Sales

CLASS NOTES CASES AND LAWS

Law on Sales; Related laws: STATUTORY DEFNITION OF SALE
- RA 6552- Maceda law Article 1458:
- PD 957 By the contract of sale one of the contracting parties obligates
- Bulk Sales Law (act no. 3952) himself to transfer ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or
CONTRACT OF SALE (Art 1458) its equivalent.
ELEMENTS: if C.O.C. there is a perfection of a
contract (born or created and can now be the A contract of sale may be absolute or conditional
source of rights and obligations)
Parties: vendor/ seller v. vendee/ buyer STATUTE OF FRAUDS (ARTICLE 1403(2))
consent: meeting of the minds, -requires that certain contracts be in writing, and that they be
focusing on the subject matter (the thing sold) signed by all parties to be bound by the contract. Although
and the consideration is the there can be significant variation between jurisdictions, the
most common types of contracts to which a statute of fraud
ILLUS 1: Car is sold. Ownership and possession is transferred to the applies is:
buyer; o Contracts in consideration of marriage.
consideration: money (1M) + tractor (worth 1M) o Contracts which cannot be performed within one
Q: is this still sale or barter? year.
A: Art 1468 o Contracts for the sale of an interest in land.
o Contracts by the executor of a will to pay a debt of
Rule: the estate with his own money.
1. Intent of the parties first o Contracts for the sale of goods not less than P.500
(Price becomes immaterial. but only if the transaction is clear) o Contracts in which one party becomes a surety (acts
(The stipulation is the law between the parties) as guarantor) for another party’s debt or other
(Must be clearly indicated in the contract) obligation.
2. If intent is not clear: then get the RELATIVE VALUE of the money *mnemonic “MYLEGS” (marriage, year, land, executor,
and the thing goods, surety).
a. If Thing is more valuable than money - BARTER
b. If 50-50- SALE Diwa vs. Donato, 234 SCRA 608
c. If money is less valuable- SALE It is settled that the Statute of Frauds applies only to
executory and not to completed, executed or partially
**Intention: consider contemporaneous and consequent acts of the executed contracts.
parties Thus as early as 1925, we held that where the land has been
delivered under the oral contract of sale, and the vendees have
Illus 2: A owns the car and lends it to B, so only USE and already paid part of the purchase price, the heirs of the vendor
POSSESSION is transferred and B pays rental for the use and cannot invoke the status of frauds in a proceeding where the
possession of the car vendees seek to have the land registered in their names.
Q: is it still sale? Agreements for the sale of real property shall be
A: Lease, not sale. ownership is not transferred unenforceable by action unless the same or some note or
parties are: lessor and lessee. memorandum thereof be in writing and subscribed by the part
charged or by his agent. Non-compliance with this provision,
Illus 3: Use and Possession to B, gratuitous. while not invalidating the contract which is not in writing,
A: not sale. Commodatum is a contract of Bailment makes ineffective the action for specific performance.
Parties are: Bailor-Bailee / lender- Borrower
ABSOLUTE v. CONDITIONAL SALE
Illus 4: Borrowing of a tangible thing xxx Guide Question: What are the distinctions between an
A: Mutuum - bailor/ lender -- Bailee/ borrower absolute sale and a conditional sale?
Illus 5: xxx CASE 1: Heirs of Juan San Andres v. Rodriguez, G.R. No.
A: contract of agency to sell 135634, May 31, 2000:
- in sale, TRANSFER OF OWNERSHIP IS CONTROLLING, Apparently, the appellate court considered as a "condition" the
BY WHICH THE BUYER PAYS A PRICE. stipulation of the parties that the full consideration, based on a
survey of the lot, would be due and payable within five (5)
illus 6: first: shoes for the general public --- but ran out. years from the execution of a formal deed of sale. It is evident
second: no brand, made specifically for B from the stipulations in the receipt that the vendor Juan San
A: The first is the perfection of sale but no delivery Andres sold the residential lot in question to respondent and
the second-- Contract for a Piece of Work (Art 1644) undertook to transfer the ownership thereof to respondent
CHARACTERISTICS OF SALE: without any qualification, reservation or condition.
1. Consensual
- created/ perfected by the meeting of the minds In Dignos v. Court of Appeals (158 SCRA 375), we have said
meeting of the minds when: determination of what is to be sold and that, although denominated a "Deed of Conditional Sale,"
how much is the price; a sale is still absolute where the contract is devoid of any
**need only: C.O.C. / perfected by mere consent proviso that title is reserved or the right to unilaterally
(other contracts where only consensual: lease, agency) rescind is stipulated, e.g., until or unless the price is paid.
Consent: legal age and of sound mind Ownership will then be transferred to the buyer upon
Sales

Sale is not: (other forms of contract) actual or constructive delivery (e.g., by the execution of a
a. Real contract: COC + delivery (pledge, mutuum, commodatum, public document) of the property sold. Where the condition is
pledge, deposit) imposed upon the perfection of the contract itself, the failure
b. Formal/ Solemn Contract: COC + form (as required by law) of the condition would prevent such perfection. If the
GR: sale does not need a form for perfection/ validity condition is imposed on the obligation of a party which is not
ie. mortgage contracts (form: must be in writing; if verbal: void fulfilled, the other party may either waive the condition or
contract of mortgage); refuse to proceed with the sale. (Art. 1545, Civil Code).

2. Commutative In People's Industrial Commercial Corporation v. Court of

- thing sold is considered the equivalent of the price paid and vice versa Appeals, it was stated:
- certainty of receiving something
A deed of sale is considered absolute in nature where there is
v. Aleatory neither a stipulation in the deed that title to the property sold is
- there is uncertain WON he will receive something in return (ie. reserved in the seller until full payment of the price, nor one
insurance) giving the vendor the right to unilaterally resolve the contract the
- performance of a party's obligation depends on some uncertain event moment the buyer fails to pay within a fixed period.
which is
beyond the control of the parties. HENCE, Sale is still absolute. There is no reservation of
*sale is commutative- because there is sure to be something to be ownership nor a stipulation providing for a unilateral
received. rescission by either party.
In fact, the sale was consummated upon the delivery of the lot
3. Bilateral / Reciprocal to respondent. Thus, Art. 1477 provides that the ownership of
- both seller and buyer are bound by the obligation’s dependent upon the thing sold shall be transferred to the vendee upon the
each other. actual or constructive delivery thereof.

v. Unilateral The stipulation that the "payment of the full consideration

ie. gratuitous contracts, guarantee based on a survey shall be due and payable in five (5) years
- only one party makes a promise or undertakes a performance from the execution of a formal deed of sale" is not a condition
which affects the efficacy of the contract of sale. It merely
4. Nominate provides the manner by which the full consideration is to be
computed and the time within which the same is to be paid.
v. Innominate: But it does not affect in any manner the effectivity of the
- *Do ut Des (i give that you give)* contract. Consequently, the contention that the absence of a
- Do ut Facias (i give that you do) formal deed of sale stipulated in the receipt prevents the
- Facio ut Des (i do that you give) happening of a sale has no merit.
- Facio ut Facias (i do that you do)
CASE 2: Babasa v. Court of Appeals, G.R. No.124045,
what if: need to draft contract but not in any of the named contracts. May 21, 1998.
how to designate if no name fit Although denominated "Conditional Sale of Registered
THEN: Memorandum, agreement, Memorandum of understanding Lands," it Is an absolute sale if xxx there is absolutely no
(only 2-4 are innominate in sale) proviso reserving title in the BABASAS until full payment of
the purchase price, nor any stipulation giving them the right
5. Onerous to unilaterally rescind the contract in case of non-payment.
- thing sold is conveyed n consideration of a price A deed of sale is absolute in nature although denominated a
"conditional sale" absent such stipulations.
v. Gratuitous (donation, commodatum)
Here, a perfected contract of absolute sale exists between the
6. Principal BABASAS and TABANGAO when they agreed on the sale of a
- its existence and validity does not depend on any other contract determinate subject matter, i.e., Lots no. 17827-A, 17827-B
and 17827-C, and the price certain therefor without any
v. Accessory contract: condition or reservation of title on the part of the BABASAS.
-simple loan/ mutuum- principal However, the obligation of TABANGAO as vendee to pay the
but if in the future has a with collateral- then the contract will be full amount of the purchase price was made subject to the
accessory condition that petitioners first deliver the clean titles over the
pawnshop (contract of pledge) -- pledge is an accessory contract lots within twenty (20) months from the signing of the
contract. If petitioners succeed in delivering the titles within
if real property: real mortgage / antichresis the stipulated 20-month period, they would get P1,821,920.00
person becomes collateral -- guarantee/ suretyship representing the entire balance of the purchase price retained
by TABANGAO. Otherwise, the deed of sale itself provides
Kinds of Sale that
1. As to Present conditions
2. As to Subject matter x x x upon the expiration of the 20-month period from the
- Real v. personal signing of the contract the Vendee is hereby authorized to
- Tangible v. intangibl e settle out of the balance retained by the Vendee all legally
3. As to Quality of things bought valid and existing obligations on the properties x x x and
- Wholesale v. retail whatever balance remaining after said settlement shall be
Sales

Wholesale- directly from manufacturer paid to the Vendor.

-if there is distributer/ supplier, but if taken directly from
manufacturer, then still wholesale Clearly then, the BABASAS' act of unilaterally rescinding
4. As to Manner of payment their contract with TABANGAO is unwarranted. Even without
- Cash v. installment the abovequoted stipulation in the deed, the failure of
5. As to validity – valid v. defective petitioners to deliver clean titles within twenty (20) months
from the signing of the contract merely gives TABANGAO the
*Absolute v. Conditional sale – page 5 option to either refuse to proceed with the sale of to waive the
*Emptio Rei Sperati v. emptio spei – page 20 condition in consonance with Art. 1545 of the New Civil
NOTE: presumption is in favor of an emptio rei sperati Code. Besides, it would be the height of inequity to allow the
Emptio Rei Sperati (sale of Emptio spei BABASAS to rescind their contract of sale with TABANGAO
an expected thing) (Sale of the hope itself) by invoking as a ground therefor their own failure to deliver
If thing does not materialize, Does not matter if it the titles over the lots within the stipulated period.
sale is not effective materializes, as long as the
hope validly exists CONTRACT OF SALE and CONTRACT TO SELL
Deals with future things which Present things because the Guide Question: What are the distinctions between a contract
is expected hope already exists of sale and a contract to sell?
Ie. sweepstakes ticket
CASE 1: Spouses Beltran v. Spouses Cangayda, G.R. No.
**VAIN HOPE or EXPECTANCY 225033, August 15, 2018
- Sale is void
- Not aleatory contract, an aleatory contract has an element In a contract of sale, title passes to the vendee upon the
of chance, here completely no chance delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is
*Sale of Real property v. personal property – xxx not to pass until the full payment of the price. In a
*Contract to sell v. Contract of sale – page 10 contract of sale, the vendor has lost and cannot recover
Contract of Sale Contract to Sell ownership until and unless the contract is resolved or
Non-payment is a resolutory Payment in full is a suspensive rescinded; whereas in a contract to sell, title is retained by
condition (puts an end to a condition. (Hence, without the vendor until the full payment of the price, x x x.
transaction) payment, there can be no
obligation to deliver or Relevant Facts: Sometime in August 1989, respondents
transfer ownership) verbally agreed to sell the disputed property to petitioners for
Title generally passes to the Ownership is retained by seller P35,000.00. After making an initial payment, petitioners took
buyer upon delivery despite delivery, until full possession of the disputed property and built their family
payment of the price home thereon. Petitioners subsequently made additional
Seller losses ownership after Seller enforces and not payments, which, together with their initial payment,
delivery and cannot recover rescinds if he ousts the buyer collectively amounted to P29,690.00. However, despite
it unless contract is resolved for failure of payment. respondents' repeated demands, petitioners failed to pay their
or rescinded remaining balance of P5,310.00

SC: The oral agreement entered into by the parties

FOR QUIZ NET WEEK!!! QUESTION10: Draft the appropriate constitutes a contract of sale and not a contract to sell. A
contract, given the ff: contract of sale is consensual in nature, and is perfected upon
the concurrence of its essential requisites. The essential
requisites of a contract under Article 1318 of the New Civil
Code are: (1) consent of the contracting parties; (2) object
certain which is the subject matter of the contract; and (3)
cause of the obligation which is established.

Thus, contracts, other than real contracts are perfected by

mere consent which is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract. Once perfected, they
**refer to case on left** bind other contracting parties and the obligations arising
FORM OF THE CONTRACT therefrom have the force of law between the parties and
should be complied with in good faith. The parties are
1. GR: *Sale- any form will do. Valid in any form (written, oral or bound not only to the fulfillment of what has been
mixed (partly oral/ partly oral--- inferred from the conduct of the expressly stipulated but also to the consequences which,
parties) --- Article 1483—subject to the statute of Frauds) according to their nature, may be in keeping with good
faith, usage and law.
*Sales required to be in writing for it to be enforceable: executory
sale of: Being a consensual contract, sale is perfected at the moment
there is a meeting of minds upon the thing which is the object
a. Statute of frauds (Art 1403) of the contract and upon the price. From that moment, the
(1 Real property; parties may reciprocally demand performance, subject to the
(2 )Personal prop worth 500 or more; provisions of the law governing the form of contracts.
 Sales

(3)Sale by which its terms is not to be performed within one year

from the making thereof. A perfected contract of sale imposes reciprocal obligations on
- Must be reduced in writing to prevent deceit/fraud the parties whereby the vendor obligates himself to transfer
- Statute of frauds may be applied so long as the parties have not yet the ownership of and to deliver a determinate thing to the
performed their obligations - Executory- buyer who, in turn, is obligated to pay a price certain in
Illus: money or its equivalent. Failure of either party to comply with
Sale of real property not in writing, only verbal his obligation entitles the other to rescission as the power to
GR: not enforceable. Orally, cannot be enforced rescind is implied in reciprocal obligations.
WHAT IF: there was partial payment, earnest money
Expn: partial execution or statute of fraud is waived. A plain reading of respondent Loreta's testimony shows that
(here, statute of frauds will no longer apply) the parties' oral agreement constitutes a meeting of the minds
-page 40- as to the sale of the disputed property and its purchase price.
Respondent Loreta's statements do not in any way suggest that
b. Sale of land or any interest therein thru an agent the parties intended to enter into a contract of sale at a later
– sales agent must be equipped with a written authority to time. Such statements only pertain to the time at which
sell (Art. 1874; either through SPL or authorization letter) petitioners expected, or at least hoped, to acquire the sufficient
from the landowner, else sale entered into by the sales agent means to pay the purchase price agreed upon. For emphasis,
would be void. the Court reproduces the relevant statements relied upon by
the CA:
c. Sale of Large Catte (Sec 511-534, Revised Admin Code in
relation to the Anti-Cattle Rustling Law (PD533)) Our [oral] agreement with [petitioner Antonio] that about
– public instrument and delivery of the cattle’s certificate of 300 square meters lot (sic) that they will pay P35,000.00 to us
registration are required for validity of the sale, else, sale is but [petitioner Antonio] told us that they will pay the amount
void. of P35,000.00 when [their] house will be sold, then they will
-bovine family pay us.
- register cattle when he is three months old with the city
treasurer’s office of the city/ municipality where the cattle is In a contract of sale, ownership of a thing sold shall pass to
located the buyer upon actual or constructive delivery thereof in the
(still have legal personality even if no birth cert or name is diff absence of any stipulation to the contrary. Refer to:
in birth cert; simple file late certification (of live birth))
Article 1477. The ownership of the thing sold shall be
Requisites for Sale to be effective against third persons: transferred to the vendee upon the actual or constructive
- Sale of Real Property—registration of the sale in the Registry delivery thereof.
of Deeds where property is located; Article 1478. The parties may stipulate that ownership in
- Sale of Personal Property--- possession in good faith by the the thing shall not pass to the purchaser until he has fully
buyer paid the price.

DEFECTIVE SALES: (1380- 1430) -In accordance with the cited provisions, ownership of the
1. Voidable – vitiated consent disputed property passed to petitioners when its possession
- Valid until annulled/ nullified was transferred in their favor, as no reservation to the
- Action in court: nullification contrary had been made.

CASE 2: Nicholas Diego v. Rodolfo Diego and Eduardo

Diego, G.R. No. 179965, Feb. 20, 2013.
The contract entered into by Nicolas and Rodolfo was a
contract to sell.

a) The stipulation to execute a deed of sale upon full

payment of the purchase price is a unique and
distinguishing characteristic of a contract to sell. It also
shows that the vendor reserved title to the property until
full payment.
On legal capacity—does not apply in civil interdiction (legal
disability) This stipulation, i.e., to execute a deed of absolute sale upon
full payment of the purchase price, is a unique and
WHO CANNOT GIVE CONSENT: distinguishing characteristic of a contract to sell.
a. minor In Reyes v. Tuparan, this Court ruled that a stipulation in the
b. insane / demented (incapacitated to give consent) contract, "[w]here the vendor promises to execute a deed of
c. illiterate deaf-mute (note: a deaf-mute can enter into a absolute sale upon the completion by the vendee of the
contract) payment of the price," indicates that the parties entered into a
*Whether seller or buyer—legally incapacitated to give contract to sell. According to this Court, this particular
consent provision is tantamount to a reservation of ownership on the
part of the vendor. Explicitly stated, the Court ruled that
Illus 1: adult seller- minor buyer the agreement to execute a deed of sale upon full payment
Can question: minor if he attains legal age; or the minor’s guardian of the purchase price "shows that the vendors reserved
Assumption: adult took advantage of the minor title to the subject property until full payment of the
Expn: minor intentionally misrepresents his age and other party relies
Sales

upon the deliberate misrepresentation. purchase price."

*minor is estopped to bring an action to question the contract
The Court further held that "[j]urisprudence has established
Illus 2: adult buyer- adult seller --- voidable that where the seller promises to execute a deed of absolute
Who can question: Minor if he is of legal age; and the minor’s sale upon the completion by the buyer of the payment of the
guardian / price, the contract is only a contract to sell."
voidable at the instance of the minor seller when he attains the age of
majority; has legal personality to sue is the guardian/ parent of the b) The acknowledgement receipt signed by Nicolas as well
minor seller. as the contemporaneous acts of the parties show that they
When can the contract be valid: minor representation- xxx here, the agreed on a contract to sell, not of sale. The absence of a
principle of estoppel sets in. formal deed of conveyance is indicative of a contract to
**How many year after reaching the age of majority can he assail sell.
the contract/ Prescriptive Period: FOUR (4) years from attainment
of age of majority. In fine, "the need to execute a deed of absolute sale upon
**If the guardian/ parent: FOUR YEARS from the time of the sale completion of payment of the price generally indicates that it
or knowledge of the sale is a contract to sell, as it implies the reservation of title in the
vendor until the vendee has completed the payment of the
Illus 3: minor buyer- buys FOOD – VALID. price."
Food is considered a necessaries. (food, clothing, shelter, etc—toys- not
necessaries- mother can question and it will become invalid haha ) In addition, "[a] stipulation reserving ownership in the vendor
(Note: he must be a buyer) until full payment of the price is x x x typical in a contract to
sell." Thus, contrary to the pronouncements of the trial and
Illus 4: buyer- insane seller appellate courts, the parties to this case only entered into a
** presumption of/is sanity. everybody is of sound mind contract to sell; as such title cannot legally pass to Rodolfo
Q: When can a person be insane for all intents and purposes? until he makes full payment of the agreed purchase price.
A: Court declares that one is insane. Expert testimony of a
psychiatrist. c) Nicolas did not surrender or deliver title or possession
Status of Sale: voidable to Rodolfo.
When can sale become valid: insane acted in his lucid interval (L.I-
period when he is thinking normally; periodic) **The contract to sell is terminated or cancelled. Having
established that the transaction was a contract to sell, what
Illus 5: insane buyer- seller happens now to the parties’ agreement?
- 4 years to question the validity of sale as well. The remedy of rescission is not available in contracts to sell.
- Sanity is internal, but something internal can be actualized.
Chua v. Court of Appeals "[s]ince the agreement x x x is a
Illus 6: Insane Buyer- Seller mere contract to sell, the full payment of the purchase price
- if food- necessaries- it is valid. partakes of a suspensive condition. The non-fulfillment of
the condition prevents the obligation to sell from arising
Voidable Sale: Vitiated Consent by FUMVI: and ownership is retained by the seller without further
- Fraud or Deceit remedies by the buyer."
- Undue Influence In Reyes v. Tuparan that "petitioner’s obligation to sell the
- Mistake subject properties becomes demandable only upon the
- Violence or Force happening of the positive suspensive condition, which is the
- Intimidated or Threat respondent’s full payment of the purchase price. Without
*Include: Intoxication & Hypnotic Spell respondent’s full payment, there can be no breach of
Intoxication- 4 stages- xxx – in any of those stages, one is intoxicated. contract to speak of because petitioner has no obligation
*Party defrauded/ defrauded may question the validity of the sale yet to turn over the title.
* Dolo causante v. dolo
OPTION CONTRACT
1. Rescissible An option contract is defined in the second paragraph of
– economic damage; lesion—somewhere in the price Article 1479 of the Civil Code as:
-unenforceable Article 1479. x x x An accepted 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.

Philippine National Oil Company and PNOC Dockyard &

Engineering Corporation, vs. Keppel Philippines Holdings,
Inc., (G.R. No. 202050, July 25, 2016) the Supreme Court
discussed that:
- An option contract must be supported by a separate
consideration that is either clearly specified as such in the
contract or duly proven by the offeree/promisee.
- An option contract is a contract where one-person (the
offeror/promissor) grants to another person (the
offeree/promisee) the right or privilege to buy (or to sell) a
Sales

determinate thing at a fixed price, if he or she chooses to do so

within an agreed period.
*As a contract, it must necessarily have the essential elements
of subject matter, consent, and consideration. Although an
option contract is deemed a preparatory contract to the
principal contract of sale, it is separate and distinct
therefrom, thus, its essential elements should be distinguished
2. Unenforceable from those of a sale.
(a)entered without authority or purporting to represent someone
else; OPTION CONTRACT OF
(b)defect in the form; CONTRACT SALE
(c) incapable of giving consent (if one of them—voidable; if two The right or privilege The subject matter is
of them-- unenforceable) to buy (or to sell) a Subject the determinate thing
determinate thing for matter itself.
a price certain,
Consent in an Option Sale
The consent in an option contract is the acceptance by the
offeree of the offeror’s promise to sell (or to buy) the
determinate thing, i.e., the offeree agrees to hold the right
or privilege to buy (or to sell) within a specified period.
This acceptance is different from the acceptance of the
offer itself whereby the offeree asserts his or her right or
privilege to buy (or to sell), which constitutes as his or her
consent to the sales contract.
The consideration in an option contract may be anything
of value, unlike in a sale where the purchase price must be
in money or its equivalent. There is sufficient consideration
for a promise if there is any benefit to the offeree or any
detriment to the offeror.
*An option imposes no binding obligation on the person
3. Void
holding the option aside from the consideration for the
– absolutely simulated sale; defect in the object (none or illegal);
offer. Until accepted, it is not treated as a sale.
defect in the cause
- most defective contract
- action: Declaration of nullity
Broker/agent and not seller
Instances:
Case 2: Ker & Co., Inc. v. Lingad, G.R. No. L-20871,
April 30, 1971.
Facts: Ker is the distributor of the said company. Ker was
precluded from disposing the products elsewhere unless there
has been a written consent from the company. The prices,
discounts, terms of payment, terms of delivery and other
conditions of sale were subject to change in the discretion of
the Company.

SC: The relationship of Ker and Co and US rubber was that of

a principal-broker/ agency. Ker and Co is only an agent of
1. a. Illicit per accidence- law prohibits the sale (illegal drugs) the US rubber because it can dispose of the products of the
v. Company only to certain persons or entities and within
b. illicit per se- by nature (ie. spoiled food) stipulated limits, unless excepted by the contract or by the
c. Outside the commerce of man- ie. properties of public Rubber Company, it merely receives, accepts and/or holds
dominion; human beings upon consignment the products, which remain properties of
* Kidneys- cannot be sold, but can be donated the latter company, every effort shall be made by petitioner to
* RA 9208- Prohibiting the sale of human organs and human promote in every way the sale of the products and that sales
trafficking made by petitioner are subject to approval by the company.
d. Inexistent- the thing does not exist Since the company retained ownership of the goods, even
**Sale of things with potential existence - emptio rei sperati (ie. as it delivered possession unto the dealer for resale to
expected harvest – in the future)—NATURE: valid but customers, the price and terms of which were subject to
conditional in nature subject to the condition that the thing must the company’s control, the relationship between the
materialize. company and the dealer is one of agency.
Effect if the thing does not come into existence: Sale is
Inefficacious Case 2: Manila Metal Container Corporation v. Phil.
- If there is advanced payment them must return the National Bank, G.R. No. 166862, Dec. 20, 2006;
money, else there be solutio indebiti (unjust enrichment)

Emptio Rei Sperati

Sales

GENERAL RULE: Valid Sale, subject to the condition that the thing OTHER CASES:
will come into existence.
Illus: grape vineyard. Sale of wine expected to be produced; grains Sale distinguished from other contracts
that may be produced in the rice terraces. Guide question: What is the legal significance of
distinguishing a contract of sale from other contracts?
Emptio Spei- sale of hope
RULE: Absolute Sale, Contract of Sale v. Contract for a Piece of Work

If VAIN HOPE- void Case 1: Engineering and Machinery Corp. v. CA, G.R. No.
52267, Jan. 24, 1996
2. Absolutely Simulated Sale- sale where parties do not Contract for a piece of work. A contract for a piece of work,
intend to be bound – VOID labor and materials may be distinguished from a contract of
sale by the inquiry as to whether the thing transferred is one
*If Relatively simulated- binding between the parties but calls for the not in existence and which would never have existed but
reformation of the instrument to reflect their true agreement because the for the order, of the person desiring it. In such case, the
parties are bound by their true agreement. contract is one for a piece of work, not a sale. On the other
hand, if the thing subject of the contract would have existed
STATUS OF THE SALE: VALID and been the subject of a sale to some other person even if the
order had not been given, then the contract is one of sale.

To Tolentino, the distinction between the two 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 work.

Clearly, the contract in question is one for a piece of work. It

is not petitioner’s line of business to manufacture air-
conditioning systems to be sold “off-the-shelf.” Petitioner’s
business and particular field of expertise is the fabrication and
installation of such systems as ordered by customers and in
accordance with the particular plans and specifications
provided by the customers. Naturally, the price or
compensation for the system manufactured and installed will
depend greatly on the particular plans and specifications
agreed upon with the customers.
1. WHAT TO DO: File for an action for the Declaration of the
cancellation of the title issued that it was for the purpose of Stages in the Formation of the contract of Sale
lending the title to them. Guide Question: When is a contract of sale perfected and
- Annulment of sale and ordered the reconveyance what are the legal ramifications of this perfection?
** Action for the declaration of the inexistence or nullity of a contract
of sale does not prescribe. But NOTE: ESTOPPEL BY LACHES. Must Case 1: Philippine National Oil Company v. Keppel
take action immediately, else, laches may set in. Philippines Holdings, Inc., G.R. No. 202050, July 25, 2016;
FACTS: Keppel entered into a lease agreement with Luzon
3. Sales without consideration Stevedoring Co. for 25 years for P2.1M. At the option of
-valid as donation, void as sale Luzsteveco, the rental fee could be totally or partially
4. Sales expressly prohibited by law. converted into equity shares in Keppel. At the end of the
- parties are prohibited from entering into a contract of sale. agreement, Keppel was given the option to purchase the land
Ie. art 1490 – H and W cannot sell property t each other--- void for P4.09M provided that it acquired the necessary
Expn: separation of property regime or judicial separation of property qualification. However, Keppel at the time of the agreement
was not qualified because less than 60% of its shareholding
before FC: conjugal partnership of gains was Filipino-owned.
after FC: absolute community of property
Separation of property ISSUE: Whether the option contract is void if it not supported
by a separate value consideration.
Reasons why H and W cannot sell to each other:
HELD: No. An option contract is a contract where one
person grants to another person the right or privilege to
buy or to sell a determinate thing at a fixed price, if he or
she chooses to do so within an agreed period. It must
necessarily have the essential elements of a contract. The
consideration in an option contract may be anything of value,
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unlike in a sale where the purchase price must be in money or

its equivalent. However, when the consideration is not
monetary, the consideration must be clearly specified as such
in the option contract or clause.

When the written agreement itself does not state the

consideration for the option contract, the offeree or promisee
bears the burden of proving the existence of a separate
consideration for the option.

On the contrary, the option to convert the purchase price for

**INCLUDED FOR THE QUIZ ON MODULE 2 shares should be deemed part of the consideration for the
contract of sale itself, since the shares are merely an
STAGES IN THE FORMATION OF THE CONTRACT OF alternative to the actual cash price.
SALE:
The absence of consideration supporting the option
1. Preparation Stage contract, however, does not invalidate the offer to buy or
a. Offer sell. An option unsupported by a separate consideration
- offer must be certain and the acceptance absolute and stands as an unaccepted offer to buy or sell which, when
unqualified. properly accepted, ripens into a contract to sell.

b. Option Contract (Article 1479, 1324) Accordingly, when an option to buy or to sell is not supported
- An Option Contract is a contract by which the owner of the by a consideration separate from the purchase price, the
property agrees with another person that he shall have the option constitutes as an offer to buy or to sell, which may be
right to buy his property at a fixed price within a certain withdrawn by the offeror at any time prior to the
time. communication of the offeree's acceptance. When the offer
- An option imposes no binding obligation on the person is duly accepted, a mutual promise to buy and to sell under the
holding the option aside from the consideration for the offer. first paragraph of Article 1479 of the Civil Code ensues and
Until accepted, it is not treated as a sale. the parties' respective obligations become reciprocally
- An option contract must be supported by a separate demandable.
consideration that is either clearly specified as such in the
contract or duly proven by the offeree/promise The court ruled that the offer to buy the land was timely
accepted by Keppel. As early as 1994, Keppel expressed its
- A purchaser who is unsure whether or not he wants to buy the desire to exercise its option to buy the land. Instead of
property can enter into an option contract with the seller. This will give rejecting outright Keppel's acceptance xxx Thus, when Keppel
the him/her an option to buy a particular asset at a later date at an communicated its acceptance, the offer to purchase the Bauan
agreed upon price. If the seller reneges on his word and disposes of the land stood, not having been withdrawn by PNOC. The offer
property in favor of another before the end of the agreed time, the having been duly accepted, a contract to sell the land ensued
purchaser can sue him for damages. which Keppel can rightfully demand PNOC to comply
with.
- It is a contract by which the owner of the property agrees with another
person that he shall have the right to buy his property at a fixed price Case 3: First Optima Realty Corp. v. Securitron Security
within a certain time. Services,G.R. No. 199648, Jan. 28, 2015;
- It is binding upon the promissor if the promise is supported by a
Case 4: Villanueva v. PNB, G.R. No. 154493, Dec. 6, 2006;
consideration distinct from the price. An option contract is likewise a
separate and distinct contract from a contract of sale.
Case 5: San Miguel Corp. v. Huang, G.R. No. 137290, July 31,
2000.
c. Right of First Refusal
- a contractual right that gives its holder the option to enter a
business transaction with the owner of something, according
to specified terms, before the owner is entitled to enter into
that transaction with a Third party. In brief, the right of first
refusal is similar in concept to a Call Option.

d. Mutual Promise to Buy and Sell

- Article 1479, parg. 1
- ie. A promises to buy something and B promises to sell it at an
agreed price. – Hence, is clearly a bilateral reciprocal
contract.
- Is as good as a perfected contract. No title of dominion is
transferred yet but there is right to demand the fulfillment or
damages.
(Page 53)

2. Perfection (meeting of the minds)

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“Under the law, a contract is perfected by mere consent, that is,

from the moment that there is a meeting of the offer and the
acceptance upon the thing and the cause that constitute the
contract. The law requires that the offer must be certain and the
acceptance absolute and unqualified.” (Art 1315 and
jurisprudence)

- Concurrence of offer and acceptance when parties are present to

each other, by phone, electronics means, and by correspondence.

*Legal effects of perfection (Article 1480, etc)

3. Consummation (when the object is delivered and the price is

paid)

1490
1. Ward- incapacitated, weak-minds
2. Agency – if he buys principals propert--- breach of trust and
confid
3. Executor/ executrix if named in will ; none named, appoint
among themselves or agree on another –else court assigns ---
administrator.
-