BSLAW 3 MIDTERM REVIEWER

SALE

Is a contract where one party (seller or vendor) obligates himself to transfer the ownership of and to
deliver a determinate thing, while the other party (buyer or vendee) obligates himself to pay for said
thing a price certain in money or its equivalent

Essential Characteristics of a Contract of Sale

(1) Consensual
– contract is perfected by mere consent;

Delivery or payment is not essential for perfection however, the contract of sale is consummated
upon delivery and payment. (Art. 1475)

(2) Bilateral reciprocal

– both parties are bound by obligations dependent upon each other;

(3) Onerous

– because to acquire rights, valuable considerations must be given;

(4) Commutative

– the values exchanged are almost equivalent to each other

(5) Principal

– for the contract of sale to validly exist, there is no necessity for it to depend upon the
existence of another contract;

(6) Nominate

– the Code refers to it by a special designation or name, that is the contract of sale.

Essential Elements of the Contract of Sale:

(a) Consent or meeting of the minds;

(b) Determinate subject matter;

The object must be determinate, that is specific, but it is not essential really that at the time of
perfection, the object be really specific. It is sufficient that it be capable of being determinate
without need of any new agreement. Thus, there can be a sale of 20 kilos of sugar of a named
quality.

(c) Price certain in money or its equivalent.

Requisites:

Consent, Object, Consideration (COC)

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STAGES OF THE CONTRACT OF SALE:

(a) Generation or negotiation;

(b) perfection

(c) Consummation.

SALES VS. DATION IN PAYMENT

Transfer of Ownership

-Although the seller must be the owner, he need not be the owner at the time of the perfection of
the contract. It is sufficient that he is the owner at the time the object is delivered, otherwise he
may be held liable for breach of warranty against eviction. Be it noted that the contract of sale by
itself is not a mode of acquiring ownership.

Art. 1459. Two Rules pertaining to Right to Transfer Ownership:

(a) The object must be licit (lawful or within the commerce of man)

(b) The vendor must have the right to transfer ownership at the time the object is delivered.

CONTRACT OF SALE
VS.
CONTRACT TO SELL
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• Sale of a thing having a potential existence (future thing) – VALID

Ex. Sale of all my rice harvest next year.

• (a) The sale of an expected thing (emptio rei sperati) - VALID

• (b) The sale of the hope itself (emptio spei) - VALID

If the expected thing in (a) does not materialize, the sale is not effective. In the second, it does
not matter whether the expected thing materialized or not; what is important is that the hope
itself validly existed. The first deals with a future thing – that which is expected; the second
deals with a present thing – for certainly the hope or expectancy already exists.

Ex. (emptio spei) Sale of a valid sweeptstakes ticket. Whether the ticket wins or not, the sale
itself is valid.

VAIN HOPE OR EXPECTANCY

– If the hope or expectancy itself is vain, the sale is itself VOID. Be it noted that this is not an
aleatory contract for while in an aleatory contract there is an element of chance, here there is
completely NO CHANCE.

Ex. Sale of a losing ticket for a sweepstakes already run.

Can Future Goods be Subjects of a Contract of Sale?

Answer: YES.

Future Goods which may be the subject of a Contract of Sale:

(a) Those which still to be manufactured;

(b) Still to be raised or future agricultural products;

(c) Acquired by seller after the perfection of the contract; (Ex. Land which the seller expects to
buy);

(d) Things whose acquisition depends upon contingency which may or may not happen. (Ex.
Selling of a car which the seller expected to receive)
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FUTURE INHERITANCE (one where the source of property is still alive)

cannot be the subject of a contract except: (Art. 1347 par. 2)

1) In the case of marriage settlements;

2) In the case of partitions of property inter vivos by the deceased.

RULES to Determine Whether Contract is One of Sale or Barter:

(1) First Rule – INTENT;

(2) If intent does not clearly appear

2.1. If the thing is more valuable than money – BARTER;

2.2. If 50-50 – SALE;

2.3. If thing is less valuable than the money – SALE

Example. If I give my car worth P25,000.00 to Jose in consideration of Jose’s giving to me P10,000
cash and a diamond ring worth P15,000, is the transaction a sale or a barter? ANSWER: It depends
on the mutual intent of parties. If the intent is not clear, the transaction is a BARTER because the
ring is more valuable than the P10,000.00.

CERTAINTY OF THE PRICE

The price must be certain, otherwise there is no true consent between the parties. There can be no
sale without a price. If the price is fixed but is later on remitted or condoned, this is perfectly all right,
for the price would not be fictitious. The failure to pay the agreed price does not cancel a sale for lack
of consideration, for the consideration is still there, namely the price.

EFFECT OF GROSS INADEQUACY OF PRICE

– Sale remains valid even if the price is very low except if there is vitiated consent. (Applies only to
voluntary sale) Judicial Sale may be set aside by the Court if the price is so inadequate as to shock the
conscience of the Court.

SIMULATED PRICE

– The price must not be fictitious. Therefore, if the price is merely simulated, the contract as a sale is
void. It may however be valid as a donation or some other agreement, provided the requirements of
donations or other agreements have been complied with. If these requirements do not exist, then as a
sale, the contract is absolutely void, not merely voidable.
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~ If the law requires a document or other special form, as in the acts and contracts enumerated in the
following article, the contracting parties may compel each other to observe that form, once the
contract has been perfected. This right may be exercised simultaneously with the action upon the
contract. (Art. 1357)

Can be availed of:

(a) If the Contract is Valid;

(b) The contract is ENFORCEABLE, that is, it does not violate the Statute of Frauds.

IN CASE OF A SALE BY AUCTION: (Art. 1476)

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate
contract of sale.

(2) 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.

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise
provided by law or by stipulation.

(4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of
the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to
bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such
sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by
him. Any sale contravening this rule may be treated as fraudulent by the buyer.

TRANSFER OF OWNERSHIP

-Mere perfection of the contract does not transfer ownership. Ownership of the object sold is
transferred only after delivery (tradition), actual, legal or constructive. The rule is therefore this: After
delivery of the object, ownership is transferred. (Art. 1477)

General Rule: Execution of Public Instrument is equivalent to constructive delivery.

Exception:

When Execution of Public Instrument amounts to Ineffective delivery:

(1) If the intention of the parties is that there is no delivery despite such execution;

(2) If the vendor has no control or control over the thing (to be effective, there should be no
impediment to actual transfer of possession; material delivery should be possible or could have
been made). Thus, there is no delivery if a third person claiming ownership is in possession.
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EFFECT IF PRICE CANNOT BE DETERMINED:

(a) If the price cannot really be determined, the sale is VOID for the buyer cannot fulfill his
duty to pay;

(b) If the buyer has made use of it, he should not be allowed to enrich himself unjustly at
another’s expense. So, he must pay a “reasonable price.” The seller’s price however must be
the one paid if the buyer knew how much the seller was charging and there was an acceptance
of the goods delivered. Here, there is an implied assent to the price fixed.

REQUIREMENTS FOR PERFECTION OF CONTRACT OF SALE:

(a) When parties are face to face, when an offer is accepted without conditions and without
qualifications. (A conditional acceptance is a counter-offer);

(b) When contract is thru correspondence or thru telegram, there is perfection when the offeror
receives or has knowledge of the acceptance by the offeree;

(c) When a sale is made subject to a suspensive condition, perfection is had from the moment the
condition is fulfilled.

FORMALITIES FOR PERFECTION: UNDER THE STATUTES OF FRAUDS, THE SALE OF;

(a) Real property (regardless of the amount must be in writing) public instrument;

(b) Personal property – if P5,000.00 or more must be in writing to be enforceable. (either public or
private instrument)

In case of a sale by auction: (Art. 1476)

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.

(2) 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.

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law
or by stipulation.

(4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller,
it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his
behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or
knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule
may be treated as fraudulent by the buyer.

TRANSFER OF OWNERSHIP:

-Mere perfection of the contract does not transfer ownership. Ownership of the object sold is
transferred only after delivery (tradition), actual, legal or constructive. The rule is therefore this: After
delivery of the object, ownership is transferred. (Art. 1477)
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General Rule: Execution of Public Instrument is equivalent to constructive delivery.

Exception:

When Execution of Public Instrument amounts to Ineffective delivery:

(1) If the intention of the parties is that there is no delivery despite such execution;

(2) If the vendor has no control or control over the thing (to be effective, there should be no
impediment to actual transfer of possession; material delivery should be possible or could have
been made). Thus, there is no delivery if a third person claiming ownership is in possession.

What is the concept of Pactum Reservati Diminii or the Contractual Reservation of Title?

ANSWER: It is a stipulation where parties agree that despite delivery, the ownership of the
thing shall remain with the seller until the purchaser has fully paid the price.

DISTINGUISH PACTUM RESERVATI DOMINII AND CONTRACT TO SELL

WHAT IS THE CONCEPT OF “THE RIGHT OF FIRST REFUSAL”?

-A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

-An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct from the
price. (Art. 1479)
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What is POLICITACION?

-This is a unilateral promise to buy or sell which is not accepted. This produces no juridical
effect, and creates no legal bond. This is a mere offer, and has not yet converted into a
contract.

OPTION CONTRACT

- Is an accepted unilateral promise to buy or sell a determinate thing for a price certain
supported by a consideration distinct from the price. The offeror is bound to comply with his
undertaking but the optionee has the right but not the obligation to buy or sell. The optionee
can sue for damages only, but he cannot sue for specific performance on the proposed
contract.

PROBLEM:

• Mark unilaterally promised to sell to Angela his house for P1M within a period of 1 week.
Angela accepted the promise. On the 5th day, Angela received a note from Mark telling her
that he is withdrawing the promise. Can Angela hold Mark liable for damages if he persists on
withdrawing the promise? Why?

ANSWER:

• No, an accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price. In this case no consideration distinct from the price has been delivered to Mark; the
offer or promise can be withdrawn anytime.