ASSIGNMENT NO.

3
IRENE S YAG-AO

CAPACITY TO BUY OR SELL

1. Who may enter into a contract? (Art. 1490)

 As a general rule, all persons, whether natural or juridical, who can bind
themselves, have the legal capacity to buy and sell.
2. Discuss the kinds of incapacity.
A. Absolute Incapacity – pertains to persons who cannot bind themselves
 Minor
 Insane or demented persons
 Deaf-mutes who do not know how to read and write
 Contracts entered into by a minor and other incapacitated persons are not void but
merely voidable, subject to annulment or ratification (Art. 1390 & 1393, CC).
However, the action for annulment cannot be instituted by the person who is
capable since he is disqualified from alleging the incapacity of the person with
whom he contracts. (Art. 1397, CC)
B. Relative Incapacity – where it exists only with reference to certain persons or class of
property (Art. 1490-1491). The prohibition extends to sales by virtue of legal redemption,
compromises, and renunciations.
 Husband and wife to each other – except when a separation of property was agreed
upon in the marriage settlements, or when there has been a judicial separation of
property;
 Guardian – as to the property of his ward;
 Agents – as to the property whose administration or sale has been entrusted to
them, unless consent of the principal is given;
 Executors or administrators – as to the state under their administration;
 Public officers and employees – as to the property of the State or any subdivision
thereof, or of the government-owned or controlled corporations, the administration
of which is entrusted to them;
 Judges and government experts who take part in the sale of the property and rights
under litigation;
 Aliens who are disqualified to purchase private agricultural lands under Art. XII,
Secs. 3 and 7 of the Constitution;
 Unpaid seller having a right of lien or having estopped the goods in transitu; and,
Officer holding the execution or his deputy.

3. What are the rules on sale to minors and other incapacitated persons?
 A minor or other incapacitated person is without legal capacity to give consent to a
contract of sale, and since consent is an essential requisite of every contract, the
absence thereof cannot give rise to a valid sale.
 Art. 1489 of the Civil Code, however, provides that "where necessaries are sold and
delivered to a minor or other person without capacity to act (without the
intervention of the parent or guardian), he must pay a reasonable price therefor."
The resulting contract of sale therefore is valid and not merely voidable.
4. Rules on sale by minor of his property.
 The sale of real estate, made by minors who pretend to be of legal age, when in fact
they are not, is valid, and they will not be permitted to excuse themselves from the
fulfillment of the obligations contracted by them, or to have them annulled (Mercado
and Mercado vs. Espiritu, 37 Phil. 265).

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5. What are necessaries?
 Necessaries cover everything indispensable for sustenance, dwelling, clothing,
medical attendance, education and transportation, in keeping with the financial
capacity of the family. 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)

6. General rule and exception on sale by ill persons and persons of old age.
 The general rule under civil codes is that contracts made by individuals who are
mentally incapacitated or elderly can be voidable if they lack the capacity to
understand the transaction. Exceptions may apply if the person can demonstrate
sufficient understanding of the agreement or if the contract pertains to necessary
items.

7. What is the general rule and the exceptions on sale between husband and wife? (Art.
1490)
Article 1490:
 Husband and wife cannot sell property to each other, except
 When separation of property was agreed upon in marriage settlements
 When there has been judicial separation of property under Art 191
 This is to prevent commission of fraud or prejudice to third persons, the other
taking undue influence over the other and to avoid indirect donations. However,
the husband and wife cannot sell property to each other except when a
separation of property was agreed upon in the marriage settlements and where
there has been a judicial separation of property as provided bylaw.

8. Is the prohibition in Article 1490 applicable to common-law spouses?

 Yes. The prescription against sale of property between spouses applies even to
common law relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun,
etc., et al.:
 Anent the second issue, we find that the contract of sale was null and void for being
contrary to morals and public policy. The sale was made by a husband in favor of a
concubine after he had abandoned his family and left the conjugal home where his
wife and children lived and from whence they derived their support. The sale was
subversive of the stability of the family, a basic social institution which public policy
cherishes and protects.
 Article 1409 of the Civil Code states inter alia that: contracts whose cause, object,
or purposes is contrary to law, morals, good customs, public order, or public policy
are void and inexistent from the very beginning.
 Article 1352 also provides that: Contracts without cause, or with unlawful cause,
produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals,
good customs, public order, or public policy.
 Additionally, the law emphatically prohibits the spouses from selling property to
each other subject to certain exceptions. Similarly, donations between spouses
during marriage are prohibited. And this is so because if transfers or conveyances
between spouses were allowed during marriage, that would destroy the system of
conjugal 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 prohibitions

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 apply to a couple living as husband and wife without benefit of marriage, otherwise,
“the condition of those who incurred guilt would turn out to be better than those in
legal union.” (Calimlim-Canullas vs. Fortun, G.R. No. L-57499, June 22, 1984; Ching
vs Goyanko, Jr., G.R. No. 165879, November 10, 2006)

9. What are properties covered or excepted?

 Under civil law, properties that may be excluded from general rules regarding
capacity often include necessities, such as food, clothing, and medical care, which
are essential for the individual's well-being. Additionally, certain types of property
transfers, like gifts or inheritance, may have specific exceptions.

10. What are the reasons for the prohibition?

 If transfers or conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in civil law
(Calimlim-Canullas vs. Fortun);
 To prevent a spouse from 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 (Calimlim-Canullas vs. Fortun); and,
 To avoid an indirect violation of the prohibition against donations between spouses
under Art. 133 of the Civil Code.

11. What is the status of contract between husband and wife. Are there exception/s?
 A sale between husband and wife in violation of Art. 1490 is inexistent and void from
the beginning because such contract is expressly prohibited by law.

12. What are transactions covered or not covered?

 Under civil law, the coverage of transactions regarding individuals with diminished
capacity, such as the elderly or those with mental impairments, generally includes
the following:
 Covered Transactions:
1. Necessities: Sales of food, clothing, and medical care, as these are considered essential
for living.
2. Minor Transactions: Small-value transactions that the person can reasonably understand
and benefit from.
3. Gifts: Voluntary transfers of property, although these may still be scrutinized for capacity.

 Not Covered Transactions:

1. Complex Contracts : Transactions involving significant obligations or risks (e.g., real
estate, loans) may be voidable if capacity is lacking.
2. Investment Contracts: Agreements that involve financial risk and require a degree of
understanding may not be valid if the individual cannot comprehend the implications.
3. Long-Term Commitments: Contracts that bind the individual for extended periods may be
contested if the person's capacity is questioned.

13. Who are permitted to question sale between spouses?

 The only persons who can question the sale are the following:
 The heirs of the spouses who have been prejudiced;Prior creditors; and
 The State when it comes to the payment of the proper taxes due on the transactions.
● Creditors who became such only after the transaction cannot attack the validity of the
sale, for it cannot be said that they have been prejudiced by the transaction.

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● The government is always an interested party to all matters involving taxable
transactions and, needless to say, qualified to question their validity or legitimacy whenever
necessary to block tax evasion. (Medina vs Collector of Internal Revenue, G.R. No. L-15113,
January 28, 1961)

14. What is the status of sale by a spouse to third parties?

 Although under Art. 1490 the husband and wife cannot sell property to one another
as a rule which, for policy consideration and the dictates of morality require that the
prohibition apply to common-law relationships, but when registered property has
been conveyed subsequently to a third-party buyer in good faith and for value, then
reconveyance is no longer available to common-law spouse-seller. Every person
dealing with registered land may safely rely on the correctness of the certificate of
title issued therefor and the law will in no way oblige him to go behind the
certificate to determine the condition of the property. (Gloria Cruz vs. Court of
Appeals, G.R. No. 120122, November 6, 1997)
The prohibition is applicable even to sales in legal redemption, compromises and
renunciation.

15. Enumerate the persons under Article 1491 who cannot acquire by purchase?
 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:
 The guardian, the property of the person or persons who may be under his
guardianship;
 Agents, the property whose administration or sale may have been intrusted to them,
unless the consent of the principal has been given;
 Executors and administrators, the property of the estate under administration;
 Public officers and employees, the property of the State or of any subdivision
thereof, or of any government-owned or controlled corporation, or institution, the
administration of which has been intrusted to them; this provision shall apply to
judges and government experts who, in any manner whatsoever, take part in the
sale;
 Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before the court within
whose jurisdiction or 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;
 Any others specially disqualified by law. (1459a)

16. Reason for prohibition?

 Prohibition under civil law regarding transactions by individuals with diminished
capacity typically stems from the need to protect those individuals from exploitation
and to ensure fairness. The primary reasons include:
 Vulnerability : Elderly and mentally incapacitated individuals may be more
susceptible to coercion or manipulation.
 Understanding: The law aims to ensure that individuals can comprehend the nature
and consequences of their transactions.
 Public Policy: Protecting vulnerable populations aligns with societal interests in
promoting justice and fairness in contractual relationships.

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17. Who is a guardian? How appointed?
 A guardian is a person legally appointed to make decisions on behalf of another
individual who is unable to do so due to incapacity, such as minors or those with
mental impairments. Guardianship can be established through a court process, where
the court assesses the individual's needs and appoints a suitable guardian, often
considering family members or trusted individuals. The appointment involves filing a
petition and may require a hearing to determine the necessity and appropriateness of
the guardianship. Would you like to know more about the responsibilities of a
guardian?

18. Kinds of guardians? Nature of relation?

 Under civil law, there are several types of guardians, each serving different purposes.
The nature of the relationship between a guardian and the ward (the person under
guardianship) varies depending on the type of guardianship:
Types of Guardians:
1. Guardian of the Person: Responsible for the physical care and well-being of the ward,
including decisions related to health care, education, and daily living.
2. Guardian of the Estate: Manages the financial affairs and property of the ward, including
handling assets, investments, and expenditures.
3. Plenary Guardian: Has comprehensive authority over both the person and the estate of
the ward.
4. Limited Guardian : Has specific, restricted powers as determined by the court, often
focusing on particular aspects of the ward’s life or finances.
Nature of the Relationship:
 Protective: The guardian has a duty to act in the best interest of the ward, ensuring
their safety and well-being.
 Fiduciary: The guardian must act with loyalty and care, managing the ward's finances
responsibly and avoiding conflicts of interest.
 Supervised: Guardianship is often subject to court oversight, requiring regular
reporting and accountability to ensure the guardian is fulfilling their responsibilities
appropriately.

19. When is sale allowed?

 In civil law, a sale is generally allowed when:
1. Capacity: The seller has the legal capacity to enter into a contract, meaning they
understand the nature of the transaction.
2. Necessities: Sales of essential goods, like food and medical supplies, are permitted
regardless of the seller's capacity.
3. Court Approval: For individuals under guardianship, sales may require court approval,
especially for significant transactions.
4. Good Faith: The sale must be conducted in good faith and without coercion or deception.

20. When is the prohibition inapplicable?

 Prohibition on sales in civil law is typically applicable in the following situations:
1. Lack of Capacity: When the seller cannot understand the transaction due to mental
incapacity or age, the sale can be voidable.
2. Undue Influence or Coercion: If the sale results from manipulation or pressure, it may be
prohibited.
3. Fraudulent Transactions: Sales involving misrepresentation or deceit are generally
prohibited.

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4. Protected Assets: Certain assets, like those belonging to minors or individuals under
guardianship, may require court approval for any sale.

21. What is a contract of agency? kinds?

 A contract of agency is an agreement where one party (the agent) is authorized to
act on behalf of another party (the principal) to create legal relations with third
parties. In civil law, the agent's actions are binding on the principal within the scope
of their authority.
Kinds of Agency:
1. General Agency: The agent has broad authority to act on behalf of the principal in various
matters.
2. Special Agency: The agent is limited to specific tasks or transactions as defined in the
contract.
3. Sub-Agent: An agent who appoints another agent to perform duties on behalf of the
principal, with the original agent retaining responsibility.
4. Universal Agency: The agent is authorized to manage all affairs of the principal, often
seen in cases of total incapacity.

22. When is the incapacity applicable/inapplicable?

 Under civil law, incapacity is applicable in the following situations:
Applicable Situations:
1. Mental Impairment: When an individual cannot understand the nature or consequences of
a contract due to mental illness or cognitive impairment.
2. Minors: Contracts made by individuals under the legal age of majority are generally
voidable.
3. Intoxication: If a person is intoxicated to the extent that they cannot comprehend the
transaction, incapacity may apply.
Inapplicable Situations:
[Link]: Contracts for essential goods or services (like food or medical care) are often
enforceable regardless of the individual's capacity.
2. Demonstrated Understanding: If an individual can show sufficient understanding of a
transaction, incapacity may be challenged or deemed inapplicable.
3. Court Approval: In some cases, contracts may be valid if they are approved by a court,
even if there are questions about capacity.

23. Who is an executor or administrator?

 Under civil law, an "executor" and an "administrator" serve similar functions in
managing a deceased person's estate, but they differ primarily in how they are
appointed.

Executor:

 Definition: An executor is an individual designated in a will by the deceased (testator)

to administer the estate after their death.
 Duties: The executor is responsible for collecting assets, paying debts and taxes, and
distributing the remaining property to beneficiaries according to the will. They act in
accordance with the testator's wishes.

Administrator:

 Definition: An administrator is appointed by a court when there is no will (intestacy)

or if the named executor is unable or unwilling to serve.

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  Duties: The administrator manages the estate similarly to an executor, but must
follow statutory rules for distribution, typically dictated by laws of intestacy. This
means they distribute the estate according to predetermined legal guidelines rather
than the deceased's specific [Link] roles require a fiduciary duty to act in the
best interest of the estate and its beneficiaries.

24. Discuss the rules on prohibition with respect to executors and administrator?
 In civil law, the rules on prohibition with respect to executors and administrators are
designed to ensure ethical management and protection of the estate. Here’s an
overview:
Rules on Prohibition for Executors:
1. Conflict of Interest
 Executors must avoid any transactions that create a conflict of interest. They cannot
engage in dealings that benefit them personally or that could compromise their
duties to the beneficiaries.
2. Self-Dealing
 Executors are generally prohibited from buying estate assets for themselves, or from
selling estate property to themselves, unless expressly permitted by the will or
authorized by the court.
3. Unauthorized Transactions
 Executors cannot make significant decisions regarding the estate (like selling
property) without proper authorization, especially if those actions may affect the
beneficiaries' interests.
[Link] from the Estate
 Executors are prohibited from making gifts of estate property to themselves or others
unless clearly allowed in the will or approved by the beneficiaries or court.
5. Duty of Loyalty
 Executors must act in the best interests of the beneficiaries and maintain
transparency in their actions regarding the estate.
Rules on Prohibition for Administrators:
1. Similar Prohibitions
 Administrators face similar prohibitions as executors, including avoiding self-dealing
and conflicts of interest.
2. Court Oversight
 Administrators are required to seek court approval for certain transactions,
particularly those that involve significant assets or potential conflicts, ensuring
compliance with legal standards.
3. Accountability
 Administrators must maintain accurate records and provide regular accounts to the
court or beneficiaries, demonstrating responsible management of the estate.
4. Fiduciary Duty
 Like executors, administrators have a fiduciary duty to act in the best interests of the
beneficiaries, ensuring that the estate is administered according to legal
requirements and the wishes of the deceased.
Rationale:
 These prohibitions are in place to protect the rights of beneficiaries and ensure that
estates are managed with integrity. Violations can lead to legal consequences,
including removal from the role, personal liability for damages, or criminal charges in
severe cases.

25. Who is a public employee/officer?

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  In civil law, a "public employee or "public officer" typically refers to individuals who
hold positions within government institutions and perform functions in the public
sector. Here are some key characteristics:
Definition:
1. Public Employee
 Generally, this refers to individuals employed by government agencies or public
institutions, carrying out administrative, clerical, or operational tasks.
2. Public Officer
 This term often refers to individuals in positions of authority, such as elected officials
or appointed leaders, who have responsibilities for making decisions, enforcing laws,
or managing public resources.
Key Characteristics:
 Authority: Public officers usually have the authority to make decisions and implement
policies that affect the public.
 Accountability: They are accountable to the public and subject to laws and
regulations governing their conduct.
 Public Interest: Their primary duty is to serve the interests of the public and uphold
the law.
Examples:
 Elected Officials : Mayors, governors, members of the legislature.
 Appointed Officials: Heads of government departments, judges, and regulatory
agency leaders.
 Administrative Staff: Clerks, administrative assistants, and other support staff within
public institutions.

26. When is the incapacity applicable/inapplicable?

 Under civil law, incapacity is applicable in the following situations:

Applicable Situations:

1. Mental Impairment: When an individual cannot understand the nature or consequences of

a contract due to mental illness or cognitive impairment.

2. Minors: Contracts made by individuals under the legal age of majority are generally
voidable.

3. Intoxication: If a person is intoxicated to the extent that they cannot comprehend the
transaction, incapacity may apply.

Inapplicable Situations:

[Link]: Contracts for essential goods or services (like food or medical care) are often
enforceable regardless of the individual's capacity.

2. Demonstrated Understanding: If an individual can show sufficient understanding of a

transaction, incapacity may be challenged or deemed inapplicable.

3. Court Approval: In some cases, contracts may be valid if they are approved by a court,
even if there are questions about capacity.

27. What are the transactions covered by the prohibition with respect to judges and
lawyers? Rationale?

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  In civil law, certain transactions involving judges and lawyers are prohibited to
maintain integrity and avoid conflicts of interest. Here are the key transactions
covered by prohibition:
Prohibited Transactions:
1. Business Relationships: Judges and lawyers are typically prohibited from engaging in
business transactions with parties involved in cases they are handling, to avoid bias or
perceived favoritism.
2. Contingency Fees: Lawyers may face restrictions on contingency fees in cases involving
clients where there’s a risk of undue influence or exploitation.
3. Gifts and Favors: Accepting gifts or favors from parties involved in ongoing litigation can
compromise the impartiality of judges and lawyers.
4. Conflicts of Interest: Any transaction that presents a conflict of interest, such as
representing clients with opposing interests, is prohibited.
Rationale:
 Integrity of the Legal System: These prohibitions help ensure that the legal system
remains fair and impartial.
 Public Trust: Maintaining high ethical standards fosters public confidence in the
judiciary and legal profession.
 Prevention of Corruption: These rules are designed to prevent corruption and the
misuse of power.
28. What are cases not covered by the prohibition with respect to judges, etc.?
 Under civil law, certain cases and transactions are generally not covered by
prohibition for judges and lawyers. These include:
Non-Prohibited Transactions:
1. Personal Relationships: Transactions or business dealings with family members or close
friends that do not involve conflicts of interest may be permissible, provided they don't
affect judicial impartiality.
2. Public Interest Representation: Lawyers may represent clients in public interest cases or
pro bono work without restrictions related to personal gain.
3. Routine Legal Matters: Engaging in standard legal transactions that do not involve any
parties in litigation before the judge is often allowed.
4. Professional Development: Participation in legal education, training, or conferences is
typically not prohibited, as long as it does not involve undue influence or gifts from involved
parties.
These exceptions aim to balance professional integrity with practical legal practice.

29. Who are other persons especially disqualified?

 Under civil law, several categories of individuals may be disqualified from serving as
judges, lawyers, or in related legal roles due to concerns about impartiality, integrity,
or conflict of interest. Here are some examples:

Disqualified Persons:
[Link] Relatives: Individuals related to parties in a case (e.g., spouses, siblings, parents) are
often disqualified to prevent bias.
2. Previous Counsel: Lawyers who have previously represented a party in a related matter
may be disqualified from later serving as a judge or opposing counsel.
3. Financial Interest Holders: Individuals with a financial stake in the outcome of a case (e.g.,
shareholders) may be disqualified to ensure impartiality.
4. Criminal Convictions: Persons with certain criminal convictions may be barred from
serving in legal positions due to concerns about integrity and ethics.

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5. Professionally Disgraced: Lawyers who have faced disciplinary actions or have been
disbarred are typically disqualified from practicing law.

30. What are the effects of sale in violation of the prohibition?

 Under civil law, several categories of individuals may be disqualified from serving as
judges, lawyers, or in related legal roles due to concerns about impartiality, integrity,
or conflict of interest. Here are some examples:
Disqualified Persons:
[Link] Relatives: Individuals related to parties in a case (e.g., spouses, siblings, parents) are
often disqualified to prevent bias.
2. Previous Counsel: Lawyers who have previously represented a party in a related matter
may be disqualified from later serving as a judge or opposing counsel.
3. Financial Interest Holders: Individuals with a financial stake in the outcome of a case (e.g.,
shareholders) may be disqualified to ensure impartiality.
4. Criminal Convictions: Persons with certain criminal convictions may be barred from
serving in legal positions due to concerns about integrity and ethics.
5. Professionally Disgraced: Lawyers who have faced disciplinary actions or have been
disbarred are typically disqualified from practicing law.

31. Differentiate the nullity of prohibited contracts.

 In civil law, the nullity of prohibited contracts can be categorized primarily into two
types: "absolute nullity" and "relative nullity". Here’s how they differ:
1. Absolute Nullity:
 Definition: Contracts that are considered void from the outset, meaning they have no
legal effect whatsoever.
 Characteristics:Cannot be validated or ratified by the parties.
- May be invoked by any interested party, including third parties or the court.
- Examples include contracts for illegal activities or those that violate public policy.
2. Relative Nullity:
 Definition: Contracts that are voidable at the option of one of the parties involved,
meaning they can be annulled if the aggrieved party chooses to do so.
 Characteristics: Can be ratified or validated by the party who has the right to annul
the contract.
- Typically invoked by a specific party rather than any third party.
- Examples include contracts entered into by minors or individuals lacking capacity, where
the affected party can choose to affirm or void the contract.
Key Differences:
 Scope of Nullity: Absolute nullity applies universally, while relative nullity is specific to
the party with the right to void the contract.
 Legal Effects: Absolute nullity has immediate and total effects, whereas relative
nullity can be resolved through ratification.

32. Discuss the other transactions where the prohibition in Article 1490 and 1491 are
applicable? [Article 1492)
 Articles 1490 and 1491 typically refer to the prohibition of certain transactions
involving individuals who may lack capacity, such as minors or those under
guardianship. Article 1492 often outlines additional prohibitions related to these
transactions.
Prohibited Transactions Under Articles 1490 and 1491:
1. Sales by Minors: Contracts made by minors without parental consent are generally
voidable.

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[Link] by Persons Under Guardianship: Individuals under guardianship may not enter into
contracts without court approval.
3. Contracts for Necessities: While contracts for necessities (like food or clothing) may be
valid, those not classified as necessities may be subject to prohibition.
 Article 1492 - Additional Prohibitions:
 Article 1492 may specify further restrictions, such as:
 Transactions with the Guardians: Prohibitions on transactions between the ward and
the guardian to prevent exploitation.
 Gifts and Donations: Specific regulations regarding gifts made by minors or those
under guardianship, which may require court approval.
Rationale:
 The purpose of these prohibitions is to protect vulnerable individuals from
exploitation and to ensure that they enter into contracts that are in their best
interest.

EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST

33. Discuss the effect of loss of thing at the time of sale? [Article 1493]
 Article 1493 addresses the effects of loss of the thing sold at the time of sale. Here’s
an overview of its implications:
Effect of Loss of the Thing at the Time of Sale:
1. General Rule: If the thing sold is lost or destroyed at the time of sale, the contract is
generally considered void. The reason for this is that the object of the contract (the thing)
must exist for the contract to be valid.
2. Risk of Loss: The risk of loss typically falls on the seller until the sale is completed. If the
seller sells a thing that no longer exists (due to loss or destruction) at the time of the
agreement, the buyer cannot enforce the contract, and the seller cannot demand payment.
3. Exceptions:
 Force Majeure: If the loss occurred due to an unforeseen event (force majeure) after
the sale but before delivery, the seller might still be obligated to deliver a substitute
or may have to compensate the buyer, depending on the terms of the contract.
 Buyer’s Knowledge: If the buyer was aware of the loss or destruction of the thing at
the time of sale, they may not be able to claim damages.

4. Legal Consequences:
 Restitution: If any payment has been made, it must be returned to the buyer since
the sale is void.
 No Obligation: The seller is released from any obligations under the contract as there
is no valid subject matter.
Rationale:
The underlying principle is that for a sale to be valid, the object of the sale must exist at the
time of the transaction. This protects both parties and ensures that the buyer is receiving
what was promised.

34. When is a thing considered lost?

 Under civil law, a thing is considered lost when it can no longer be found or
recovered, rendering it unavailable for the purposes of ownership or contract. Here
are key criteria for determining when a thing is considered lost:
1. Physical Destruction
 The thing is destroyed or rendered inoperable, making it impossible to use or recover.
2. Unrecoverable

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  The item is not in the possession of any person, and there are no means to locate it.
This includes cases where it has been stolen, misplaced, or abandoned.
3. Duration of Absence
 If the thing has been missing for a significant period without any sign of recovery, it
may be deemed lost. The exact duration may vary by jurisdiction.
4. Legal Declaration
 In some cases, a court may declare an item as lost based on evidence presented,
such as in inheritance or property disputes.
5. Circumstances of Loss
 Situational factors, such as natural disasters, theft, or accidents, can contribute to
the classification of a thing as lost.
Legal Implications:
 When a thing is considered lost, it typically impacts contracts, ownership claims, and
obligations related to the item, particularly in sales and property transactions.
35. Discuss the effect of loss in case of goods? [Article 1494]
 Article 1494 addresses the effects of loss of goods that are the subject of a sale.
Here’s a detailed overview of its implications:
Effect of Loss of Goods (Article 1494):
1. General Rule: If goods that have been sold are lost before the buyer has taken possession
and the loss is not due to the buyer’s fault, the contract is generally considered void. The
seller cannot demand payment since the subject matter of the sale no longer exists.
2. Risk of Loss:
 The seller bears the risk of loss until the goods are delivered to the buyer.
- If the goods are lost due to circumstances beyond the seller's control (e.g., natural
disaster), the seller is typically not held liable for damages.
3. Buyer’s Knowledge
 If the buyer was aware of the loss at the time of the sale, the buyer cannot claim
damages or restitution. This means that the buyer's knowledge of the loss can affect
their rights under the contract.
4. Restitution
 If any payment has been made for the lost goods, the buyer is entitled to a refund
since the sale cannot be fulfilled.
5. Substitute Goods
 Depending on the terms of the contract, if the goods are lost, the seller may offer
substitute goods, but this is subject to the buyer’s acceptance.
Legal Implications:
 The article emphasizes the importance of the existence of the goods at the time of
the sale, protecting the interests of both parties involved in the transaction.
 It delineates the responsibilities related to risk and loss, ensuring clarity in
contractual obligations.

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