Law on Sales

P E R F EC T I O N S TA G E
FORMS OF SALE
W H E N S A L E I S S I M U L AT E D
Perfection Stage: Offer and Acceptance
A contract of sale is “born” from the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price and the manner of its payment.
A Sale is at once perfected when a person (the seller) obligates himself for a price certain, to
deliver and to transfer ownership of a specified thing or right to another (the buyer) over which
the latter agrees.
Consent may be vitiated by any of the following: mistake, violence, intimidation, undue
influence and fraud.
Can only be a source of an obligation or serve as a binding Juridical relation once it has been
perfected.
Perfection Stage: Offer and Acceptance
Consent that Perfects the Sale
Article 1475 of the Civil Code provides that the sale is perfected at the moment there is a
“meeting of minds” upon the thing which is the object of the contract and upon the price.
It stresses that the offer must be certain, and the acceptance absolute — it must be plain,
unequivocal, unconditional and without variance of any sort from the proposal
Offer must be Price Certain
For the perfection of a valid sale, there must be a “meeting of minds,” which means that an “offer
certain” is met by an “absolute acceptance;” any other offer which is not certain, no matter how
absolutely it is accepted, can never give rise to a valid sale.
Certain when subject matter is licit, and determinate or at least determinable; and with a price
that has the requisites of being real, money or its equivalent.
Perfection Stage: Offer and Acceptance
Acceptance Must Be “Absolute”
Zayco v. Serra, held that in order for an acceptance to have the effect of converting an offer to sell
into a perfected contract, it must be plain and unconditional, and it will not be so, if it involves
any new proposition, for in that case, it will not be in conformity with the offer, which is what
gives rise to the birth of the contract.
A. When “Deviation” is allowed
The Court held that there was a perfected sale that arose from the exchange of correspondences,
even if literally, there was a correction or modification contained in the acceptance, changes
were not substantial, but merely clarificatory.
Perfection Stage: Offer and Acceptance
B. Acceptance May Be Express or Implied
Acceptance may be evidenced by some act, or conduct, communicated to the offeror, either in a
formal or an informal manner, that clearly manifest the intention or determination to accept the
offer to buy or sell.
C. Acceptance by Letter or Telegram
Acceptance made by letter or telegram does not bind the offeror except from the time it came
to his knowledge. Therefore, even if an acceptance has been mailed or sent to the offeror, the
offeror may still withdraw his offer anytime before he has knowledge of the acceptance.
D. Acceptance Subject to Suspensive Condition
Even when there is a meeting of minds as to the subject matter and the price, there is deemed
to be no perfected sale, if the sale is subject to suspensive condition.
Perfection Stage: Offer and Acceptance
E. Acceptance in Auction Sales
A sale by auction is perfected when the auctioneer announces its perfection by the fall of the
hammer, or in other customary manner. Until such announcement is made, any bidder may
retract his bid, and the auctioneer may withdraw the goods from the sale, unless the auction has
been announced to be without reserve.
Perfection Stage: Offer and Acceptance
Earnest Money
A. Function of Earnest Money
Under Article 1482 of the Civil Code, whenever earnest money is given in a sale, it shall be
considered as part of the price and as proof of the perfection of the contract.
B. Varying Treatments of Earnest Money
The concept of “earnest money” given under Article 1482 of the Civil Code, is the preferred
concept under the law, but nothing prevents the parties to the sale to treat earnest money
differently.
Perfection Stage: Offer and Acceptance
C. Distinguishing Earnest Money and Option Money
Adelfa Properties, Inc. v. Court of Appeals,
(a) Earnest money is part of the purchase price, while option money is the money given as a distinct consideration
for an option contract;
(b) Earnest money is given only where there is already a sale, while option money applies to a sale not yet
perfected; and
(c) When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives
option money, he is not required to buy, but may even forfeit it depending on the terms of the option.
D. Effect of Rescission on Earnest Money Received
In the absence of a specific stipulation, the seller of real estate cannot keep the earnest money received to
answer for the damages sustained in the event the sale fails due to the fault of the prospective buyer.
Perfection Stage: Offer and Acceptance
5. Place of Perfection
Generally, the sale’s place of perfection is where there is a meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. In case of acceptance through letter or telegram, it is
presumed that the contract was entered into in the place where the offer was made.
6. Expenses of Execution and Registration
In general, the expenses for the execution and registration of the sale shall be borne by the seller, unless there is
a stipulation to the contrary.
7. Performance Should Not Affect Perfection
Since sale is a consensual contract, then the ability of the parties to perform the contract (after perfection) does
not affect the perfection of the contract, which occurs when the minds of the parties have met as to the subject
matter, price and terms of payment.
Form of Sales
1. Form Not Generally Important for Validity of Sale
Article 1483 provides that, subject to the provisions of the Statute of Frauds, “a contract of sale may
be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be
inferred from the conduct of the parties.” In other words, Article 1483 stresses that sale being a
consensual contract, no form is really required for its validity.
a. Requirement for Public Instrument for Immovables under Article 1358
“acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property must appear in a public document;”
b. Function of Deed of Sale
The deed of sale operates as a formal or symbolic delivery of the property sold and authorizes the
buyer to use the document as proof of ownership.
Form of Sales
2. When Form of Sale Affects Its Validity
The general rule therefore is that form is not important for the validity of a sale, except in the
following instances:
(a) The power to sell a piece of land or interest therein must be in writing, otherwise, the sale
thereof by the agent (even when the sale itself is in writing) would be void;
(b) Sale of large cattle must be in writing, otherwise the sale would be void; and no sale of large
cattle shall be valid unless the sale is registered with the municipal treasurer who shall issue a
certificate of transfer;
and (c) Sale of land by “non-muslim hill tribe cultural minorities all throughout the Philippines”
is void if not approved by the National Commission on Indigenous Peoples (NCIP).
Form of Sales
3. STATUTE OF FRAUDS: When form is important for enforceability.
a. Nature and Purpose of Statute of Frauds
It is descriptive of the statutes which require certain classes of contracts, such as agreements for
the sale of real property, to be in writing, the purpose being to prevent fraud and perjury in the
enforcement of obligations
Form of Sales
b. Sales Coverage in Statute of Frauds
Insofar as applicable to sales, Article 1403(2) of the Civil Code provides that 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:”
(a) A sale agreement which by its terms is not to be performed within a year from the making
thereof;
(b) An agreement for the sale of goods, chattels or things in action, at a price not less than
5500.00; and
(c) A sale of real property or of an interest therein.
Form of Sales
c. Exceptions to Coverage of Statute in Sales Contracts
Although a sale transaction may fall under any of the foregoing covered transactions under the
Statute of Frauds, the following sales would still not be covered and would be enforceable:
(a) When there is a note or memorandum thereof in writing, and subscribed by the party
charged or his agent
(b) When there has been partial consummation of the sale
(c) When there has been a failure to object to the presentation of evidence aliunde as to the
existence of a contract;
(d) When sales are effected through electronic commerce.
Form of Sales
d. Nature of Memorandum
Article 1403 of the Civil Code clearly states the nature of the memorandum that would take the
transaction out of the coverage of the Statute of Frauds against proof by oral evidence: it must
be in writing and subscribed by the party charged. The party charged of course would either be
the seller or buyer against whom the sale is sought to be enforced.
e. Partial Performance
Partial performance of the sale would take the same outside the coverage of the Statute of
Frauds. When it comes to sale of goods, chattels, or things in action, Article 1403 of the Civil
Code specifically states that the Statute of Frauds shall not apply when “the buyer accept[s] and
receive[s] a part of such goods and chattels, or the evidence, or some of them, of such things in
action, or pay at the time some part of the purchase money.”
Form of Sales
f. Effect of Partial Execution on Third Parties
The doctrine of partial execution when covering sale of real properties cannot be applied to
third parties, who are granted legal remedies against the contract.

g. Nature and Coverage of Partial Performance

Partial performance to constitute as an exception to the Statute of Frauds must by itself pertain
to the subject matter or to the price of the purported sale, and must involve an act or
“complicity” on the party sought to be changed.
Form of Sales
h. Waiver of Provisions of Statute of Frauds
The third ground by which a covered sale contract would be enforceable in spite of the fact that
it is not contained in a deed, or a note or memorandum, is when the party against whom such
oral contract is sought to be proved, fails to object during trial to the presentation of oral
evidence to prove the contract.
Said business forms are commonly recognized in ordinary commercial transactions as valid
between the parties and at the very least they serve as an acknowledgment that a business
transaction has in fact transpired.
Form of Sales
4. Sales Effect
a. Legal Recognition of Electronic Data Message
Information shall not be denied validity or enforceability solely on the ground that it is in the
form of an electronic data message purporting to give rise to such legal effect, or that it is
merely incorporated by reference in that electronic data.
b. Legal Recognition of Electronic Documents
Electronic documents shall have the legal effect, validity or enforceability as any other document
or legal writing,
Form of Sales
c. Legal Recognition of Electronic Signatures
An electronic signature on the electronic document shall be equivalent to the signature of a person
on a written document if the signature is an electronic signature and proved by showing that a
prescribed procedure.
d. Presumption Relating to Electronic Signatures
Provides that in any proceedings involving an electronic signature, there are certain presumptions.
e. Consummation of Electronic Transactions
Electronic transactions made through networking among banks, or linkages thereof with other entities
or networks, and vice versa, shall be deemed consummated upon the actual dispensing of cash or the
debit of one account and the corresponding credit to another
Form of Sales
f. Electronic Commerce in Carriage of Goods
The Electronic Commerce Acts is expressly applicable to any action in connection with, or in
pursuance of, a contract of carriage of goods.
g. Rule on Transport Documents
The Act provides for the following rules when it covers the transport documents for carriage of
goods effected through electronic commerce.
WHEN SALE COMPLETELY SIMULATED
When a sale is absolutely simulated, then it is completely void and non-existent.
The requisites for simulation are:
(a) An outward declaration of will different from the will of the parties;
(b) The false appearance must have been intended by mutual agreement; and
(c) The purpose is to deceive third persons.