When all 3 elements are present, but there is defect or illegality

constituting any of such elements, the resulting contract is either

VOIDABLE

VOID CONTRAC:
Art. 1305. A contract is a meeting of minds between two persons when some of the essential requisites are not present. (Supreme
whereby one binds himself, with respect to the other, to give Court). The more appropriate term to use when an essential
something or to render some service. element is not present at meeting of the minds is to declare a “NO
Art. 1458. By the contract of sale one of the contracting parties CONTRACT” situation.
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 SUMMARY:
conditional. Since these are essential elements, they are therefore necessary for
Nature of Obligations Created in a Sale the validity of a contract of sale. If one of these essential elements is
absent, then there can be no perfected contract of sale. f there is a
A) Two Obligations of the Seller  to transfer the ownership and  defect in the consent, then what we have is a voidable contract. If
to deliver the possession, of the subject matter there is a subject matter but it is illegal or illicit, then it is a void
B) An Obligation of the Buyer  to pay the price contract.

VALID CONTRACT:

When all 3 elements are present, there being a meeting of the NATURAL ELEMENTS
minds, then a perfected contract of sale arises and its validity is not These are elements of a contract which exist even in the absence of
affected by the fact that previously a fictitious deed of sale was an agreement of the parties, because the law provides that these
executed y the parties or by the fact of nonperformance of the elements exist, (Even if the parties did not agree to such, the law
obligations thereafter. deems it existent in every contract of sale.)
VOIDABLE CONTRACT: 1. implied warranties against division
2. implied warranties against division
ACCIDENTAL ELEMENTS EARNEST MONEY:

Stipulated by the parties ART. 1482. Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the
1. existence of conditions,
perfection of the contract.
2. stipulation on the payment of price

The earnest deposit could not be taken as an earnest money

pnb case:
because there was no meeting of the minds yet. At the time the
Price is an essential element for a valid contract of sale. A contract petitioner accepted the terms of respondent’s offer, their contract
of sale is consensual in nature and is perfected upon mere meeting had not yet been perfected. What they have here was an offer, then
of the minds. When there is merely an offer by one party without a counter-offer, then the extension period to accept the counter
acceptance of the other, there is no contract. Again, there must be offer. At the end, there was no acceptance, so there was never a
consent as to the price. When there’s merely an offer by one party perfected contract of sale. They never passed the negotiation stage.
and without acceptance by the other party, there can be no valid
contract. Here Manila Container was told that PNB did not allow
partial redemption. It sent a letter to the president reiterating its The negotiation stage covers the period from the time the
offer to purchase the property. There was no response to prospective contracting parties indicate their interests in the
petitioner's letters. As to the Statement of Account, the amount contract to the time the contract is perfected.
indicated therein was clearly not the purchase price. It cannot be
considered as an unqualified acceptance to petitioner’s offer to
purchase the property because it was only a computation of the DEFINITIONS:
amount which petitioner was obliged to pay in case PNB would later
agree to sell the property. Acceptance of the offer here was in fact nominate contract since it has been given a particular name by law,
qualified. In other words, there was merely a counteroffer, there more importantly, its nature and consequences are governed by a
was no absolute acceptance that would give rise to a valid contract set of rules in the Civil Code, which euphemistically we refer to as
of sale. the “Law on Sales.”

principal contract, as contrasted from accessory or preparatory

contracts, because it can stand on its own, and does not depend on
another contract for its validity or existence.
A suspensive condition gives rise to the obligations contract while in 1458), and whereby the obligation or promise of each party
a resolutory condition, the happening thereof extinguishes the is the cause or consideration for the obligation or promise
obligations of contract. of the other (Art. 1191). Reciprocal obligations are “those
which arise from the same cause, and in which each party is
a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the
other. They are to be performed simultaneously such that
CONSENT BE VALID: the performance of one is conditioned upon the
(a) it should be intelligent, or with an exact notion of the matter to simultaneous fulfillment of the other.
which it refers;  Intelligence in consent is vitiated by error; (b) it
should be free and  freedom is vitiated by violence, intimidation or 4. ONEROUS (WON THERE IS VALUABLE CONSIDERATION)
undue influence; (c) it should be spontaneous.  spontaneity is -Art. 1458. Sale is an ONEROUS contract, as distinguished
vitiated by fraud. from a gratuitous contract, because it imposes a valuable
consideration as a prestation, which ideally is a price certain
in money or its equivalent.
Article 1332 of the Civil Code which provides that "When one of the
Onerous vs. Gratuitous
parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person  Onerous – burdensome because it imposes a valubable
enforcing the contract, in this case the buyer, must show that the consideration as a prestation which is a price certain in
terms thereof have been fully explained to the former money or its equivalent.
 Gratuitous – an act of pure liberality

5. COMMUTATIVE

CHARACTERISTICS: Sale is a COMMUTATIVE contract, as distinguished from an

aleatory contract, because a thing of value is exchange for
1. NOMINATE AND PRINCIPAL equal value, i.e., ideally the value of the subject matter is
2. CONSENSUAL equivalent to the price paid. Nevertheless, there is no
3. BILATERAL AND RECIPROCAL requirement that the price to be equal to the exact value of
Sale is a bilateral contract embodying reciprocal obligations, the subject matter; all that is required is for the seller to
as distinguished from a unilateral contract, because it believe that what was received was of the commutative
imposes obligations on both parties to the relationship (Art.
 value of what he gave. (Buenaventura vs. Court of Appeals)
Commutative vs. Aleatory
 Commutative – a thing of value is exchanged for equal
value as a consequence of equal bargaining. It involves a
relative value between what is given and what is received.
 Aleatory – chance determines the value received.

The Subjective Test of the Commutative Nature of Sale

Whether or not the party believes in all honesty that he is
receiving good value for what he transferred.  the
inadequacy of price does not affect ordinary sale  Actual Delivery – consists in placing the thing sold in the control and
inadequacy of price may be a ground for setting aside an possession of the vendee.
execution sale but is not a sufficient ground for the
cancellation of a voluntary contract of sale otherwise free  Legal or Constructive Delivery – may be had through any of the
from invalidating effects  inadequacy of price may show following ways:
vice in consent, in which case the sale may be annulled, but ◦ the execution of a public instrument evidencing the sale; ◦
such annulment is not for adequacy of price, but rather for symbolical tradition such as the delivery of the keys of the place
vitiation in consent where the movable sold is being kept; ◦ traditio longa manu or 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; ◦
6. SALE IS A TITLE AND NOT A MODE traditio brevi manu if the buyer already had possession of the object
even before the sale; ◦ and traditio constitutum possessorium,
Sale is merely a TITLE that creates the obligation on the part where the seller remains in possession of the property in a different
of the seller to transfer ownership and deliver possession, capacity
but on its own, sale is not a mode that transfers ownership.
(Equatorial Realty vs. Mayfair Theater)
1) DISTINGUISHED FROM CONTRACT TO SELL
A contract to sell is akin to a conditional sale where the
1) DISTINGUISHED FROM BARTER
efficacy or obligatory force of the vendor's obligation to
transfer title is subordinated to the happening of a Barter Article 1638. By the contract of barter or exchange one of the
future and uncertain event, so that if the suspensive parties binds himself to give one thing in consideration of the
condition does not take place, the parties would stand other's promise to give another thing.
as if the conditional obligation had never existed. The
suspensive condition is commonly full payment of the Sale Article 1458. By the contract of sale one of the contracting
purchase price. parties obligates himself to transfer the ownership and to deliver a
In a contract to sell, the ownership is reserved in the determinate thing, and the other to pay therefor a price certain in
seller and is not to pass until full payment of the money or its equivalent.
purchase price is made. Full payment is a positive Rule
suspensive condition. However, the title remains in the
vendor if the vendee does not comply with the Article 1468. If the consideration of the contract consists partly in
condition precedent of making payment at the time money, and partly in another thing, the transaction shall be
specified in the contract 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.
2) DISTINGUISHED FROM DONATION 3) DISTINGUISHED FROM A CONTRACT FOR A PIECE OF WORK

Art. 725. DONATION is an act of liberality whereby a person

disposes gratuitously of a thing or right in favor of another person,
Contract for a Piece of Work Art. 1713. By the CONTRACT FOR A
who accepts it.
PIECE-OF-WORK, the 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.

RULE:

Contract of Sale or Contract for a Piece of Work 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.

Tests for Distinguishing Sale from Contract for a Piece-of-Work

(Art. 1467)

(a) Manufacturing in the ordinary course of business to cover sales

contracts; and

(b) Manufacturing upon special order of customers, to cover

contracts for piece-of-work.
 2. TEST OF EXISTENCE

-The distinction between a sale a contract for work, labor, and

materials is tested by the inquiry of whether the thing transferred is
one not in existence and which never would have existed but for the
order of the party desiring to acquire it, or a thing which would have
existed and been the subject of sale to some other person, even if
the order had not been given. (Inchausti vs. Cromwell)

3. TIMING or HABITUALITY TEST

When the manufacturer engages in the same activity in the ordinary

course of business, and does not need to employ extraordinary skills
and equipment, that would classify the underlying transaction as a
SALE. (Celestino V IR)

4. NATURE OF THE OBJECT or the TEST OF NECESSITY

TESTS:
-Engineering Machinery Corp. vs. CA
1. TEST OF SPECIAL ORDERS
 The large quantity of the products to be delivered do not indicate
that the underlying contract is one of sale. (Dino vs. CA)

5) CONSENSUALITY TEST / TEST OF INTENTION

-To Tolentino, the distinction between the 2 contracts depends on

the intention of the parties. Thus, if the parties intended that at
some future date an object has to be delivered, without considering
the work or labor of the party bound to deliver, the contract is one
of sale. But if one of the parties accepts the undertaking on the
basis of some plan, taking into account the work he will employ
personally or through another, there is a contract for a piece of 5) DISTINGUISHED FROM AGENCY TO SELL
work. (Engineering Machinery Corp. vs. CA)
Art. 1868. By the contract of agency, a 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. 
WARRANTIES:
A contract of agency is one that essentially establishes a
representative capacity in the person of the agent on behalf of the
principal, and one characterized as highly fiduciary.
5) DISTINGUISHED FROM DACION EN PAGO Requisites for a valid dation in payment:

Dation in payment  one whereby property is alienated to the (a) Animo Solvendi – Performance of the prestation in lieu of
creditor in full satisfaction of a debt in money  constitutes the payment which may consist in the delivery of a corporeal thing or a
delivery and transmission of a thing by the debtor to the creditor as real right or a credit against the third person.
an accepted equivalent of the performance of the obligation 
(b) Aliud Pro Alio – Some difference between the prestation due
governed by the Law on Sales, since it essentially involves the
and that which is given in substitution
transfer of ownership of a subject matter
(c) An agreement between the creditor and debtor that the
obligation is immediately extinguished by reason of the
NO. performance of a prestation different from that due.

The repossession does not amount to dacion en pago. Dation in

payment takes place when property is alienated to the creditor in
6) DISTINGUISHED FROM PAYMENT BY CESSION
satisfaction of a debt in money and the same is governed by sales.
Dation in payment is the delivery and transmission of ownership of This is one of the special forms of payment.
a thing by the debtor to the creditor as an accepted equivalent of
Four special forms of payment
the performance of the obligation. As aforesaid, the repossession of
the machinery and equipment in question was merely to secure the 1. Payment by cession 2. Dacion en pago 3. Tender of payment and
payment of TCC's loan obligation and not for the purpose of consignation 4. Application of payment
transferring ownership thereof to PNB in satisfaction of said loan.
Thus, no dacion en pago was ever accomplished. PNB has the right
to foreclose the mortgages executed by the spouses Arroyo as
sureties of TCC. A surety is considered in law as being the same
party as the debtor in relation to whatever is adjudged touching the
obligation of the latter, and their liabilities are interwoven as to be
inseparable. As sureties, the Arroyo spouses are primarily liable as
original promisors and are bound immediately to pay the creditor
the amount outstanding 7) DISTINGUISHED FROM LEASE

In a contract of lease, the lessor binds himself to give to another

(the lessee) the enjoyment of use of a thing for a price certain, and
for a period which may be definite or indefinite. (Article 1643)
A conditional sale may be made in the form of a “ease with option
to buy” as a device to circumvent the provisions of the Recto Law
Incapacity in relation to a contract of sale
governing the sale of personal property on installments. It may be
stipulated in such contract that the lessee has the option to buy the There are 2 kinds of capacity:
leased property for a small consideration at the end of the term of
the lease, provided that the rent has been duly paid; or if the rent 1) Absolutely incapacitated persons and
throughout the term had been paid, title shall vest in the lessee. 2) relatively incapacitated persons
Such contract are really conditional sales and are deemed leases in
name only. Discussion:; However, no lease for more than ninety-
nine years shall be valid. CANT CONSENT

Article 1327. The following cannot give consent to a contract:

NOTE: (1) Unemancipated minors; (lahat ng minors ngayon,
unemancipated) (2) Insane or demented persons, and deaf-
mutes who do not know how to write

1. MINORS:

Art. 234. Emancipation takes place by the attainment of

majority. Unless otherwise provided, majority commences at
the age of twenty-one (now 18) years. Emancipation also takes
place: (1) By the marriage of the minor; or (2) By the recording
in the Civil Register of an agreement in a public instrument
executed by the parent exercising parental authority and the
minor at least eighteen years of age. Such emancipation shall be
ELEMENTS:
irrevocabl
1. CONSENT
Insane or Demented
-Every person having legal capacity to obligate himself may
validly enter into a contract of sale whether as seller or Article 1328. Contracts entered into during a lucid interval are
buyer. When we say capacity to act, obviously, we refer to valid. Contracts agreed to in a state of drunkenness or during a
the person who has the power to do acts with legal effect or hypnotic spell are voidable.
the power to obligate himself.
 Article 1390. The following contracts are voidable or the marriage and within 10 years of the questioned transaction. All
annullable, even though there may have been no damage to the requisites are present in this case. So, the Supreme Court ruled
the contracting parties: (1) Those where one of the parties is that the sale entered into by Vicente was VOIDABLE.
incapable of giving

(2) Those where the consent is vitiated by mistake, violence,

NOTE:
intimidation, undue influence or fraud. These contracts are
binding, unless they are annulled by a proper action in court. A conjugal property cannot be alienated because his wife had not
They are susceptible of ratification given consent to the sale. We do not apply 166 and 177 of the Civil
Code and declare it as voidable but void because, not of the lack of
consent, of it being contrary to law, morals, good customs, public
2. BETWEEN SPOSES order or public policy. The sale was made by the husband to a
concubine after he had abandoned his family and left the conjugal
Art. 73. Either spouse may exercise any legitimate profession,
home. The sale was subversive of the stability of the family and
occupation, business or activity without the consent of the other.
therefore we apply 1409. Article 1490 prohibits a sale to spouses
The latter may object only on valid, serious, and moral grounds. In
and which would include donations, unless the donation is
case of disagreement, the court shall decide whether or not: (1) The
moderate. Obviously, it would be unfair to the wife. The reason of
objection is proper, and (2) Benefit has accrued to the family prior
Article 1490 is to prevent commission of fraud or prejudice to 3rd
to the objection or thereafter. If the benefit accrued prior to the
persons. The provision of 1490 is also applicable to parties living as
objection, the resulting obligation shall be enforced against the
husband and wife without the benefit of marriage.
community property. If the benefit accrued thereafter, such
obligation shall be enforced against the separate property of the
spouse who has not obtained consent. The foregoing provisions
Who can validly questions sales between husband and wife?
shall not prejudice the rights of creditors who acted in good faith.
1.) The heirs
Discussion:
2.) Creditors that are prejudiced – they must be creditors before the
Sale is annulled in its entirety. The governing provisions are Art. 166
sale
and 173 of the NCC because the sale was perfected before the
effectivity of the Family Code. The requirement under the Civil Code 3.) Government – when the sale is done to avoid the payment of
is that the sale must have the consent of the other spouse. The taxes
husband can’t alienate or encumber any conjugal real property
without the consent, expressed or implied, otherwise it is voidable.
Under 173, it is required that the complaint must be made during
Article 1491. The following persons cannot acquire by purchase, II. SUBJECT MATTER
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; (3) EXECUTORS AND
ADMINISTRATORS, the property of the estate under administration;
Determinable Subject Matter

 2 Requisites:

 Capacity to Segregate Test – If at the perfection of the sale, the

thing is capable of being made determinate ; and

 No Further Agreement Test – Without the necessity of a new or

further agreement between the parties.