CRUZ, EDEVA ANICA B.

AUSL
REVIEWER – SALES 2-/7/17
BOOK: VILLANUEVA-TIANSAY

CHAPTER 1 ----- NATURE OF SALES

 SALE – the seller obligates himself to transfer the ownership and to deliver a possession of a determinate
thing; the buyer obligates himself to pay thereof a price certain in money or equivalent. *NOTE : Both are
obligations to give
1. OBLIGATION OF THE SELLER
-Transfer the ownership
-Deliver the possession of the subject matter
2. OBLIGATION OF THE BUYER
-Pay the price
 Subject matter – determinate thing -- -may be generic which are at least determinable

Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.

Article 1460. A thing is determinate when it is particularly designated or physically segregated from all others
of the same class. The requisites that a thing be determinate is satisfied if at the time the contract is entered
into, the thing is capable of being made determinate without the necessity of a new or further agreement
between the parties.

 Essential elements of a valid contract of sale

1. Consent – meeting of the minds to transfer ownership in exchange for the price
2. Subject matter
3. Price – money or its equivalent
-All elements present – perfected sale, validity is not affected (by the fact that there is no written deed of sale)
-Some of the elements are not present; defect constitutes a vitiation of consent – void, no contract situation
- All elements present but with defect or illegality – voidable

 Stages in life of sale

1. Policitacion – negotiation or preparation stage; PERIOD: from the time the contracting
parties indicate their interest to the time the contract is perfected
2. Perfection – conception or birth; concurrence of the essential elements
3. Consummation – death, delivery of a thing; perform their respective undertaking under
the contract of sale, extinguishment thereof
 Essential characteristics of sale
1. Nominate and Principal
-particular name in law (Law on Sales)
-can stand on its own
-NOTE: title given to it by the parties is not as significant as its substance
2. Consensual
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 -perfected by mere consent at the moment of meeting of minds
*VALID SALE but subject to reformation – real price not stated in the contract
*VOID – price agreed is simulated
*NON PERFORMANCE – specific performance or rescission with damages
-can be affected by modalities that are stipulated in a contract: suspensive term or
condition
3. Bilateral and reciprocal
-imposes obligation on both parties
*RECIPROCAL – arise from the same cause and in which each party is a debtor and creditor
of the other, obligation of one is dependent upon the obligation of the other
*LEGAL EFFECTS OF SALE BEING A BILATERAL ONTRACT COMPOSED OF RECIPROCAL
OBLIGATION:
-Power to rescind is implied, need not to be stipulated
-neither party incurs delay if the other party does not comply
4. Onerous
-Imposes a valuable consideration as a prestation – a price certain in money or its
equivalent
-“the greater reciprocity of interests” rules of interpretation of sale in favour of this
5. Commutative
-thing of value is exchanged for equal value
-no requirement that the price to be equal, requires is for the seller to accept
-party believes in all honesty that he is receiving a good value for what he transferred
6. Sale is a form of “Title” and not a “Mode”
-delivery or tradition is the mode to transfer ownership or possession to the buyer
-sale consummated upon delivery of the property, remedy-rescission
*MODE – process by which a dominion or ownership is created, transferred or destroyed
*TITLE – only constitutes a legal basis by which to affect dominion or ownership
 Sale distinguished from other contracts
1. Donation – gratuitous; Sale – onerous
2. Barter – one of the parties binds himself to give one thing in consideration of the other’s promise to
give another thing; Sale – deliver a things in consideration of the other’s undertaking to pay the price in
money or its equivalent
3. Dacion en Pago – debtor offers another thing to the creditor who accepts it as equivalent of payment of
an outstanding debt
4. Contract for a piece work – the contractor binds himself to execute a piece of work for the employer in
consideration of a certain price or compensation, not allow an action for specific performance, not
governed by statute of fraud; Sale – action for specific performance, subject matter is generic or
indeterminate

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

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 5. Contract of Agency – person binds himself to render some service or to do something in
representation or on behalf of the principal, with the consent or authority of the latter,
establishes a representative, revocable, agent is not obliged to pay the price, agent does not
become the owner of the thing, agent binds himself to the warranties of the seller, agent is
disqualified from receiving any personal profit, exempted from all liabilities
6. Contract of lease – lessor binds himself to give another the enjoyment or use of a thing for a
price certain and for a period which may be definite or indefinite

CHAPTER 2 ----- PARTIES TO THE CONTRACT OF SALE

 GENERAL RULE – Any person who has “capacity to act” or “the power to do acts with legal effects” may
enter into a contract of sale as a seller or buyer
 VOIDABLE subject to annulment or ratification - MINORS, INSANE AND DEMENTED PERSON, DEAF
MUTES WHO DO NOT KNOW HOW TO WRITE
-Annulment – cannot be instituted by the person capacitated during contract
-disqualified from being parties to a sale
*entered during lucid intervals by insane or demented persons – VALID
* entered during drunkenness or hypnotic spell – VOIDABLE
-Incapacitated Person not obliges to make any restitution except he has been benefiter by the thing or
price
 NECESSARIES - everything indispensable for sustenance, dwelling, clothing, medical attendance,
education and transportation, in keeping with the financial capacity of the family. The education of the
person entitled to be supported referred to in the preceding paragraph shall include 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.
-VALID SALE if necessaries are sold
*to be valid:
1. perfection
2.delivery of subject necessaries
-VOIDABLE (valid until annulled) – minor without legal capacity to give consent to a sale
 Senility and Serious Illness
-VOID – age or mental faculties prevent the person to properly and intelligently protect her property
rights is deemed incapacitated (no meeting of minds, deed was forged)
 SALES BY AND BETWEEN THE SPOUSE
1. Sales with third parties
-VOID (conjugal partnership) – without authority of the court or written consent of the spouse,
continuing offer on the part of consenting spouse, lack of full consent
*EXCEPTION – without spouse consent of such sale is necessary to answer conjugal
liabilities
2. Sales between spouses
-(1490) Spouses cannot sell property to each other *EXCEPT
1. Separation of property was agreed upon in marriage settlements
2. Judicial Decree for the separation of property
*Persons who can question the sales:
1. Heirs of either of the spouse who have been prejudiced
2. Prior creditors
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 3. State – when it comes to taxes
-Rationale:
1. Prevent spouse from defrauding his creditors
2. To avoid situation where dominant spouse take advantage of weaker spouse
3. Avoid prohibition against donation
3. Applicability of incapacity to common law spouse
-Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the
spouses during the marriage shall be void, except moderate gifts which the spouses may give
each other on the occasion of any family rejoicing. The prohibition shall also apply to persons
living together as husband and wife without a valid marriage.
-can apply without the benefit of a valid marriage
 SPECIFIC INCAPACITY MANDATED BY LAW

ARTICLE 1491. The following persons cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another:

(1) The guardian, the property of the person or
persons who may be under his guardianship;
(2) Agents, the property whose administration
or sale may have been intrusted to them,
unless the consent of the principal has been
given;
-appointed or confirmed by court
-VOID – re-sale of property to the guardian
herself
-VALID and BINDING – made with express
consent of their principals and no exception

(3) Executors and administrators, the property -VOID but can be RATIFIED thru a new
of the estate under administration; contract, will be valid from its execution and
cannot retroact from the first contract
-appointed or confirmed by court
(4) Public officers and employees, the property -VOID cannot ratify due damage to public
of the State or of any subdivision thereof, or of service
any government-owned or controlled
corporation, or institution, the administration
of which has been entrusted to them; this
provision shall apply to judges and
government experts who, in any manner
whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, -VOID FROM THE BEGINNING AND
clerks of superior and inferior courts, and INEXISTENT, cannot be ratified - lawyer of
other officers and employees connected with property of a client in litigation
the administration of justice, the property and -Involve in administration of justice -
rights in litigation or levied upon an execution applicable only during the period of litigation
before the court within whose jurisdiction or and property is the subject of litigation
territory they exercise their respective
functions; this prohibition includes the act of
acquiring by assignment and shall apply to
lawyers, with respect to the property and
rights which may be the object of any litigation
in which they may take part by virtue of their
profession;
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 (6) Any others specially disqualified by law.

ARTICLE 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption,
compromises and renunciations.

 Any oarty may invoke the inexistence of the contract.

 Contract is full executor, o party need bring an action to declare its nullity, but if any party should bring
an action to enforce it, the other party can simply set up nullity as defense.
 Fraud or Lesion is not a factor of application of 1491.
 RATIONALE – Cannot have be allowed to have any inducement to neglect his ward’s interest
 NOT WITHIN THE COVERAGE OF THE PROHIBITION - brokers, hereditary rights insofar as the
administrator or executor of the estate of the deceased, contingent fee after judgement
 PENDENCY OF LITIGATION – litigation has finally been terminated and negotiation and bargaining
between the lawyer and client on the property that was the subject of litigation can be exercised

CHAPTER 3 ----- SUBJECT MATTER

 REQUISITE OF A VALID SUBJECT MATTER

1. Possible thing – existing, potential existence, future thing or even contingent, subject to
resolutory condition
2. Licit – not outside the commerce of men and all rights are not intransmissible
3. Determinate or at least Determinable – particularly designated or physically segregated from all
others of the same class, defense of force majeure is applicable

*DETERMINABLE ONLY WHEN:

A. Capable of being made determinate, capacity to segregate test

B. No further agreement test
 VOID or NO CONTACTS OF SALE ---- restoration of what has been given is possible if characterized by
good faith and fair dealing
1. fails to meet the requisites of a valid subject matter
2. Impossible thing
3. Illicit
4. Kind and quantity that cannot be determined without need of a new agreement of the parties
 IN PARI DELICTO – illegality of the cause or object and constitutes a criminal offense, both parties have
no cause of action against each other.

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:

(1) When the fault is on the part of both contracting parties, neither may recover what he has given by
virtue of the contract, or demand the performance of the other's undertaking;

(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason
of the contract, or ask for the fulfilment of what has been promised him. The other, who is not at fault,
may demand the return of what he has given without any obligation to comply his promise.
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 Art. 1416. When the agreement is not illegal per se but is merely prohibited, and the prohibition by the
law is designated for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover
what he has paid or delivered.

ARTICLE 1462. The goods which form the subject of a contract of sale may be either existing goods,
owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after
the perfection of the contract of sale, in this Title called "future goods."

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

 EMPTIO REI SPERATAE – contract covering future things and subject to suspensive condition that the
subject matter will come into an existence; DOES NOT COME TO EXISTENCE – extinguished contract
(time expires or event will not take place)

ARTICLE 1461. Things having a potential existence may be the object of the contract of sale.

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

The sale of a vain hope or expectancy is void.

 EMPTIO SPEI – commutativeness of a contract of sale seems not to be present

 Defect of deed of sale would not work to invalidate the contracts where all the essential elements for
its validity are present and can be proven
 SUPPLY AGREEMENT – obligation of the seller and buyer is to enter into one or series of contracts of
sale based thereon when they come to agree upon the quantity

ARTICLE 1463. The sole owner of a thing may sell an undivided interest therein. – it would result co-
ownership with the buyer over the subject matter

 Seller need not to be the owner at the time of perfection, provided he is the owner at the time of
delivery. *EXCEPTION – judicial sales

CHAPTER 4 ----- PRICE AND OTHER CONSIDERATION

 PRICE – sum certain in money or its equivalent, equivalent of the thing sold and every incident taken
into consideration for the fixing of rge price put to the debit of the buyer and agreed by him
*REQUISITE for valid price
A. Real – there is 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
B. Must be in money or its equivalent
C. Certain or ascertainable
 Seller cannot unilaterally increase the price. Buyer could not unilaterally withdraw from a valid sale.
 Non payment of the price – not grant the seller to rescind the sale

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 IN PARI DELICTO NONOVITAR ACTIO – price is completely simulated and denies all recovery of the
guilty parties, applies where the nullity arises from the illegality of the consideration or the purpose of
the contract, not apply to inexistent and void contracts where the price is merely simulated
 PRICE IS FALSE – real price upon which the minds of the parties had met, and what is stated in the
covering deed is not the one intended to be paid; VALID contract subject to reformation
 FALSE CONSIDERATION – has in effect a real consideration but the same is not the one stated in the
document
 FAILURE TO PAY THE CONSIDERATION – results in a right to demand the fulfilment or cancellation of
the obligation under an existing valid contract
 Price stipulated in the covering instrument is relatively simulated the underlying sale would still be valid
and enforceable provided there is another consideration to support the sale
 VOIDABLE – no intention to enter into a sale
 VOID SALE:
1. Price is simulated, neither party had any intention that the amount will be paid
2. Absolute Simulated contract – no intention to be bound by the contract, parties may recover
from each other
3. NO REAL CONSIDERATION – no consideration and not one that merely states a false
consideration; incurable and could not be subject to prescription
4. No consideration or price agreed upon
5. LACK OF CONSIDERATION – purchase price has been paid but in fact never been paid (BADGE
OF SIMULATION) (VOID AB INITIO) - --- delivery of the subject matter does not transfer
ownership

ARTICLE 1468. If the consideration of the contract consists partly in money, and partly in another thing,
the transaction shall be characterized by the manifest intention of the parties. If such intention does not
clearly appear, it shall be considered a barter if the value of the thing given as a part of the
consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. --- VALID
CONTRACT OF SALE