buy) of the
sale
Earnest money – considered payment of part of
the price and as a proof of perfection of the
contract. It may be given as a guarantee that the
vendee will not back out.
Converting the option money into an earnest
money WILL NOT violate the definition that option
money must be separate and distinct from
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
purchase price if it is stipulated that it will not be
forfeited. There is a different period for the option
money & earnest money, thus there is no conflict
with regard the two. <3
PARTIES TO A CONTRACT
Capacity to Contract: (Arts. 1327, 1489-1492)
General rule: Any person who has the capacity to
act or the power to do acts with legal effects, or
with the power to obligate himself, may enter into a
contract of sale, whether as seller or buyer.
Natural persons – age of majority is 18 y.o
Juridical persons – a juridical personality
separate, and distinct from that of the
shareholders, partners or members is expressly
recognized by law, with full juridical capacity and
capacity to act to such juridical persons to obligate
themselves and enter into a valid contract.
capacity of the contracting parties – essential
element of a contract; indispensable requisite of a
consent
Incapacity to contract may be absolute or
relative incapacity.
• Absolute incapacity – their personality is
restricted; these persons cannot enter into
a contract by themselves, but only through
their legal representatives.
◦ Except: for necessaries delivered to
them, they are obliged to pay a
reasonable price (Art. 1489)
• Relative incapacity – incapacity by reason
of the parties' relation to each other or their
relation to the thing which is the object of
the sale.
Incapacitated to give consent:
1. unemancipated minors – absolute
incapacity
exception:
• when it is entered into by a minor who
misrepresents his age
▪ based on the principle of estoppel
▪ must be active not merely
constructive
10 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
• when it involves the sale and delivery
of necessaries to the minor (Art.1449)
***there are no more emancipated minors since the
age of majority has been raised to 18 y.o.
Necessaries – everything indispensable for
sustenance, dwelling, clothing, medical
attendance, education and transportation, in
keeping with the financial capacity of the family…
[and education] includes his schooling or training
for some profession, trade, or vocation, even
beyond the age of majority. Transportation shall
include expenses in going to and from school, or to
and from place of work. (Art. 194, Family Code)
2. insane or demented persons – absolute
incapacity
• contracting parties are unable to
understand the nature and
consequences of the contract at the
time of its execution by reason of any
cause affecting his intellectual or
sensitive faculties. (includes
drunkenness, or under hypnotic spell)
• contracts entered into during lucid
interval is valid.
• A question of act which must be
decided by the court
3. deaf-mutes who do not know how to
write – absolute incapacity
• there is no way that the stipulations in
the contract be explained to them to
insure that they understand what they
are entering into.
4. Husband and wife to each other –
relative incapacity
• General rule: (Art. 1490, Civil Code)
Spouses cannot sell property to each
other.
◦ Exception:
▪ When a separation of property
was agreed upon in the
marriage settlement
▪ When there had been a judicial
decree for the separation of the
property
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
• Prohibition relating to spouses selling
to one another is applicable even to
sales in legal redemption, compromises
and renunciations. (Art. 1492)
• Said transactions are null and void.
(Medina vs Colector, 1 SCRA 302) The
prohibition is a matter of public policy
• Who may assail the validity of the
contract?
◦ Heirs of either spouses who have
been prejudiced
◦ Prior creditors
◦ State when it comes to the
payment of the proper taxes due on
the transactions.
• Who may NOT assail the validity of
the contract?
◦ Spouses – because of pari delicto
◦ Creditors after the transaction – it
cannot be said that they have been
prejudiced
• Rationale for prohibition: (Medina vs
Collector, 1 SCRA 302)
◦ To prevent a spouse defrauding his
creditors by transferring his
properties to the other spouse.
◦ To avoid a situation where the
dominant spouse would unduly
take advantage of the weaker
spouse, thereby effectively
defrauding the latter; and
◦ To avoid an indirect violation of the
prohibition against donations
between spouses under Art. 133,
CC (now Art. 87, Family Code)
• Art. 87 of the Family Code added the
provision “The prohibition shall also
apply to persons living together as
husband and wife without a valid
marriage.”
Read Matabuena vs Cervantes, 38
SCRA 284, (1971)
“And this is so because if transfers or
conveyances between spouses were
allowed during the marriage, that would
destroy the system of conjugal
11 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
partnership, a basic policy in civil law. It
was also designed to prevent the
exercise of undue influence by one
spouse over the other, as well as to
protect the institution of marriage,
which is the cornerstone of family law.
The prohibition apply to a couple living
as husband and wife without the
benefit of marriage, otherwise, “the
condition of those who incurred guilt
would turn out to be better than those
in legal union.” Those provisions are
dictated by public interest and their
criterion must be imposed upon the will
of the parties.” (Calimlim-Canullas vs
Fortun, 129 SCRA 675)
Cruz vs CA (281 SCRA 491) reiterated the
Calimlim-Canullas ruling but further held
that, when registered property has been
conveyed subsequently to a third-party-
buyer in good faith and for value, the
reconveyance is no longer available to
common-law spouses, since under the
Torrens system every buyer has a right to
rely upon the title of his immediate seller.
Art. 1490 Art. 133
Civil Code (now Art. 87, FC)
Exempts from its Do not make such
prohibition sales exception in case of
between spouses donations
governed by the
complete separation of
property regime
Reason:
Donation between spouses governed by CSP
regime, being a gratuitous contract, would
necessarily reduce the estate of the donor and
increase the estate o the donee, while a sale
between such spouses, being an onerous and
commutative contract, would result in the separate
estates of the spouses being of the same value as
before the sale and no fraud could result, either to
the spouses or to their creditors.
5. Specific Incapacity to enter into a
contract of sale as mandated by law
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
(Art. 1491) – relative incapacity
• 1st group
◦ Agent – with respect to the property
whose administration or sale had been
entrusted to him, unless the consent of
the principal has been given.
◦ Guardian – with respect to the property
of the person who is under his
guardianship
◦ Executor or administrator – with
respect to the property of the estate
under his administration except the
sale of hereditary rights of an heir to
the executor or administrator as rights
of an heir is not subject to
administration.
• 2nd group
◦ Public officers or employees – with
respect to the property of the State or
any subdivision thereof, or of any
government-owned or controlled
corporation or institution, the
administration of which has been
entrusted to them; it includes judges
and government experts who in any
manner take part in the sale.
◦ Justices, judges, prosecuting
attorneys, COCs, and other officers
and employees connected with the
administration of justice – with
respect to the property and rights in
litigation or levied upon an execution
before the court within whose
jurisdiction of territory they exercise
their respective functions;
▪ this is to avoid fraud and to free
such official from any suspicion
which may cause discredit to the
judicial system.
◦ Lawyers – with respect to the property
and tights which may me the object of
any litigation in which they may take
part by virtue of their profession.
▪ Consequence in case of violation
are voidable contract of sale and
subject of the lawyer to disciplinary
action for malpractice.
• Such prohibitions apply to sales in legal
12 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

redemption, compromises and recover back the land sold even if

renunciations (Art. 1492) an offer to pay back the purchase
• Only sales by agents are valid when made price is made.
with the express consent of their principals • married woman in cases specified by
and no such exception is granted in all the law
other instances covered by the article. • incompetent (Sec. 2 of Rule 92 of the
• Contracts entered into in violation of Art. New Rules of Court) includes:
1491 are ▪ persons suffering from civil
◦ Villanueva: “inexistent and void from interdiction
the beginning.” (Art. 1409, CC; Rubias ▪ hospitalized lepers
vs Batiller, 51 SCRA 120) ▪ prodigals
◦ Tolentino: are not void but voidable ▪ deaf and dumb who are unable to
• incapacity is based on moral reasons, and read
is intended to avoid situations where a ▪ who are of unsound mind
person may find his personal interests ▪ those who by reason of age, weak
conflicting with the interests of those whom mind or other similar cases, cannot,
they represent. without aid from other, take care of
themselves and manage their
1st group 2nd group property becoming thereby easy
disqualification is for Disqualification is prey fro deceit and exploitation.
the interest of the grounded on public Purchase made by Intermediary:
principal, ward and policy and interest To set aside a purchase made by an intermediary,
estate it is necessary to prove that there is an agreement
Private wrong to the Public wrong which is between the intermediary and the disqualified
ward, principal or damage to public person person that the former will make the
estate service or to the high purchase for the benefit of the latter.
esteem that should be
accorded to the Effects:
administration of • Defective contract – effect of incapacitated
justice in our society persons entering into a contract not
May be ratified by Even when the parties through a parent or agent.
means of and in the seek to ratify the • Voidable contracts – only one of the
form of a new contract private wrong by contracting parties is incapacitated to give
executing a new consent.
contract, such cannot • Unenforceable contracts – when both
resurrect and calidate parties are incapacitated to give consent..
a relationship, which
continues to be OBJECT OF CONTRACTS
tainted with a public requisites:
wrong 1. it must be a possible thing
2. it must be licit
3. it must be determinate or at least
6. other incapacitated persons determinable
• aliens as to real property – mandated
by Sec. 5, Art. XIII of the Constitution lack of any requisite enumerated would either
▪ a sale made in violation of the engender a “no contract” situation (buyer can still
provision is null and void but recover the amount based on the principle of
although void, the vendor cannot unjust enrichment) or the resulting contract of sale

Jmvdg 13 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law
would be void (no remedy can be maintained and
generally the courts will leave the party where they
are).
Licit
• The illegality of the subject matter
undermines the demandability of the
underlying obligation of the seller to deliver,
and renders the sale void.
• Prohibition: Public land & homestead
(within the 5-year prohibition) cannot be the
object of sale, even if the buyer is in good
faith.
Determinate
• particularly designated or physically
segregated from all others of the same
class (Art. 1460)
• Includes generic objects which are at least
“determinable”
• in case of determinable object, the
requisite that the thing be determinate is
satisfied if at the time the contract is
entered into, the thing is capable of being
made determinate without the necessity of
a new or further agreement between the
parties (Art. 1460)
Nature of the Object:
• Future Goods (Art. 1462)
o property or goods, which at the
time of the sale are not yet owned
by the seller, but which are
thereafter to be acquired by him
o cannot be subject of an executed
SALE
o such contract for the future sale
and delivery of goods which seller
has not in possession but which he
intends to acquire is valid as an
executory contract to be fulfilled by
acquiring and delivering the goods
specified in the contract.
***things with potential existence (Art.
1461)
o things which though not yet in
existence, is reasonably certain to
come into existence as the natural
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
increment or usual incident of
something already in existence,
then belonging to the vendor
o the title will pass to the buyer the
moment the thing comes into
existence.
o Validity of the sale of things with
potential existence depends upon
the intention of the parties.
 Emptio rei speratae –
(purchase of an expected
thing) if the parties make a
contract depend upon the
existence of the thing, so
that of the thing DOES NOT
come into existence the
contract is considered as
not made and there is no
obligation to pay the price.
 Emptio spei – (purchase of
a hope or expectancy); the
parties intend the contract
to exist at all events, so that
the buyer will have to pay
the price even if the thing
does not actually come into
existence; the contract is
aleatory. Sale of a vain
hope or expectancy is void.
• Undivided interests of share
• things in litigation
• things subject to conditions
◦ Whether the contract of sale involves a
present object, or a future thing subject
to a suspensive condition, or a present
object subject to a resolutory condition,
the subject matter must be existing or
must come to existence to be delivered
to the buyer, otherwise the contract of
sale is void, or an existing contract of
sale is extinguished with the obligation
on the part of the seller to return what
he has received thereby.
PRICE AND OTHER CONSIDERATION
by definition under Art. 1458, the ideal
consideration for a sale would be a “price” as a
14 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
sum certain in money or its equivalent.
However, sale may still be valid when it has for its
cause or consideration an item other than the
price.
Price – a sum certain in money or its equivalent
– Ideal consideration in contract of sale
– Sum stipulated as the equivalent of the
thing sold and also every incident taken
into consideration for the fixing of the price
put to the debit of the buyer and agreed to
by him. (Inchausti & Co. vs Cromwell, 20
PHIL 345)
A seller cannot unilaterally increase the price
previously agreed upon with the buyer, even when
the need to adjust the price of sale is due to
increased construction cost (GSIS vs CA, 228
SCRA 183); otherwise, it would be a violation of
the essential characteristics of “obligatory force” of
contracts of sale (Art. 1308, CC).
Requisites:
 must be real
o There must be a legal intention on
the part of the buyer to pay the price,
and legal expectation on the part of the
seller to receive such price as the value
of the subject matter he obligates
himself to deliver. Otherwise, the price
is simulated and the sale is void for
lack of consideration.
o Remedy for simulated contracts:
parties may recover form each other
what they may have given under the
contract. (Heirs of Sps. Balite vs Lim,
446 SCRA 54)
o Principle of in pari delicto nonovitar
actio applies only to cases where the
nullity arises from the illegality of the
consideration or the purpose of the
contract (Modina vs CA, 317 SCRA
696) but does not apply to inexistent
and void contracts where the price is
merely simulated (Yu Bun Guan vs
Ong, 367 SCRA 559).
o False price – there is a real price
upon which the minds of the parties
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
had met, but not declared, and when
what is stated in the covering deed is
not the one intended to be paid.
o Instrument with false consideration
are valid but subject to reformation to
reveal the real intent of the parties.
o Failure to pay the price or the
balance thereof does not render the
sale inexistent or invalid, but merely
gives rise to a right in favor of the seller
to either demand specific performance
or rescission of the contract of sale.
(Province of Cebu vs. Heirs of Morales,
546 SCRA 315)
o “A contract of sale being
consensual, it is perfected by
mere consent of the parties.
Delivery of the thing bought or
payment of the price is not
necessary for the perfection of the
contract; and failure of the vendee
to pay the price after the execution
of the contract does not make the
sale null and void for lack of
consideration but results at most
in default on the part of the
vendee, for which the vendor may
exercise his legal remedies.”
(Balatbat vs CA, 261 SCRA 128)
o delivery of the subject matter made
pursuant to a sale that is void for lack
of consideration therefore does not
transfer ownership to the buyer
 must be in money or its equivalent
o valuable consideration
o Art. 1468 recognizes that if the
consideration of the contract consists
partly in money and partly in another
thing, the transaction can still be
considered a contract of sale when this
is the manifest intention of the parties.
o Although the cause is not stated in
the contract, it is presumed that it exists
and is lawful, unless the debtor proves
the contrary. (Art. 1354)
Philippine jurisprudence has not accepted
the Anglo-Saxon concept that “any”
15 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

consideration is enough to support a case may be. (Art. 1469, cross refer to
contract, what prevails in Philippine Art. 1186)
jurisprudence is that for a consideration to o Designation of a 3rd party to fix the
support an onerous contract, such as a subject matter of the contract is not
contract of sale, it wold have yo be a provided by law.
valuable consideration under the Roman
Law concept. Designation to 3rd Designation to 3rd
party as to the price party as to the
 must be certain or ascertainable. subject matter
o Certain – expressed and agreed in Obligation to pay the Obligation to deliver
term of specific pesos and/or centavos. price is a fungible the subject matter is a
o Ascertainable – it shall be sufficient obligation species obligation
that it be so with reference to another Price, subject of the A 3rd party may choose
thing certain or that the determination obligation of the buyer a subject matter
thereof be left to the judgment of a is generic and beyond the capacity of
specified person or persons. generally cannot be the seller to comply
o Designation of a 3rd party to fix the extinguished by a with his obligation to
price is valid. fortuitous event deliver the same.
o Even before the fixing of the price o Art. 1472
by the designated 3rd party, a contract o Manner of payment of the price
of sale is deemed perfected and goes into the essence of what makes
existing, albeit conditional. (Barretto vs. price certain or ascertainable.
Santa Marina, 26 Phil 200) o The buyer was free to decide on
o Fixing of the price cannot be validly the manner of payment of the purchase
left to the discretion of one of the price. (Bortikey vs. AFP retirement and
contracting parties. Separation benefits System, 477 SCRA
o 2 instances where the parties can 511)
seek court remedy to fix the price o When the manner of the purchase
designated to 3rd party. (Art. 1469) price is discussed after the acceptance,
 Designated 3rd party acted then such acceptance did not produce
in bad faith a binding and enforceable contract of
 Designated 3rd person sale; there was therefore no complete
acted by mistake. meeting of the minds and there is no
o Inefficacious contract – when price basis to sue on a contract that does not
cannot be ascertained with any of the exist. (Navarro vs Sugar Producer’s
rules stated in Art. 1474 Corp., 1 SCRA 511)
- inability to produce the o Although a down payment had
effect wanted already been made by the buyer and
- does not exclude void sale received by the seller, there was still no
contracts when the sale is valid sale. The court held that although
neither certain or part of the down payment has been
ascertainable. paid, a definite agreement on the
o When the 3rd party designated is manner of payment on the purchase
prevented from fixing the price by fault price was an essential element in the
of either the buyer or the seller, the formation of a binding and enforceable
party not at fault may have such contract of sale. (Velasco vs CA, 51
remedies against the party at fault as SCRA 439; Limketkai Sons Milling, Inc.
are allowed the seller or buyer, as the vs. CA, 255 SCRA 626)

Jmvdg 16 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law
o The terms of payment being an
integral part of the price, would have
the same requisites that the law
imposes on price to support a valid
contract of sale: certain or at least
ascertainable.
o Fixing of the terms of payment may
also be designated to a 3rd party.
o “Every obligation, whose
performance does not depend upon a
future or uncertain event, or upon a
past event unknown to the parties, is
demandable at once.” (Art. 1179)
o In the absence of any stipulation or
agreement or actuation indicating that
a different term of payment would be
applicable and for which a meeting of
the minds must be achieved, the price
is deemed to be by operation of law
immediately demandable upon the
perfection of the contract.
o Art. 1474 present the only
exception when there would still be a
valid sale even when there has been
no meeting of the minds as to the price
or any other consideration.
 “If the thing or any part
thereof has been delivered to and
appropriated by the buyer, he must
by a reasonable price therefore. x x
x the court have authority to fix the
reasonable price for the subject
matter appropriated by the buyer”
(Art. 1474)
o “Preceding article” in Art. 1474
starts at Art. 1469 to Art. 1473
Doctrine of Appropriation (Art. 1474)
 Based on the principle of unjust enrichment
directed against the buyer who is not
allowed to retain the subject matter of the
sale without being liable to pay the price
even when no such agreement on the price
was previously made
 Applies even to “no contract” situation
because of no meeting of the minds as to
the price, although there was a meeting of
the minds as to the subject matter, and
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
may also apply to void sale contract
situation where the defect is as to the price.
 Remedy clause in favor of the seller who
has delivered the subject matter in
accordance with an agreement (though it
may not be a full contract yet) with the
buyer who has received it and appropriated
it.
The gravamen of Art 1474 would mean that in spite
of the lack of an agreement as to the price or
defect in the agreement as to price, there would
nevertheless be a valid contract of sale upon which
an action for specific performance would prosper
for the recovery of the price when the following
elements are present:
(a) There was a meeting of the minds
of the parties to a sale and purchase as to
the subject matter;
(b) There was an agreement that price
would be paid which fails to meet the
criteria being certain or ascertainable; and
(c) There was delivery by the seller
and appropriation by the buyer, of the
subject matter of the sale.
From the rulings of the Supreme Court in Raet vs.
CA (295 SCRA 677) and NHA vs. Grace Baptist
Church (424 SCRA 147), the concept of
“appropriation” under Art 1474 is not applicable to
real estate and that the rights of the parties to a
purported sale would be under the principles
applicable to builders in good faith.
It may also be an indication that “appropriation”
under Art 1474, even when applied only to
movables, would necessarily entail a
“transformation” of the subject matter of sale such
that it can no longer be returned to its original
state, as to warrant the fixing of reasonable price to
prevent unjust enrichment.
“The best evidence to prove payment of the price
is the official receipt issued by the seller.” (El Oro
Engravers vs. CA, 546 SCRA 42)
“These documents [receipts and invoices] are not
mere scraps of paper bereft of probative value but
vital pieces of evidence of commercial
17 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

transactions. They are written memorials of the the contract their intention.
details of the consummation of contracts.” (Lagon
vs Hooven Camalco Industries Inc., 349 SCRA It has no legal effect Does not even affect the
363) (void) as there is no real validity of the contract of
agreement between the sale unless it signifies a
INADEQUACY OF PRICE parties defect in th econsent or
Lesion or inadequacy of cause shall not invalidate that the parties actually
a contract, unless there has been fraud, mistake, intended a donation or
or undue influence. (Art. 1355) some other contrac.

General rule: “Gross inadequacy of price does not
affect a contract of sale, except as it may indicate a
defect in the consent, or that the parties really
intended a donation or some other act or contract.
(Art. 1470)
***The characteristic that a contract of
sale is onerous is met whenever the
consideration is a “valuable
consideration and the test for its
“commutativeness” is met when the
parties believe honestly that they
received good value or what they
have given up in exchange.
Gross inadequacy of price is ground for rescission
of conventional sale (Art. 1381, NCC)
Sales with right to repurchase
- the gross inadequacy of price raises the
presumption of equitable mortgage (Art.
1602, Civil Code)
- remedy of the seller: have the contract
reformed or declare a mortgage contract
and to pay the indebtedness which is
secured.
- Remedy of the buyer: foreclose on the
equitable mortgage (Briones-Vasquez vs.
CA, 450 SCRA 644)

Exception: Gross inadequacy of price may avoid MOTIVE

judicial sale of real property.
Reason: the sale here is not the result of
negotiations and bargaining; in fact, the property of
the supposed seller would be sold at public auction
without his intervention)
Requisites: such inadequacy must be such as to
be
(a) shocking to the conscience of man
(Pascua vs. Simeon, 161 SCRA 1) and
(b) there must be a showing that, in the
event of resale, a better price can be
obtained (Cu Bie vs. CA, 15 SCRA 307)
Exception to the exception: when there is a right
of redemption – since the more adequate the
winning bid is, the more easily it is for the owner to
redeem the property (De Leon vs. Salvador, 36
SCRA 567)
Simulated price Gross inadequacy of
price
Parties do not really Parties are bound by
intend to be bound by the contract based on
- different from the consideration
Cause Motive
Essential reason which Particular reason of a
moves the contracting contracting party
parties to enter into a which does not affect
contract the other party
Cause is the immediate, direct, and proximate
reason which justifies the creation of an obligation
through the will of the contracting parties.
General rule: A party’s motive for entering into the
contract does not affect the contract.
Exception: When the motive predetermines the
cause, the motive may be regarded as the cause
(Uy vs CA, 314 SCRA 69)
PERFECTION OF THE CONTRACT
Until a sale is perfected, it cannot be an
independent source of obligation, nor serve as a
binding juridical relation.
General Rule: A contract of purchase and sale is
perfected from the moment the parties have

Jmvdg 18 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law
agreed upon a:
• determinate thing, the object of the contract
• certain price thereof, whether in money or
its equivalent
Exceptions:
• when by virtue of the stipulation of the
parties or by provision of law, the sale is
subject to a suspensive condition
• if the contract of sale is subject to the
approval of higher authorities
modification: Art. 1476;
• auction sale is perfected when the
auctioneer pounded his hammer
• seller in the auction sale cannot bid but he
may do so provided he gives adequate
notice that he will participate in the bidding
through another.
Effects of Perfection:
• gives right to the vendee a right to compel
the vendor to deliver the thing
• vendee acquires personal right over the
thing until the delivery is made
• if a party refuses to proceed with the sale,
he is guilty of breach of contract.
General rule: the ownership of the thing is
transferred only from the time of delivery thereof,
either actual or constructive, even if the price is not
fully paid.
Exception: if the sale is conditional and ownership
is transferred, not upon delivery, but upon full
payment of the price
pactum reservati dominii – ownership is reserved
in the seller and is not to pass until the full payment
of the purchase price is made
Art. 1319 defines consent or meeting of minds as
manifested by the meeting of the offer and the
acceptance upon the thing and the cause which
are to constitute the contract.
• The offer must be certain
◦ when it is floated by the offeror having
within its terms the description of the
subject matter that has all 3 requisites
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
of possible, licit, determinate or
determinable; and with a price that has
the requisites of being real, mney or its
equivalents, and must be certain or at
least ascertainable, including on the
terms of the payment thereof.
◦ The absence of either just one of the
essential requisites pertaining to either
subject matter or price in the terms of
the offer makes the offer “not certain”,
and cannot give rise to a valid sale,
even when such offer is absolutely
accepted by the offeree.
• the acceptance must be absolute
◦ the acceptance to have the effect of
converting an offer to sell into a
perfected contract, it must be plain and
unconditional, and will not be so if
involves any new proposition
◦ such acceptance should be
unequivocal and unconditional and the
acceptance and proposition shall be
without any variation whatsoever. Any
modification or deviation from the terms
of the offer annuls the latter and frees
the offeror.
The owner of property offered for sale at public or
private auction has the right to prescribe the
manner, conditions and terms of such sale.
Assignment
• agreement by virtue of which the owner of
a credit (assignor), transfers his credits and
its accessory rights to another(assignee),
who acquires the power to enforce it to the
same extent as the assignor could have
enforced it against the debtor.
• legal causes where assignment may be
done:
◦ sale
◦ dation in payment
◦ exchange or donation
• covers not only assignment of credits but
also other incorporeal rights
• a specie of the genus sale; all the
characteristics of and jurisprudential
doctrines pertaining to the genus sale must
19 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
necessarily pertain to assignment; except
to the extent modified by the chapter
dealing specifically on assignment.
• Characteristics:
◦ consensual
◦ reciprocally
◦ onerous
◦ commutative
• effects:
◦ transfers to the assignee the right to
collect the full value of the credit, even
if he paid a price less than such value
◦ all the accessory rights (guaranty,
mortgage, pledge or preference) are
transferred
◦ debtor can set up against the assignee
the defenses he could have set up
against the assignor
• transfer of right by assignment takes place
upon the perfection of the contract.
• Does not affect 3rd persons, including the
debtor, unless they have knowledge
thereof (must appear in a public
instrument)
• exceptions are assignments made:
1. To a co-heir or co-owner of the right
assigned;
2. To a creditor in payment of his credit;
3. To the possessor of a tenement or
piece of land which is subject to the
right in litigation assigned.
• Reason for the exception:
1. the position of the assignee to enforce
the right is merely strengthened
FORMALITIES
General rule: a sale being a consensual contract,
no form is really required for its validity
Exception:
• the power to sell a piece of land or
interests therein must be in writing,
otherwise, the sale thereof by the agent
(even if the sale its elf be in writing) would
be void
• sale of large cattels must be in writing,
otherwise the sale would be void; and no
sal eof arge cattle shall be valid unless the
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
sale is registered with the municipal
treasurer who shall issue a certificate of
transfer; and
• sale of land by “non-muslim hill tribe
cultural minorities all throughout the
Philippines is void if not approved by the
NCIP
Documents of Title
• quedan=negotiable instrument=warehouse
receipts
• exception to the general rule of nemo dat
quod non habet
• includes any bill of lading, dock warrant,
quedan, or warehouse receipt or order for
the delivery of goods, or any other
document used in the ordinary course of
business in the sale or transfer of goods,
as proof of the possession or control of the
goods
• functions:
◦ as evidence of the possession or
control of the goods described therein
◦ as the medium of transferring title and
possession over the goods described
therein, without having to effect actual
delivery thereof.
Through the document of title, the seller is
allowed, by fiction of law, to deal with the goods
described therein as though he had physically
delivered them to the buyer; and the buyer may
take the document of title as though he had
actually taken possession and control over the
goods described therein.
Dealings through documents of title
represent a species of constructive delivery, and
therefore operate under the same premise as other
forms of delivery, namely that the seller had
ownership of the goods described thereon to effect
proper delivery.
Nevertheless when the document of title is
negotiable in character, the public policy behind the
State's protective mantle on the effects of
negotiation, the invalidity of the underlying sale or
the actual lack of ownership of the seller of the
goods described therein, would still effectively
20 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
transfer ownership to the buyer who takes the
document of title in due course.
Types of Documents of Title
• Negotiable Documents of Title
◦ goods referred therein are deliverable
“to bearer”, or “to order” of any person
named in such document
• Non-Negotiable Documents of Title
◦ document of title which does not state
that the goods referred to therein are
deliverable either to bearer or to the
order of any person named therein.
Statute of Frauds
the purpose of Art. 1403 (Statute of Frauds) is to
prevent fraud and perjury in the enforcement of
obligations depending for their evidence upon the
unassisted memory of witnesses.
Since the rules under the SoF pertains not to
perfection, but to enforceability and proof, then
they operate only when there is an underlying
contract that is validly perfected.
The following agreements shall be unenforceable
by action, “unless the same, or some note or
memorandum thereof, be in writing, and
subscribed by the party charged, or by his agent.”
• sale agreement which by its terms is not to
be performed within a year from the
making thereof
• an agreement for the sale of goods,
chattels or things in action, at a price not
less than P500.00
• A sale of real property or of an interest
therein.
Exceptions to coverage of statute in sales
contracts:
• when there is a note or memorandum
thereof in writing, and subscribed by the
party charged or his agent
• when there had been partial consummation
of the sale
• when there has been a failure to object to
the presentation of evidence aliunde as to
the existence of a contract
• when sales are effected through electronic
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
commerce
Partial execution under Art. 1403 par. 2 (d) does
not cover land.
Sales Effected as Electronic Commerce
electronic document – that information or the
representation of information, data, figures,
symbols or other modes of written expression,
described or however represented, by which a fact
may be proved or affirmed, which is received,
recorded, transmitted, stored, processed, retrieved
or produced electronically.
For evidentiary purposes, an electronic document
shall be the functional equivalent of a written
document under existing laws.
Under Sec. 16 (1) of the E-Commerce Act, except
as otherwise agreed by the parties, an offer, the
acceptance of an offer and such other elements
required under existing laws for the formation of
contracts may be expressed in, demonstrated and
proved by means of electronic data messages or
electronic documents and no contract shall be
denied on the sole ground that it is in the form of
an electronic data message or electronic
documents.
Reformation
• used when the true intention of the parties
to a perfected and valid contract are not
expressed in the instrument purporting to
embody their agreement by reason of
mistake, fraud, inequitable conduct or
accident
• based on justice and equity
• requisites:
• meeting of the minds of the contracting
parties
• true intention not expressed in the
instrument
• such failure to express their true
intention is due to mistake, fraud,
inequitable conduct, or accident.
21 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Reformation of Annulment of contract the vendor has elected to avail himself of any of
contract these remedies, he is deemed to have renounced
the others.
Presupposes a valid Based on a defective
contract in which there contract in which there Recto Law
has already been a has been no meeting of
meeting of the mind the minds because the
• Art. 1484 specifically provides that if the
consent of one or both seller should foreclose on the mortgage
of the contracting constituted on the thing sold, he shall
parties has been have no further action against the
vitiated. purchaser to recover “any unpaid balance
Remedy when there Not a remedy when of the price and any agreement to the
has been no meeting of there has been fraud, contrary shall be void.
the minds because of mistake, inequitable • The passage of the Recto Law was meant
mistake, fraud, conduct or accident. to remedy the abuses committed in
inequitable conduct, or connection with the foreclosure of chattel
accident mortgages and to prevent mortgagees from
seizing the mortgaged property, buying it at
SALE ON INSTALLMENT foreclosure sale for a low price and then
bringing suit against the mortgagor for a
Remedies available to Vendor deficiency of judgment.
[in case of default in 2 or more payments in a sale • The provisions of the Recto law are
by installment: (Art. 1484)] applicable to financing transactions derived
• Exact fulfillment of the obligation (specific or arising from sales of movables on
performance); installment, even if the underlying contract
◦ if this remedy is availed, the vendor is at issue is a loan because the promissory
not limited to the property under Chattel note had been assigned or negotiated by
mortgage. The judgment he secures the original seller.
can be enforced by attachment and
execution upon the mortgaged Art. 1485, NCC expressly made the provisions of
property, and in case of deficiency, also Art. 1484 applicable to contracts purporting to be
upon any other property not exempt leases of personal property with option to buy,
from execution. when the lessor has deprived the lessee of the
◦ If the specific performance becomes possession or enjoyment of the thing.
impossible, the vendor may still choose
rescission pursuant to the provisions of Maceda Law
Art. 1191, NCC • prior to the passage of the Maceda law, the
• Cancel the sale; legal provisions governing the remedies of
parties covering sales of immovables were
◦ a stipulation of forfeiture of all amounts
Arts. 1191, 1591 and 1592, NCC.
paid in case of cancellation is not
unconscionable. • The Maceda law has declared that whether
it be a contract of sale or a contract to sell,
• Foreclose the chattel mortgage on the
the actual rescission or cancellation thereof
thing sold, if one has been constituted.
shall take place “thirty days from receipt by
the buyer of the notice of cancellation or
Art. 1484 refers only to sale of PERSONAL
the demand for rescission of the contract
property payable in installments.
by a notarial act.”
There remedies are alternative, not cumulative. If

Jmvdg 22 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law
OBLIGATIONS OF THE VENDEE
• to pay
◦ if the seller delivers the article without
asking simultaneous payment, he may
demand payment of the price at any
time after the delivery.
◦ Mere sending of a letter by the buyer
expressing his intention to pay without
the accompanying payment is not
considered a valid tender of payment
◦ The vendee shall owe interest for the
period between the delivery of the thing
and the payment of the price, in the
following three cases:
▪ Should it have been so stipulated;
▪ Should the thing sold and delivered
produce fruits or income;
▪ Should he be in default, from the
time of judicial or extrajudicial
demand for the payment of the
price.
• to accept delivery
◦ place of delivery in case of default of
agreement is the seller's place of
business or at his place of residence
▪ in case of sale of specific goods,
the place where the goods are is
the place of delivery
◦ The buyer is in no obligation to accept
the partial tender, but may refuse the
same and maintain his action for the
breach of the contract as a whole.
◦ The buyer is entitled to a fair
opportunity to inspect or examine the
goods tendered to determine whether
they conform to the contract.
◦ The right to inspect implies the right to
reject them if they are not of the quality
required by the contract.
◦ A denial of the buyer's right to examine
the goods affords a ground for the
recover of the buyer of money
advanced.
◦ There is acceptance when:
▪ the buyer intimates to the seller that
he has accepted the goods; or
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
▪ when he does an act inconsistent
with the ownership of seller
• continued possession of the
goods
• resale of the goods
• offering the goods for sale
• mortgaging the goods
▪ when he retains the good without
intimating to the seller that he has
rejected them.
◦ General rule: acceptance of the goods
by the buyer shall not discharge the
seller from liability in damages or other
legal remedy for breach of any promise
or warranty in the contract of sale.
◦ The buyer must give the seller a notice
within a reasonable time after he knew
or under the circumstances should
have known of the breach
The purchaser will not be released from his
obligation to accept and pay for the goods by
deviations on the part of the seller from the exact
terms of the contract, if the purchaser acquiesces
in such deviations after due notice thereof.
OBLIGATIONS OF VENDOR
To preserve the subject matter
• the goods remain at the sellers risk until
the ownership therein is transferred to the
buyer (Art. 1502)
To deliver the subject matter
• the means by which the seller can transfer
the ownership of the subject matter is by
the mode of tradition or delivery, whether
actual or constructive.
• As a consequence of a valid sale, the
delivery of the subject matter ipso jure
transfers its ownership to the buyer.
• Types of delivery:
◦ actual delivery (Art. 1497)
▪ when the thing sold is placed in
control and possession of the
buyer
▪ although possession is the best
gauge when there is control,
nonetheless, control can take other
23 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
forms other than actual physical
possession
▪ the keyword is control, not
possession
◦ constructive delivery (Art. 1496)
***existence of an agreement
between seller and buyer that latter
is understood to have control over
the subject matter of the sale
▪ execution of a public instrument
• Art. 1498: in the case of both
movables and immovables,
when the sale is made through
a public instrument, the
execution thereof shall be
equivalent to the delivery of the
subject matter of sale if in the
deed the contrary does not
appear or cannot be clearly
inferred
▪ symbolic delivery
• delivery of the keys of the place
or depository where the
movable is stored or kept
• must involve or cover the
subject matter and cannot take
the form relating to the payment
of the purchase price
▪ constitutum possessorium
• takes effect when at the time of
the perfection of the sale, the
seller held possession of the
subject matter in the concept of
an owner, and pursuant to the
contract, the seller continues to
hold physical possession
thereof no longer in the concept
of an owner, but as a lessee or
any other form of possession,
other than in concept of owner
• where the seller remains in
possession of the property in a
different capacity. (San Lorenzo
Dev't Corp vs CA)
▪ traditio brevi manu
• opposite of constitutum
possessorium
• if the buyer already had
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
possession of the object even
before the sale (San Lorenzo
Dev't Corp vs CA)
▪ traditio longa manu
• delivery by mere agreement
• pointing of the hand
• by mere consent or agreement
if the movable sold cannot yet
be transferred to the
possession of the buyer at the
time of the sale (San Lorenzo
Dev't Corp vs CA)
▪ delivery by negotiable document of
title
▪ quasi tradition or delivery of
incorporeal property
• the placing of the titles of
ownership in the possession of
the vendee or the use by the
vendee of his rights, with the
vendor's consent, shall be
understood as a delivery.
▪ On sale or return
• Art. 1502: “When goods are
delivered to the buyer "on sale
or return" to give the buyer an
option to return the goods
instead of paying the price, the
ownership passes to the buyer
on delivery, but he may revest
the ownership in the seller by
returning or tendering the
goods within the time fixed in
the contract, or, if no time has
been fixed, within a reasonable
time.
• When goods are delivered to
the buyer on approval or on trial
or on satisfaction, or other
similar terms, the ownership
therein passes to the buyer:
◦ When he signifies his
approval or acceptance to
the seller or does any other
act adopting the
transaction;
◦ If he does not signify his
24 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
approval or acceptance to
the seller, but retains the
goods without giving notice
of rejection, then if a time
has been fixed for the
return of the goods, on the
expiration of such time,
and, if no time has been
fixed, on the expiration of a
reasonable time. What is a
reasonable time is a
question of fact.
▪ delivery through carrier
To deliver the fruits and accessories
• General rule: (Art. 1537) “The vendor is
bound to deliver the thing sold and its
accessions and accessories in the
condition in which they were upon the
perfection of the contract. All the fruits shall
pertain to the vendee from the day on
which the contract was perfected.”
• Except: if the thing is loss or destroyed
due to a fortuitous event
• the obligation to deliver the thing sold
arises upon the perfection of the contract;
thus, the fruits of the thing shall belong to
the vendee from the time of such perfection
To warrant the subject matter
sale by a person not the owner; (Art. 1505)
• a seller without title cannot transfer a better
title than what he has, unless some
principle of estoppel comes into operation.
• The purchaser of property which has been
stolen from the owner, has been held to
acquire no title thereto even though he
purchases for value and good faith
• estoppel
◦ the owner of goods may by his conduct
be precluded from denying the seller's
authority to sell
◦ for this to apply, the owner must by
word or conduct have caused or
allowed it to appear that the title is in
the seller and the buyer must have
been thereby misled to his damage
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
sale of one having voidable title
• Art. 1506: Where the seller of goods has a
voidable title thereto, but his title has not
been avoided at the time of the sale, the
buyer acquires a good title to the goods,
provided he buys them in good faith, for
value, and without notice of the seller's
defect of title.
Double sale
• considered double sale if the same
property has been sold by the same person
who has an existing right over such
property, to two different persons
• rules of preference:
◦ 1st who recorded it with the the proper
registry of property
◦ should there be no entry, the one who
1st took possession thereof
◦ the one with oldest title, provided there
is good faith
expenses of sale
• Art. 1487: The expenses for the execution
and registration of the sale shall be borne
by the vendor, unless there is a stipulation
to the contrary.
RISK OF LOSS
before perfection:
• risk of loss pertains to the purported seller
since he owns the thing
at the time of perfection:
• Art. 1493, par. 1:If at the time the contract
of sale is perfected, the thing which is the
object of the contract has been entirely
lost, the contract shall be without any
effect.
◦ Exception: in sale that are aleatory, the
vendor will be entitled to the price, even
if the thing had ceased to exist at the
time of the contract.
◦ if the loss is by fault of the vendor, or
he knew at the time of the contract that
it had already been loss, he must pay
damages to the vendee.
25 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law
• Art. 1493, par. 2: If the thing should have
been lost in part only, the vendee may
choose between withdrawing from the
contract and demanding the remaining
part, paying its price in proportion to the
total sum agreed upon.
◦ This applies even when the loss is only
an insignificant part as the law makes
no distinction.
• ARTICLE 1494. Where the parties purport
a sale of specific goods, and the goods
without the knowledge of the seller have
perished in part or have wholly or in a
material part so deteriorated in quality as to
be substantially changed in character, the
buyer may at his option treat the sale:
▪ As avoided; or
▪ As valid in all of the existing goods
or in so much thereof as have not
deteriorated, and as binding the
buyer to pay the agreed price for
the goods in which the ownership
will pass, if the sale was divisible.
◦ Sale of good “as is”, not covered by this
provision.
After perfection, but before delivery:
• although the SC has held that the general
rule under the Philippine jurisdiction is that
after perfection but before delivery, the risk
of loss is borne by the seller under the rule
of res perit domino, the statutory bases for
such doctrine are not clear-cut and
sometimes conflicting.
◦ Art. 1504
◦ Art. 1163 to 1165, cross refer to Art.
1262
◦ Art. 1538, cross refer to Art. 1189
after delivery
• under Art.1504, when ownership of the
goods has been transferred to the buyer,
the goods shall be at the buyer's risk.
• Exception
◦ actual delivery had been delayed
through the fault of either buyer or
seller, the goods are at the risk of the
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
party at fault.
WARRANTIES
express warranty
• makes the seller liable for damages
• requisites
◦ it must be an affirmation of the fact or
any promise by the seller relating to the
subject matter of the sale
◦ the natural tendency of such affirmation
is to induce the buyer to purchase the
thing; and
◦ the buyer purchases the thing relying
on such affirmation or promise thereon
• a mere expression of an opinion does not
signify fraud, unless made by a expert and
the other party has relied on the former's
special knowledge (Art. 1341)
implied warranty
• those which the law constitute parts of
every contract of sale, WON the parties
were aware of them, and WON the parties
intended them.
• Examples:
◦ Warranty that seller has the right to sell
◦ warranty against eviction
◦ warranty against non-apparent
servitude
◦ warranty against hidden defects
buyer's option in case of beach of warranty (Art.
1559)
• accept or keep the goods and set up
against the seller, the breach of warranty
by way of recoupment in diminution or
extinction of the price
• accept or keep the goods and maintain an
action against the seller for damages for
the breach of warranty
• refuse to accept the goods, and maintain
an action against the seller for damages
and breach of warranty
• rescind the contract of sale and refuse to
receive the goods or ifteh goods have
already been received, return them or offer
to return them to the seller and recover the
26 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

price or any part thereof which has been breach but an event that
paid prevents the vendor’s
obligation to convey title
the retailer shall be subsidiarily liable under from acquiring binding
the warranty in case of failure of both the force.
manufacturer and distributor to honor the warranty,
and that in such case would be to proceed.

The warranty rights can be enforced by BULK SALES LAW

presentment to the immediate seller either the intended as a specie of bankruptcy and
warranty card or the official receipt along with the fraudulent transactions law meant to protect suppl
produced to be serviced or returned to the creditors or businessmen against preferential or
immediate seller. No other documentary fraudulent transfers done by merchants.
requirement shall be demanded from the
purchaser. (Art. 68, RA 7394) the primary objective of the law is to
compel the seller in bulk to execute and deliver a
implied warranty shall endure not less than verified lists of his creditors to his buyer, and notice
60 days nor more than 1 year following the sale of of intended sale to be sent in advance to said
the new consumer products (Art. 68, RA 7394) creditors, and to use the proceeds to cover
outstanding liabilities.
REDEMPTION AND
EXTINGUISHMENT OF SALE This law is constitutional as being a valid
exercise of the State's police power (Liwanag vs
Sales are extinguished by the same causes Mengraj)
as all other obligations; and by conventional or
legal redemption. transactions covered by the law
• Extraordinary sale of goods. A stock of
RESCISSION goods, wares, merchandise, provisions, or
material NOT in the ordinary course of
Art. 1191 Art 1383
trade and the regular prosecution of the
While Article 1191 uses rescission under Article business of the seller, mortgagor,
the term rescission, the 1383 is a subsidiary transferor, or assignor
original term used in action limited to cases • Extraordinary sale of fixtures and
Article 1124 of the old of rescission for lesion equipments. All or substantially all of the
Civil Code, from which under Article 1381 of fixtures and equipment used in or about the
Article 1191 was based, the New Civil Code business of the seller, mortgagor,
was resolution. transferor, or assignor
Resolution is a principal • Sale of business enterprise. All, or
action that is based on substantially all, of the business or trade
breach of a party, theretofore conducted by the seller,
the obligor’s failure to mortgagor, transferor, or assignor.
comply with an
obligation already WON the transaction is meant to defraud creditors,
extant, not a failure of a or WON the seller is in a state of solvency or
condition to render insolvency, would be irrelevant; as long as the
binding that obligation. transaction falls within any of the 3 defined
Failure to pay, in this transactions, it s covered by the law.
instance, is not even a
Obligations of seller/encumbrancers when

Jmvdg 27 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law
transaction is a bulk sale:
• to deliver a sworn statement of listing of
creditors
• pro-rata application of proceeds
• written advance disclosure to creditors
• bulk transfer for nominal value
consequences of violation of the law:
• imprisonment for not less than 6 months to
more than 5 years or fine in any sum not
exceeding P5k or by both such fine and
imprisonment, in the discretion of the court.
RETAIL TRADE LIBERALIZATION ACT
Section 2. Declaration of Policy. – It is the policy of
the State to promote consumer welfare in attracting
promoting and welcoming productive investment
that will bring down price for the Filipino consumer,
create more jobs, promote tourism, assist small
manufacturers, stimulate economic growth and
enable Philippine goods and services to become
globally competitive through the liberalization of the
retail trade sector.
Pursuant to this policy, the Philippine retail industry
is hereby liberalized to encourage Filipino and
competitive retail trade sector in the interest of
empower the Filipino consumer through lower
prices, higher quality goods, better services and
wider choices.
Repealed Retail Trade Nationalization Law –
nationalized the retail trade system and which
allowed only citizens and juridical entities which
are 100% Filipinos to engage in retail trade.
RTLA liberalized the Philippine retail industry to
encourage Filipino and foreign investors to forge
an efficient and competitive retail trade sector in
the interest of empowering the Filipino consumer
through lower prices, higher quality goods, better
services, and wider choices.
A natural born citizen of the Philippines who has
lots his Philippine citizenship but who resides in the
Philippines shall be granted the same rights as
Filipino citizens for purposes of retail trade under
the RTLA.
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
Retail trade
• any act, occupation or calling of habitually
selling direct to the general public
merchandise, commodities or goods for
consumption.
• Exempted transactions
◦ sales by a manufactirer, processor,
laborer or worker to the general public
of the products manufactured,
processed or produced by him if his
capital does not exceed P100k
◦ sale by a farmer or agriculturist of the
products of his farm, regardless of
capital
◦ sales in restaurant operations by a
hotel owner or inn-keeper irrespective
of the amount of capital, provided that
the restaurant is incidental t the hotel
business
◦ sales to the general public, through a
single outlet owned by a manufacturer
of products manufactured, processed
or assembled in the Philippines,
irrespective of capitalization
◦ sales to industrial and commercial
users or consumers who use the
products bought by them to render
service o the general public and/or
produce or manufacture of goods which
are in turn sold by them, and
◦ sales to the government and/or its
agencies and GOCCs.
Categories of Retail Trade Enterprises
• Category A – with paid up capital of the
peso equivalebt of less than US$2.5M
• Category B – minimum paid up capital of
the peso equivalent of US$2.5M but less
than US$7.5M, procided in no case shall
the investments for establishing a store be
less than the peso equivalent of US$30,k
• Category C – paid up capital of the peso
equialent of US$7.5M or more provided
that in no case shall the investments for
establishing a store be less than the peso
equivalent of US$380k
28 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

• Category D – specializing in high end or In order to constitute Ownership is not

luxury products with a paid up capital of the usufruct, one must be required to constitute
peso equivalent of US$250k per store the owner of the thing lease (case of sublease)
Owner allows the Lessor places and
CONSUMER ACT OF THE PHILIPPINES
usufructuary to use and maintain the lessee in
Article 2. Declaration of Basic Policy. – It is the
enjoy the property the enjoyment of the
policy of the State to protect the interests of the
thing
consumer, promote his general welfare and to
establish standards of conduct for business and Includes all possible May be limited to
industry. Towards this end, the State shall uses and manner of particular uses by the
implement measures to achieve the following enjoyment of the contract
objectives: property
(a) protection against hazards to health and May be for an indefinite Must be for a
safety; period of time determinate period
(b) protection against deceptive, unfair and
unconscionable sales acts and practices;
(c) provision of information and education to Lease of a thing:
facilitate sound choice and the proper • one of the parties binds himself to give to
exercise of rights by the consumer; another the enjoyment or use of a thing for
(d) provision of adequate rights and means of a price certain and for a period which may
redress; and be definite or indefinite
(e) involvement of consumer representatives • subject matter must be within the
in the formulation of social and economic commerce of man, otherwise it is void
policies. • the lease of a building naturally includes
the lease of the lot
PART 2: LEASE • special characteristics
◦ essential purpose is to transmit the use
The contract of lease may be of a thing, or enjoyment of a thing
work, or service. ◦ it is consensual
Characteristics: ◦ it is onerous
• temporary duration ◦ its price is fixed in relation to the period
• onerous of use or enjoyment
• the price is fixed according to the duration ◦ it is temporary
of the contract. • the rent may be paid in money, or in fruits,
or in some other useful things
Sale Lease • rent must be serious or substantial
There is a permanent There is a transfer of • duration of lease must not go beyond 99
transmission of use or enjoyment of the years
ownership of the thing thing, and only for a
sold determinate period of General rule: consumable goods cannot be the
time subject of a contract of lease,
exceptions:
• when they are merely to be exhibited or
Usufruct Lease • when they are accessory to an industrial
Both involves the use and enjoyment of the thing establishment
Always is a real right Real right only when it is lease of work or service
registered
• one of the parties binds himself to execute

Jmvdg 29 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

a piece of work or to render to the other the necessary repairs in order to keep it
some service for a price certain suitable for the use to which it has been
Lease of services Agency devoted, unless there is a stipulation to the
contrary;
There is no Principle of ◦ this obligation of the lessor may be
representation representation is waived by the lessee thus relieving the
present former of his duty to make such repairs
There must be a price Gratuitous ◦ lessee shall make notifications to the
lessor for the latter to make the
Will of both parties is The will of one party is
necessary repairs
necessary for the sufficient to extinguish a
extinguishment of the contract of agency. ◦ in default of special stipulation, the
obligation custom of the place shall be observed
with regard to the kinds of repairs on
urban property (Art. 1686)
The lessee cannot assign the lease without the
• To maintain the lessee in the peaceful and
consent of the lessor.
adequate enjoyment of the lease for the
entire duration of the contract.
Assignment Sublease ◦ The non-fulfillment by the lessor of this
Transfer to a 3rd person Merely another contract obligation releases the lessee from the
of the rights and of lease obligation to pay what is stipulated in
obligations arising from the contract from the date he ceased to
the contract occupy the premises
◦ this duty of the lessor is merely a
Sale of a lessee's right The original lessee
warranty that the lessee shall not be
becomes in turn a
disturbed in his legal, not physical
lessor
possession
Original lessee is The original lease ◦ the lessee has the obligation to notify
released from his contract subsists and is the lessor of the necessity of making
obligations under the binding on the lessee the repairs.
contract ◦ The remedy of the tenants where
Consent of the lessor is Consent of lessor may lessor refuses to make an urgent repair
needed or may not be secured is to make the urgent repairs
themselves and charge the costs
thereof to lessor.
Obligations of the Lessor
• To deliver the thing which is the object of ◦ The lessor is not obliged to answer for
the contract in such a condition as to a mere act of trespass which a third
render it fit for the use intended; person may cause on the use of the
thing leased; but the lessee shall have
◦ if the dwelling place or building is in
a direct action against the intruder. (Art.
such a condition that its use brings
1664)
imminent and serious danger to life or
health, the lessee may terminate the ▪ trespass in fact
lease at one by informing the lessor • de mero hecho
◦ the lessor cannot alter the form of the • no juridic intention on the part
thing leased in such a way as to impair of the trespasser
the use to which the thing is devoted • affects only the use of the
under the terms of the leased. property leased and therefore it
• To make on the same during the lease all is incumbent upon the lessee to

Jmvdg 30 1st Sem/A.Y. 2010-2011

 Sales and Lease
AUF School of Law
repel it
• the lessor is not liable for this
kind of trespass
▪ trespass in law
• disturbance of the possession
warranted by the lessor
• by judicial or extra-judicial
acts3rd person questioned the
rights of the lessee to enjoy the
property or the lease, and
claims it for himself by virtue of
a right pertaining to him.
• The lessor is liable to the
lessee for the disturbance of
the latter's possession
Obligations of the Lessee
• To pay the price of the lease according to
the terms stipulated;
◦ this obligation arises only where the
contract has been actually carried into
effect by the delivery of the thing
leased
◦ only the owner has the right to fix the
rent
• To use the thing leased as a diligent father
of a family, devoting it to the use stipulated;
and in the absence of stipulation, to that
which may be inferred from the nature of
the thing leased, according to the custom
of the place;
• To pay expenses for the deed of lease.
Lease with a fix term
• ceases upon the day fixed without need of
demand
• when a contract contains a provision that
the term of the lease may be extended for
a further similar period, the extension is to
be understood as having been promised to
the lessee and the latter, without need of
further consent of the lessor can continue
the lease and occupy the premises on
notice to the lessor
• If the lessee continues enjoying the thing
after the expiration of the contract, over the
lessor's objection, the former shall be
subject to the responsibilities of a
Jmvdg
(outline by Atty. Marianne Beltran-Angeles)
possessor in bad faith. (ARTICLE 1671)
• In case of an implied new lease, the
obligations contracted by a third person for
the security of the principal contract shall
cease with respect to the new lease.
(ARTICLE 1672)
“If the period for the lease has not been fixed, it is
understood to be from year to year, if the rent
agreed upon is annual; from month to month, if it is
monthly; from week to week, if the rent is weekly;
and from day to day, if the rent is to be paid daily.
However, even though a monthly rent is paid, and
no period for the lease has been set, the courts
may fix a longer term for the lease after the lessee
has occupied the premises for over one year. If the
rent is weekly, the courts may likewise determine a
longer period after the lessee has been in
possession for over six months. In case of daily
rent, the courts may also fix a longer period after
the lessee has stayed in the place for over one
month”. (ARTICLE 1687)
Payment shall be made in the place designated in
the obligation.
There being no express stipulation and if the
undertaking is to deliver a determinate thing, the
payment shall be made wherever the thing might
be at the moment the obligation was constituted.
In any other case the place of payment shall be the
domicile of the debtor.
If the debtor changes his domicile in bad faith or
after he has incurred in delay, the additional
expenses shall be borne by him.
These provisions are without prejudice to venue
under the Rules of Court. (ARTICLE 1251)
31 1st Sem/A.Y. 2010-2011
 Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Sources:
• Civil Code of the Philippines, Book V,
Tolentino, 1992
• Civil Code of the Philippines, Book II,
Tolentino, 1992
• Law on Sales, 2009 ed., Cesar L.
Villanueva
• Civil Code of the Philippines, Book V,
Paras
• Comments and Jurisprudence on
Obligations and Contracts, 11th revised
Edition, Jurado

Jmvdg 32 1st Sem/A.Y. 2010-2011