Sales: Theory and Practice
I. Introduction
A. Governing law
B. History of law on sales
C. Source of law on sales
II. Concept of contract of sale
A. Concept of sale (Art. 1458)
B. Characteristics of contract of sale
C. Essential elements of contract of sale: an overview (Art. 1318)
i. Consent (Art. 1319)
ii. Object (Arts. 1347-1349)
iii. Cause (Art. 1350)
D. Kinds of contract of sale
i. Absolute
ii. Conditional
III. Parties to the contract of sale
A. Persons who may enter into a contract of sale (Art. 1489)
B. Type of incapacity
i. Absolute
ii. Relative
C. Rules applicable to specific sellers
i. Minors (Art. 1327, 1390; Family Code, art. 290)
ii. Husband and wife (Arts. 1409, 1490, 1492)
iii. Persons disqualified to buy specific properties (Art. 1409, 1491, 1492)
iv. Other persons
D. Practice notes: parties to contract of sale
i. Husband or wife
ii. Corporation
IV. Formation and perfection of contract of sale
A. Consent/offer and acceptance
i. In general (Arts. 1319-1326)
a) Offer
- certain (Art. 1319)
- fixing terms of offer (Art. 1321)
- when offer becomes ineffective (Art. 1323)
- period for acceptance (Art. 1324)
- when offer accepted when acceptance made by letter or telegram or offer made through agent
(Arts. 1319, 1322)
- business advertisements (Arts. 1325-1326)
b) Acceptance
- absolute vs. qualified acceptance (Art. 1319)
- express or implied (Art. 1320)
ii. Practice notes: offer and acceptance
- counterpart signing
B. Object or subject matter
i. Thing must be determinate (Arts. 1318[2], 1349, 1458, 1460)
ii. Thing must be licit (Art. 1459)
a) In general
b) Illicit things (Art. 1409)
iii. Thing must be within the commerce of men (Art. 1347)
iv. Thing must not be impossible (Art. 1348)
v. Thing must be an existing good or a future good (Arts. 1347, 1461, 1462)
a) Sale of things having a potential existence (Arts. 1461)
b) Sale of mere hope of expectancy (Art. 1461)
c) Sale of vain hope or expectancy (Art. 1461)
vi. Sales of specific things
a) Sale of things in litigation (Art. 1381(4))
b) Sale of an undivided interest in a thing (Art. 1463)
c) Sale of undivided share of a specific mass (Art. 1464)
d) Sale of things subject to a resolutory condition (Art. 1465)
vii. Practice notes: object or subject matter of the contract
a) Sale of shares – sale of nominee shares, sale at less than fair market value, sale of shares in a
corporation engaged in a partly-nationalized activity, right of first refusal, pre-emptive rights, tag-along rights,
drag-along rights, tax requirements, registration requirements
b) Sale of land - sale of land to aliens, tax requirements, registration requirements, sale of land acquired
by homestead or free patent
c) Sale of assets – sale of all or substantially all of the assets, sale in bulk
d) Sale of motor vehicles – registration requirements
C. Cause or consideration
i. Price certain (Art. 1469, 1472, 1473, 1474)
b) Effect when price not certain (Art. 1474)
ii. Lack of cause or consideration (Art. 1409(3))
iii. Inadequacy of the price (Art. 1470)
a)When price inadequate
b) Effect of inadequate price
- on voluntary sales
- on involuntary sales
iv. Simulated price (Art. 1471)
a) When price simulated
b) Effect of simulated price
vi. Practice notes: cause or consideration
- how payment effected: cash, check, wire transfer, etc.
D. Perfection of contract (Art. 1475)
i. Offer and Acceptance (Arts. 1319-1326)
- stages of a contract of sale
- concept of perfection; perfection in consensual contracts vs. real contracts
- necessity for payment or delivery of thing
- necessity for written agreement
- requirements for offer and acceptance
- how perfection may be proved
- manner of payment as a requirement for perfection
- effect of non-payment on perfected contract
ii. Payment of earnest money as proof of perfection (Art. 1482)
iii. Perfection of sale by auction (Art. 1476)
iv. Expropriation (Art. 1488)
F. Consummation of contract
V. Formalities of contract of sale
A. In General (Arts. 1356, 1483)
i. Verbal
ii. Written
B. Form required for enforceability: Statute of Frauds (Art. 1403, 1405, 1406)
i. concept
ii. purpose
iii. scope
iv. ratification of contract
C. Form required for validity (Art. 1356)
i. Sale of a piece of land or any interest therein is made through an agent (Art. 1874)
D. Form required for convenience of the parties (Art. 1358)
E. Items to note: Electronic Commerce Act
F. Practice notes: formalities of contract of sale
- notarization
- consularization or authentication
VI. Covenants: obligations of the seller
A. Obligations under the Civil Code
i. Take care of thing pending delivery (Art. 1163)
ii. Pay for expenses for the execution and registration of the sale, unless there is stipulation to the contrary (art.
1487)
- practice notes: payment of income tax, stamp tax, local transfer tax, legal fees, Register of Deeds expenses
iii. Transfer ownership (Arts. 1458, 1495)
a) Owner must have right to transfer ownership (Arts. 1459)
b) When right to transfer ownership must exist (Art. 1459)
c) How effected (Arts. 1477, 1478, 1496)
iv. Deliver the thing with accessions and accessories (Art. 1537)
a) Concept of delivery; intention to deliver
b) Consequence of delivery
c) Delivery and non-payment of the price
d) Ways of effecting delivery (Arts. 1497-1501)
- actual delivery
- constructive (execution of public instrument, traditio symbolica, traditio longa manu, traditio
brevi manu, traditio constitutum possesorium)
e) When seller not bound to deliver (Arts. 1524, 1536, 1198)
f) Incidents of delivery
- Place of delivery (Art. 1521)
- Time of delivery (Arts. 1521)
- Expenses of delivery (Art. 1521)
- Proof of delivery
g) Special rules
- Contract of sale or return (Art. 1502)
- Contract of sale or approval (Art. 1502)
- Delivery to carrier (Arts. 1503, 1523)
B. Practice notes: usual covenants of the seller
i. Pre-closing covenants: (a) access; (b) conduct of operations prior to closing; (c) approvals; (d) notification to
buyer; (e) others
ii. Post-closing covenants: (a) confidentiality; (b) covenant not to compete; (c) anti-poaching covenant; (d)
payment of income tax; (e) others
iii. Affirmative covenants and negative covenants
VII. Covenants: obligations of the buyer
A. Obligations under the Civil Code
i. Accept delivery (Art. 1582)
a) meaning of acceptance
b) mode of manifesting acceptance (Art. 1585)
- express
- implied
c) delivery by installments (Art.1583)
d) right to examine goods prior to delivery (Art. 1584)
- type of delivery contemplated
- purpose of inspection
- right not absolute
- waiver of right
- how right exercise (time, place, manner, expenses)
- buyer’s right to reject goods
- Collect on delivery
e) effect of acceptance (Art. 1586)
- acceptance not a bar to action for damages
- notice to seller for breach of promise or warranty
f) when buyer’s refusal to accept justified/wrongful (Arts. 1587, 1588)
ii. Pay the price (Art. 1582)
a) where and when (Art. 1582)
b) buyer’s liability to pay interest (Art. 1589)
c) right of vendee to suspend payment of price (Art. 1590)
d) effect of failure to pay price
B. Practice notes: usual covenants of the buyer
i. Pre-closing covenants: (a) approvals; (b) others
ii. Post-closing covenants : (a) payment of stamp tax; (b) obtaining BIR Certificate Authorizing Registration; (c)
others
iii. Affirmative covenants and negative covenants
VIII. Conditions
A. Meaning of condition (Art. 1545)
B. Types of conditions
i. Conditions precedent vs. conditions subsequent
ii. Conditions for perfection vs. conditions for performance
C. Effect of non-fulfillment of condition
D. Practice notes: conditions in contract of sale
i. Usual contractual conditions
a) Conditions precedent: (i) accuracy of representations; (ii) performance of all covenants/no breach; (iii)
consents; (iv) no litigation/suit; (v) delivery of documents; (vi) others
b) Conditions subsequent
ii. Time frame for meeting conditions: drop dead date/long stop date
iii. Result if closing condition not satisfied: (a) no closing; (b) closing delayed; (c) condition waived and closing
occurs; (d) condition changed to post-closing covenant and closing occurs; (e) others
IX. Representations and warranties
A. Meaning of representations and warranties
B. Type of warranties
i. Express – meaning, effect
ii. Implied – meaning, effect, nature, when not applicable
C. Categories of representations and warranties
i. Relating to the contract itself
ii. Relating to the subject matter of the contract
iii. Relating to the parties
D. Distinguished from other terms
i. Conditions
ii. Opinion, dealer’s talk
E. Representations and warranties of the seller
i. Express – Art. 1546
a) meaning
b) terminology used
c) time of warranty, form, seller’s good faith
ii. Implied
a) implied warranty of title (Art. 1547)
- warranty in case of eviction (Art. 1548-1560)
- meaning of eviction (Art. 1548)
- eviction vs. trespass in fact
- requirement of final judgment; duty to appeal (Arts. 1557, 1558, 1559, 1549)
- vendor as party to the suit for eviction (Art. 1559)
- effect of prescription (Art. 1550)
- rights and liabilities in case eviction occurs; rights in case of partial eviction (Arts. 1555, 1556)
- waiver of warranty in case of eviction; kinds; effect; presumption (Arts. 1548, 1553, 1554)
- eviction for nonpayment of taxes (Art. 1551)
- judicial sales (Art. 1552)
- encumbrance with non-apparent burden (Art. 1560)
b) implied warranty against hidden encumbrances and defects (Art. 1547(b), 1561, 1566, 1572-1581)
- requisites for warranty against hidden defects (Arts. 1561, 1566)
- remedies: accion redhibitoria, accion quanti minoris (Arts. 1567, 1570)
- warranty in sales of animals (Arts. 1572- 1581)
- judicial sales (Art. 1570)
c) implied warranty as to fitness or merchantability or merchantable quality (Art. 1562, 1563, 1564, 1565,
1570)
- implied warranty of quality/fitness – particular purpose of goods, test, sale under trade name,
usage of trade, sale by sample, remedies (Art. 1562-1564, 1565)
- implied warranty of merchantability/merchantable quality (Art. 1562)
- remedies: accion redhibitoria, accion quanti minoris (Arts. 1567, 1570)
F. Representations of the buyer
G. Practice notes: representations of the seller and the buyer
i. Typical contractual representations of the seller: (a) corporate existence, power and authority, (b) consents, no
violation; (c) financial statements, no undisclosed liability; (d) material adverse change; (e) title; (f) litigation; (g) others
ii. Typical contractual representations of the buyer
iii. When representations made (e.g., time of execution, time of closing, etc.)
iv. Bring-down representations – concept, why required
v. Survival of representations
X. Rules on risk of loss and deterioration
A. Theories of risks of loss
i. Theory of tradition vs. theory of perfection
ii. Theory followed by the Spanish Civil Code and the Philippine Civil Code
B. Principle of res perit domino
C. Rules on risk of loss and deterioration
i. Prior to perfection of contract
ii. At time of perfection (Arts. 1409(3), 1493, 1494)
iii. After perfection of contract but before delivery
- Fortuitous event (Art. 1480, 1163-1165, 1262-1263, 1269, 1504, 1537-1538, 1189[1,3])
- Seller’s fault (Arts. 1480, 1165, 1262-1263, 1504[2], 1538, 1189)
iv. After delivery (Arts. 1504, 1568, 1569)
D. Practice notes: risk of loss and deterioration
- drafting notes to address issues of loss and deterioration
XI. Actions and remedies for breach of agreement
A. In general (Art. 1594)
i. Actions available to seller
a) payment of price (Art. 1595)
b) damages (Arts. 1596)
c) rescission of contract (Art. 1597)
ii. Actions available to the buyer
a) specific performance (Art. 1598)
b) damages (Art. 1599)
B. Remedies available
i. Remedies available to the seller
a) lien on the goods (Arts. 1525-1529, 1535)
b) right of stoppage of goods in transitu (Art. 1530-1532, 1535)
c) right of resale (Art. 1533)
d) right of rescission (Art. 1534)
e) rescission in case of loss of immovable property (Art. 1591)
(f) rescission in case of sale of movable property (Art. 1593)
ii. Remedies available to buyer
a) remedies in sale of goods by description and/or sample (Art. 1481)
b) remedies in case of loss of specific goods (Art. 1494)
c) remedies in case of delivery of goods less than the quantity contracted (Art. 1522)
d) remedies in case of a sale of real property by unit of measure (Arts. 1539, 1540, 1541, 1543)
e) remedies in case of sale of real property made of a lump sum (Arts. 1542, 1543)
f) suspension of payments (Art. 1590)
g) remedies in sale of immovable property (Art. 1592)
C. Special Laws
i. The Recto Law (Arts. 1484-1486) re sale of personal property payable in installments
a) Transactions covered and not covered
b) Purpose of the law
d Election of remedies
ii. The Maceda Law (R.A. No. 6552)
a) Transactions covered and not covered (Sec. 3)
b) Purpose of the law (Sec. 2)
c) Rights granted to the buyer
- at least two years of installments (Sec. 3)
- less than two years of installments (Sec. 4)
- other rights of the buyer (Secs. 5, 6)
d) Cancellation of sale by the seller
- requirements
- period
e) Calculation of installment payments
f) Stipulation to the contrary (Sec. 7)
D. Practice notes: actions and remedies
i. Typical contractual stipulations in case of breach
ii. Breach of covenant
iii. Breach of warranty
XII. Extinguishment of sale
A. In general
B. Causes of extinguishment (Art. 1600)
C. Conventional redemption
i. Concept of conventional redemption (Art. 1601)
ii. Subject matter of conventional redemption
iii. Distinguished from option to buy
iv. Period to redeem (Art. 1606)
a) express agreement
b) no express agreement
c) court judgment: true sale with right to repurchase
iv. Exercise of right to redeem
a) how right exercised (Art. 1616)
- manner of exercise
- amounts that should be paid
- requirement of tender of payment and consignation
b) who exercises right
- vendor, his assigns and heirs
- vendor’s creditor (Art. 1610)
- co-owners and co-heirs (Arts. 1612, 1613, 1614)
c) from whom to redeem (Arts. 1608, 1615,
- vendee
- vendee’s assigns (Art. 1608)
- vendee’s heirs (Art. 1615)
v. Effect of redemption and non-redemption (Art. 1617, 1618, 1607, 1609, 1611)
- consolidation of ownership (Art. 1607)
- subrogation of vendee (Art. 1609)
- redemption of entire property (Art. 1611)
- distribution of fruits (Art. 1617)
- return free from liens and encumbrances (Art. 1618)
D. Legal redemption
i. Concept
ii. When applicable
a) Co-owners (Art. 1620)
b) Adjoining land-owners of rural land (Art. 1621)
c) Adjoining land-owners of urban land (Art. 1622)
iii. Period to redeem (Art. 1623)
iv. Exercise of right to redeem (Art. 1623)
v. Redemption/pre-emption under special laws
a) land acquired under free patent or homestead (C.A. No. 141, sec. 119)
b) extra-judicial foreclosure of mortgage (Act No. 3135, sec. 6)
c) agricultural land (R.A. No. 3844, sec. 12)
E. Practice notes: termination of contract of sale
i. Grounds for termination
ii. Manner of termination
XIII. Special problems in sales
A. Sale by non-owner (Arts. 559, 1505, 1434)
i. when ownership required
a) perfection
b) consummation
ii. rule on acquisition of ownership by the buyer in case of sale by non-owner; principle behind the rule (nemo dat
quod non habet)
iii. exceptions to the rule
a) estoppel
b) recording laws
c) judicial power and statutory sale
d) merchant store
iv. subsequent acquisition of title (Art. 1434);
iv. rule with respect to immovable property
v. status of contract
B. Sale by owner with voidable title non-owner (Arts. 559, 1506)
i. rule on acquisition by ownership by the buyer; principle behind the rule
ii. Art. 559 in relation to Arts. 1505 and 1506
C. Double sales (Art. 1544)
i. requisites for applicability of Article 1544
ii. rules under Article 1544
a) movables
- ”possession”; how acquired (see Art. 559)
b) immovables
- meaning of “registration”
- requirement of ”good faith”
- meaning of “possession”
- meaning of “oldest title”
iii. applicability of Art. 1544 to unregistered lands
iv. Article 1544 and execution sales
XIV. Sale contract distinguished from other contracts
A Dacion en pago (Art. 1245);
i. concept
ii. distinguished from a contract of sale
B. Contract to sell/contract of conditional sale
i. concept
ii. distinguished from a contract of sale
C. Agency to buy and sell (Art. 1466)
i. concept
ii. distinguished from a contract of sale
D. Contract for a piece of work (Art. 1467)
i. concept
ii. distinguished from a contract of sale
E. Barter and exchange (Arts. 1638-1641, 1468)
i. concept (Art. 1638)
ii. when perfected and consummated
iii. effect if giver not the lawful owner of thing delivered (Art. 1639)
iv. effect of eviction (Art. 1640)
v. test for determining whether transaction is sale or barter (Art. 1468)
F. Equitable mortgage (Arts. 1602-1605)
i. concept
ii. pacto de retro vs. mortgage distinguished
iii. requisites for presumption that the transaction is an equitable mortgage (Arts. 1602, 1604)
iv. badges of equitable mortgage (Art. 1603)
v. effect if contract is an equitable mortgage
vi. remedy of reformation (Art. 1605)
H. Donation (Arts. 725, 1471)
i. concept
ii. distinguished from a contract of sale
I. Lease (Art. 1643)
i. concept
ii. distinguished from a contract of sale
J. Assignment of credits and incorporeal rights (Arts. 1624-1637)
i. concept
ii. perfection (Art. 1624)
iii. binding effect (Art. 1626)
iii. need for debtor’s consent; effect of payment by debtor before and after notice (Art. 1626)
iv. effect of assignment of credit on accessory rights (Art. 1627); fruits and expenses (Arts. 1632, 1633)
v. warranties of the assignor of the credit
a) in general (art. 1628)
b) where debtor’s insolvency guaranteed (Art. 1629)
c) sale of hereditary right (Art. 1630)
d) sale of whole of certain rights, rents or products (Art. 1631)
vi. legal redemption in the sale of credit in litigation (Arts. 1634, 1635)
XV. Documents of title (Art. 1507-1520)
A. Concept (Art. 1507)
B. Function of documents of title
C. Examples of documents of title
D. Classes of documents of title
E. Negotiable documents of title
i. who negotiates (Art. 1512)
ii. how negotiated
a) by delivery (Art. 1508)
b) by indorsement and delivery (Art. 1509)
iii. effect of negotiable documents of title marked “non-negotiable” (Art. 1510)
iv. effect of negotiation (Art. 1513)
a) rights acquired by the buyer of the negotiable document of title when properly negotiated (Art. 1513)
b) effect where negotiation impaired by breach of duty, etc. (Art. 1518)
c) effect where document of title not properly negotiated (Art. 1514, 1st par., Art. 1515)
v. warranties by seller of the documents of title (Art. 1516-1517)
vi. rights of creditors against the goods (Arts. 1519-1520)
F. Non-negotiable
i. how transferred (Art. 1511)
ii. effect of transfer (Art. 1514)
XVI. Special Laws
A. Presidential Decree No. 957, secs. 23-24
B. Bulk Sales Law (Act No. 3952)
C. Retail Trade Liberalization Act (Republic Act No. 8762), sec. 3 and 5
XVII. Practice notes: overview of the typical sale transaction/contract
A. What happens in a typical sale transaction
i. Due diligence
ii. Negotiation and drafting of contract
iii. Execution of contract
iv. Compliance with (or waivers of) conditions precedent
v. Closing
vi. Performance of post-closing covenants
B. Overview: how a typical sale and purchase agreement looks like
i. Parties
ii. Recitals
iii. Operative provisions on sale
iv. Conditions for closing
v. Covenants
vi. Representations and warranties
vii. Termination
viii. Miscellaneous provisions
ix. Signature page
SALES ASSIGNMENT AND ANNOUNCEMENTS
Class Assignment for June
14
On June 14, we will cover parts I, II and III of the course outline. Please study:
(a) the following articles of the Civil Code: Arts. 1458, 1489, 1490, 1491, 1492; [Reference guide: De Leon, pp. 1-18, pp.
155-170]
(b) the following cases:
1. Cook vs. McMicking, 27 Phil. 10 (1914);
2. Ching vs. Goyanko, G.R. No. 165879, November 10, 2006;
3. Distajo vs. Court of Appeals, G.R. No. 112954, August 25, 2000;
4. Fiestan vs. Court of Appeals, G.R. 81552, May 28, 1980;
5. Macariola vs. Asuncion, A.M. No. 133-J May 31, 1982;
6. Valencia vs. Cabanting, A.M. 1302, April 26, 1991;
7. Fabillo vs. Intermediate Appelate Court, G.R. No. L-68838, March 11, 1991;
8. Rubias vs. Batiller, G.R. No. L-35702, May 29, 1973;
9. Halili vs Court of Appeals, G.R. No. 113539, March 12, 1998.
Please also read the following provisions: Civil Code, Arts. 1318, 1319, 1327, 1347-1350, 1390, 1409(7); Family Code,
art. 194. There is no need to read commentaries on these provisions.
Class Assignment for June
21
On June 21, we will cover part III until part IV.C of the course outline. In addition to the matters that we have not finished
discussing last week, please study:
(a) the following articles of the Civil Code: Arts. 1459-1465, 1469-1474; [Reference guide: De Leon, pp. 27-29, 32-45, pp.
53-67]
(b) the following cases:
1. Vda. de Cabalu vs. Tabu, G.R. No. 188417, September 24, 2012;
2. Melliza vs. City of Iloilo, G.R. No. L-24732, April 30, 1968;
3. National Grains Authority vs. Intermediate Appellate Court, G.R. No. 74470, March 8, 1989;
4. Buenaventura vs. Court of Appeals, G.R. No. 126376, November 20, 2003;
5. Heirs of Ureta vs. Heirs of Ureta, G.R. No. 165748, September 14, 2011;
6. Intac vs. Court of Appeals, G.R. No. 173211, October 11, 2012;
7. Mate vs. Court of Appeals,G.R. No. 120724-25, May 21, 1998;
8. Ong vs. Ong, G.R. No. L-67888 October 8, 1985.
Please also read the following provisions: Civil Code, Arts. 1318(2), 1319-1326, 1347, 1349, 1381(4), 1409(3),(4),(7).
There is no need to read commentaries on these provisions.
Class Assignment for June
28
On June 28, we will cover part IV.B until part IV.F of the course outline. In addition to the matters that we have not
finished discussing last week, please study:
(a) the following Civil Code provisions: Arts. 1475-1476; 1482, 1488; [Reference guide: De Leon, pp. 67-84, 120-121,
154 ]
(b) the following cases:
1.
Robern Development Corporation vs. People’s Landless Association
, G.R. 173622, March 11, 2013 (Art. 1475).
2. Limketkai Sons Milling Inc. vs. Court of Appeals, G.R. No. 118509. March 29, 1996; (Art. 1475);
3.
Heirs of Ignacio vs. Home Bankers Savings and Trust Company
, G.R. 177783, January 23, 2013 (Art. 1475).
4. Villonco Realty Company vs. Bormaheco, Inc., G.R. No. L-26872 July 25, 1975 (Art. 1475);
5. Dizon vs. Dizon, G.R. No. 156539, September 5, 2007 (Art. 1476);
6. Province of Cebu vs. Heirs of Morales, G.R. No. 170115, February 19, 2008 (Art. 1476);
7. Manila Metal Container Corporation vs. Philippine National Bank, G.R. No. 166862, December 20, 2006 (Art.
1482).
Please also read the following Civil Code provisions: Arts. 1319-1326. There is no need to read commentaries on these
provisions.
Class Assignment for July
5
On July 5, we will finish part IV.B and will try to cover until part VI.A.iv.(c) of the course outline. In addition to the matters
that we have not finished discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1483, 1487, 1459, 1477-1478, 1495; [Reference guide: De Leon, pp.
122-132, 152-154, 29-32, 85-88, 174-176]
(b) the following cases:
1. Dalion vs. Court of Appeals, G.R. No. 78903, February 28, 1990 (Art. 1358);
2. Limketkai Sons Milling Inc. vs. Court of Appeals, G.R. No. 118509, March 29, 1996; (Art. 1483);
3. Ortega vs. Leonardo, G.R. No. L-11311, May 28, 1958 (Art. 1483);
4. Obaña vs. Court of Appeals, G.R.No. L-36249, March 29, 1985 (Art. 1477);
5. Ocejo, Perez & Co. vs. The International Banking Corporation, G.R. No. L-10658, February 14, 1918 (Art. 1496).
Please also read the following Civil Code provisions: Arts. 1163, 1356, 1403, 1405, 1406. There is no need to read
commentaries on these provisions.
Class Assignment for July
12
On July 12, we will finish part V and will try to cover until part VI.A.iv.(d) of the course outline. In addition to the matters
that we have not finished discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1496, 1505-1506, 1537, 1497-1501 [Reference guide: De Leon, pp. 177-179,
211-220, 266-268, 180-196];
(b) the following cases:
2. EDCA Publishing & Distributing Corp. vs. Santos, G.R. No. 80298 April 26, 1990 (Art. 1506);
3. Vda. de Sarmiento vs. Lesaca, G.R. No. L-15385, June 30, 1960 (Art. 1498);
4. Santiago vs. Villamor, G.R. 168499, November 26, 2012 (Art. 1498);
5. Villamar vs. Mangaoil, G.R. No. 188661, April 11, 2012 (Art. 1498);
6. Power Commercial and Industrial Corporation vs. Court of Appeals, G.R. No. 119745, June 20, 1997 (art. 1498);
7. Pasagui vs. Villablanca, G.R. No. L-21998 November 10, 1975 (Art. 1498).
Please also read the following Civil Code provisions: Arts. 559, 1434. There is no need to read commentaries on these
provisions.
Class Assignment for July
19
On July 19, we will finish part VI.A.iv.g of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1524, 1536, 1521, 1502, 1503, 1523 [Reference guide: De Leon, pp.
245-247, 264-266, 234-238, 196-206, 242-245];
(b) the following cases:
1. Lagon vs. Hooven Comalco Industries, Inc.,G.R. No. 135657. January 17, 2001 (Art. 1521);
2. Vallarta vs. Court of Appeals, G.R. No. L-40195 May 29, 1987 (Art. 1502);
3. Industrial Textile Manufacturing Co. of the Philippines vs. LPJ Enterprises, G.R. No. 66140, January 21,
1993 (Art. 1502);
4. Behn, Meyer & Co vs. Yangco, G.R. No. 13203, September 18, 1918 (Art. 1523);
5. General Foods Corporation vs. National Coconut Corporation, G.R. No. L-8717, November 20, 1956 (Art. 1523);
6. David vs. Misamis Occidental II Electric Cooperative, Inc., G.R. No. 194785, July 11, 2012 (Art. 1523).
Please also read Article 1198 of the Civil Code. There is no need to read commentaries on Article 1198.
Class Assignment for July
26
On July 26, we will try to cover part VIII of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1582-1590, 1545 [Reference guide: De Leon, pp. 359-372; 309-312];
(b) the following cases:
1. Integrated Packaging Corporation vs. Court of Appeals,G.R. No. 115117, June 8, 2000 (Art. 1583);
2. Fule vs. Court of Appeals, G.R. No. 112212, March 2, 1998 (Arts. 1584, 1585, 1589);
3. Development Bank of the Philippines vs. Medrano, G.R. No. 167004, February 7, 2011 (Art. 1545);
4. Lim vs. Court of Appeals, G.R. No. 118347, October 24, 1996 (Art. 1545); and
5. Delta Motors Corporation vs. Genuino, G.R. No. L-55665, February 8, 1989 (Art. 1545).
Please also read:
(a) Sections 5, 6, 7 and 8 of the sample Stock Purchase Agreement (pp. 39-44) found in the
Materials
page of this site;
(b) DHL’s Basic Overview of Incoterms 2010 found in the
Materials
page of this site.
Announcement for August
2
As discussed, we will have the mid-term examination on August 2.
Coverage
The exam will cover Parts 1 to 6 of the course outline. Questions will be sourced from Civil Code provisions, the assigned
cases, the commentaries and matters discussed in class.
The exam will not cover: (a) the sample stock purchase agreement; and (b) the DHL shipping terms (except that you
should know the concept of FOB and CIF). The exam will also not cover Arts. 1505 and 1506 of the Civil Code (and the
assigned cases on these articles); we will discuss these articles in subsequent classes.
Certain questions (and the correct response to these questions) assume knowledge of basic provisions of Obligations
and Contracts. In this regard, please ensure that you know which contracts are rescissible, voidable, unenforceable and
void.
The purpose of the exam is to test: (a) your knowledge of legal concepts and doctrines; and (b) your ability to apply legal
concepts and doctrines to particular situations. As such, I will not ask factual matters about the assigned cases (e.g., date
of sale, object of the sale, amount of purchase price, etc.). It is sufficient to know the basic fact pattern about the cases
and what legal concepts and doctrines were applied to the cases.
The questionnaire
1. The questionnaire consists of fifty (50) multiple choice questions (MCQs) numbered 1 up to 50 contained in eight (8)
pages. Each question is worth two points.
2. The exam period is one hour. (This is similar to the 2012 bar examinations in Civil Law where an examinee is given
two hours to answer 100 MCQs.) No extra time will be given to those who will arrive late.
3. Your answers should be written in the blue book (not in the questionnaire). Only answers written in the blue book will
be considered.
4. You may write on the questionnaire and use it as scratch paper.
5. Please insert the questionnaire inside your blue book and return with your blue book.
6 Do not explain any answer in the blue book. For example, in response to question no. 1, you only need to write “1.”
followed by a letter (i.e., ”a”, “b”, “c”, or “d”), depending on which is the correct answer.
7. If an answer contains more than one letter, no point will be given for that question. In this regard, please minimize
erasures, and if you need to make an erasure, please make sure to indicate clearly what is the final answer.
Other matters
1. During the exam, all books, notes, electronic equipment, bags and other items of possession should be placed in front
or at the back of the classroom. The only items on your desk should be the questionnaire, the blue book and your pen.
2. If you finish the exam before the end of the exam period, you may already turn over the blue book/questionnaire and
leave the classroom. However, if you finish early, I suggest that you review your answers before surrendering the blue
book.
If you have questions, please let me know.
Study well!
Class Assignment for August
16
On August 16, we will try to cover until part IX.E.i of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) Art. 1546 of the Civil Code [Reference guide: De Leon, pp. 312-316];
(b) the following cases:
1. Harrison Motors Corp vs. Navarro, G.R. No. 132269, April 27, 2000 (Art. 1546); and
2. Power Commercial and Industrial Corp. vs. Court of Appeals, G.R. No. 119745, June 20, 1997 (Art. 1546).
Please also read Sections 3 and 4 of the sample Stock Purchase Agreement found in the
Materials
page of this site.
Here is the list of cases for August 23:
1. Songco vs. Sellner, G.R. No. 11513. December 4, 1917 (Art. 1547);
2. Investment & Development, Inc. vs. Court of Appeals, G.R. No. L-51377, June 27, 1988 (Art. 1547);
3. Moles vs. Intermediate Appellate Court, G.R. No. 73913, January 31, 1989 (Art. 1547);
4. Escaler vs. Court of Appeals, G.R. No. L-42636, August 1, 1985 (Art. 1548, 1558, 1559);
5. Uy vs. Ariza, G.R. No. 158370, August 17, 2006. (Art. 1548, 1558, 1559);
6. Quirong vs. DBP, G.R. No. 173441, December 3, 2009 (Arts. 1548, 1556);
7. Andaya vs. Manansala, G.R. No. L-14714, April 30, 1960 (Art. 1554); and
8. JM Tuason Co. Inc vs. Court of Appeals, G.R. No. L-41233, November 21, 1979. (Art. 1555).
Class Assignment for August
23
On August 23, we will try to cover until part IX.E.ii.a of the course outline. In addition to the matters that we have not
finished discussing during the last class, please study Arts. 1547-1560 of the Civil Code [Reference guide: De Leon, pp.
316-336].
As previously announced, please study the following cases:
1. Songco vs. Sellner, G.R. No. 11513. December 4, 1917 (Art. 1547);
2. Investment & Development, Inc. vs. Court of Appeals, G.R. No. L-51377, June 27, 1988 (Art. 1547);
3. Escaler vs. Court of Appeals, G.R. No. L-42636, August 1, 1985 (Arts. 1548, 1558, 1559);
4. Uy vs. Ariza, G.R. No. 158370, August 17, 2006. (Arts. 1548, 1558, 1559);
5. Quirong vs. DBP, G.R. No. 173441, December 3, 2009 (Arts. 1548, 1556);
6. Andaya vs. Manansala, G.R. No. L-14714, April 30, 1960 (Art. 1554); and
7. JM Tuason Co. Inc vs. Court of Appeals, G.R. No. L-41233, November 21, 1979. (Art. 1555).
Please also read: (a) Article 1495 of the Civil Code; and (b) Sections 3 and 4 of the sample Stock Purchase Agreement
found in the
Materials
page of this site.
Class Assignment for August
30
On August 30, we will try to cover part IX.E.2.c of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1561-1581 [Reference guide: De Leon, pp. 336-358];
(b) the following cases:
1. Nutrimix Feeds Corporation vs. Court of Appeals, G.R. No. 152219, October 25, 2004 (Art. 1561)
2. Supercars Management & Development Corporation vs. Flores, G.R. No. 148173, December 10, 2004 (Arts.
1547, 1561, and 1566)
3. Knecht vs. Court of Appeals, G.R. No. L-65114, February 23, 1988 (Art. 1561)
4. Consolidated Plywood Industries, Inc. vs. IFC Leasing and Acceptance Corporation, G.R. No. 72593, April 30,
1987 (Arts. 1561. 1562, 1564, 1566, 1567)
5. Schmid & Oberly, Inc. vs. RJL Martinez Fishing Corp., G.R. No. No. 75198, October 18, 1988 (Arts, 1561, 1563)
6. Philippine National Bank vs. Mega Prime Realty and Holdings Corporation, G.R. No. 173454, October 6, 2008
(Arts. 1547, 1561)
7. La Fuerza, Inc. vs. The Honorable Court of Appeals, G.R. No. L-24069, June 28, 1968 (Arts. 1566, 1571)
8. Moles vs. Intermediate Appellate Court, G.R. No. 73913, January 31, 1989 (Art. 1561, 1571)
9. De Guzman vs. Toyota Cubao, Inc., G.R. No. 141480, November 29, 2006 (Arts. 1561, 1566, 1571)
10. Ang vs. Court of Appeals, G.R. No. 177874, September 29, 2008 (Art. 1571)
11. Coca Cola Bottlers Philippines Inc. vs. Court of Appeals, G.R. No. 110295, October 18, 1993 (Art. 1567)
12. Villostas vs. Court of Appeals, G.R. No. 96271, June 26, 1992 (Art. 1571)
Thank you.
Class Assignment for September
6
On September 6, we will try to cover part XI.A of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1480, 1493 to 1494, 1504, 1538, 1568-1569, 1594-1599 [Reference guide:
De Leon, pp. 111-118, 171-173, 206-211, 268-279, 349-351, 385-398)
(b) the following cases:
1. Roman vs. Grimalt, G.R. No. L-2412, April 11, 1906;
2. Norkis Distributors, Inc. vs. Court of Appeals, G.R. No. 91029 February 7, 1991;
3. Chrysler Philippines Corporation vs. Court of Appeals, G.R. No. L-55684 December 19, 1984;
4. Lawyer’s Cooperative vs. Tabora, G.R. No. L-21263. April 30, 1965.
Please also read thew following provisions of the Civil Code: Art. 1163-1165, 1189, 1262-1263, 1269, 1537, and 1636 (re
definition of “goods”).
Class Assignment for September
13
On September 13, we will try to cover part XI.B of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1525-1535, 1481, 1494, 1522, 1539-1543, 1590-1593 [Reference guide: De
Leon, pp. 247-264, 118-120, 172-173, 238-241, 269-280, 372-384];
(b) the following cases:
1. Visayan Sawmill Company, Inc. vs. Court of Appeals, G.R. No. 131074,March 3, 1993 (Art. 1597);
2. Mendoza vs. David, G.R. No. 147575, October 22, 2004 (Art. 1481);
3. Lietz vs. Court of Appeals, G.R. No. 122463, December 19, 2005 (Arts. 1539, 1542);
4. Cebu Winland Development Corporation vs. Ong, G.R. No. 173215, May 21, 2009 (Arts. 1539, 1542, 1543);
5. Del Prado vs. Carballero, G.R. No. 148225, March 3, 2010 (Art. 1542).
Thank you.
Class Assignment for September
20
On September 20, we will try to cover part XII of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1484-1486; 1600-1601, 1606-1623 [Reference guide: De Leon, pp. 132-146,
149-152, 399-403, 431-494];
(b) Republic Act No. 6552 [Reference guide: De Leon, pp. 146-149, 380-383, 548-550];
(C) the following cases:
1. Levy Hermanos, Inc. vs. Gervacio, 69 Phil. 52 (1939)(Art. 1484);
2. Nonato vs. IAC, 140 SCRA 255 (1985) (Art. 1484[2]);
3. Delta Motor Sales Corp vs. Niu Kim Duan, 213 SCRA 259 (1992)(Art. 1484[2]);
4. Tajanlangit vs. Southern Motors, Inc., 101 Phil. 606 (1957)(Art. 1484[3]);
5. Northern Motors Inc. vs. Sapinoso, 33 SCRA 356 (1970)(Art. 1484[3]);
6. Cruz vs. Filipinas Investment and Finance Corporation, 23 SCRA 791 (1968)(Art. 1484[3]);
7. Borbon II vs. Servicewide Specialists, Inc., 258 SCRA 634 (1996)(Art. 1484[3]);
8. Garcia vs. Court of Appeals, 619 SCRA 280 (2010)(R.A. No. 6552);
9. Jestra Development and Management Corp vs. Pacifico, 513 SCRA 413 (2007)(R.A. No. 6552);
10. McLaughlin vs. Court of Appeals, 144 SCRA 693 (1986)(R.A. No. 6552);
11. Misterio vs. Cebu State College of Science and Technology, 461 SCRA 122 (2005)(Art. 1606); and
12. Francisco vs. Boiser, 332 SCRA 305 (2000)(Art. 1623).
Please also read: Civil Code, art. 1088; Commonwealth Act No. 141, sec. 119; Act No. 3135, sec. 6; Republic Act No.
3844, sec. 12.
Thank you.
Class Assignment for September
27
On September 27, we will try to cover part XIV.B of the course outline. In addition to the matters that we have not finished
discussing during the last class, please study:
(a) the following Civil Code provisions: Arts. 1505, 1506, 1544 [Reference guide: De Leon, pp. 211-220, 280-308, 18-27];
(b) the following cases:
1. SunBrothers & Co vs. Velasco, [CA], 54 O.G. 5103 (Art. 1505);
2. Aznar vs. Yapdiangco, G.R. No. L-18536, March 31, 1965 (Arts. 559, 1505, 1506);
3. EDCA Publishing & Distributing Corp. vs. Santos, G.R. No. 80298, April 26, 1990 (Art. 1506);
4. Carbonnell vs. Court of Appeals, G.R. No. L-29972, January 26, 1976 (Art. 1544);
5. Cheng vs. Genato, G.R. No. 129760, December 29, 1998 (Art. 1544);
6. Consolidated Rural Bank vs. Court of Appeals, G.R. No. 132161, January 17, 2005 (Art. 1544);
7. Dagupan Trading vs. Macam, G.R. No. L-18497, May 31, 1965 (Art. 1544);
8. Carumba vs. Court of Appeals, G.R. No. L-27587, February 18, 1970 (Art. 1544);
9. Abrigo vs. de Vera, G.R. No. 154409, June 21, 2004 (Art. 1544);
10.Rosaroso vs. Doria
, G.R. No. 194846, June 19, 2013 (Art. 1544);
11. Roman Catholic Church vs. Pante, G.R. No. 174118, April 11, 2012 (Art. 1544); and
12. Adelfa Properties, Inc vs. Court of Appeals, G.R. No. 111238, January 25, 1995.
Please also read: Civil Code, arts. 559, 1434, 1245.
Class Assignment for October
4
On October 4, we will finish the rest of the items in the course outline. Please study:
(a) the following Civil Code provisions: Arts. 1466-1468, 1602-1605, 1624-1635, 1638-1641, 1643, 1507-1520
[Reference guide: De Leon, pp. 16-27, 45-53, 495-512, 517-520, 403-431, 602, 220-234; 521-531];
(b) the following cases:
1. Celestino & Company vs. Collector, G.R. No. L-8506, August 31, 1956 (Art. 1467);
2. Commissioner vs. Engineering Equipment & Supply Company, G.R. No. L-27044, June 30, 1975 (Art. 1467);
3. Quiroga vs. Parsons Hardware Co., G.R. No. L-11491, August 23, 1918 (Arts. 1466, 1868);
4. Puyat vs. Arco Amusement Co, G.R. No. L-47538, June 20, 1941 (Arts. 1466, 1868);
5. Lo vs. KJS Eco-Formwork System Phil., Inc. , G.R. No. 149420, October 8, 2003 (Art. 1628);
6. Roberts vs. Papio, G.R. No. 166714, February 9, 2007 (Art. 1602);
7.
Martires vs. Chua
, G.R. 174240, March 20, 2013 (Arts. 1602, 2088);
8. Solid Homes Inc. vs. Court of Appeals, G.R. No. 117501, July 8, 1997 (Art. 2088);
9. A. Francisco Realty vs. Court of Appeals, G.R. No. 125055, October 30, 1998 (1998)(Art. 2088);
10. Abilla vs. Gobonseng, G.R. No. 146651, January 17, 2002 (Arts. 1602, 1606);
11. Development Bank of the Philippines vs. Regional Trial Court of Manila, 86 O.G., No. 6, 1137 (1987).
Please also read: Civil Code, arts. 725, 1471, 1245, 2088; Presidential Decree No. 957, secs. 23-24; Bulk Sales Law (Act
No. 3952); Retail Trade Liberalization Act (Republic Act No. 8762), secs. 3 and 5.
As October 4 is our class, we may need to extend the class a little bit if necessary to finish the course outline.
Thank you.
As discussed, the final exam will be given on Wednesday, October 9. Please coordinate with the Office of the College
Secretary (OCS) with respect to the venue of the exam. I will send the questionnaire to the OCS before Wednesday. I
have also requested the OCS to provide a proctor for the essay exam. If any problem arises during the day of the exam,
please do not hesitate to contact me.
Coverage
1. The MCQ exam on Sales will cover the entire course and will be given by the Office of the Dean.
For the MCQ exam, I do not have information whether some of the questions will be based on Supreme Court decisions.
In the event that the question is based on a Supreme Court decision (which we have hopefully taken up), your answer
should be based on the Supreme Court’s ruling (and the applicable provisions of law), and not on my view on what should
have been the correct ruling.
2. The questions for the essay portion will be from topics discussed after the mid-terms exam. Most of the questions will
be “situational”; however, some of the questions will be “objective” (e.g., summarize the rules on ___________). I will not
ask questions on “Practice Notes”.
In reviewing for the exam, it would be very important for you to know and understand the provisions of law. This includes
an understanding of when a particular provision applies. For example: (a) some provisions may apply only when the sale
involves a certain type of property (real vs. personal property) or a particular form of payment (full payment vs. installment
payment); (b) some actions and remedies may apply only under certain situations (e.g., buyer is insolvent, goods not yet
delivered to the buyer, etc.).
When you review, I suggest that you go over the course outline and test your knowledge against the items listed in the
course outline. For those who were not able to finish studying the class assignments, I suggest that you finish studying
them this weekend. Tuesday and Wednesday should be devoted to a review of what you have already learned.
Essay exam
The questionnaire consists of twelve (12) questions (numbered 1 to 12) contained in two (2) pages.
Begin your answer to each numbered question on a separate page of the blue book.
Answer the question directly and concisely. Do not repeat the question. Write legibly.
Please write your name and student number on the inside back cover of the blue book. When you are finished with the
exam, please put the questionnaire inside the blue book and give the blue book to the proctor.
MCQ
As stated above, the MCQ exam will be given by the Office of the Dean.
Other matters
During the essay exam, all books, notes, mobile phones, electronic equipment, bags and other items of possession
should be placed in front or at the back of the classroom. The only items on your desk should be the questionnaire, the
blue book and your pen.
For the MCQ exam, please follow the directions that will be given by the proctor.
If you have questions, please let me know.
Sales: Theory and Practice I. Introduction
A. Governing law
B. History of law on sales C. Source of law on sales II. Concept of contract of sale
A. Concept of sale (Art. 1458)
Art. 1458. By the contract of sale one of the contracting parties 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 conditional. (1445a) B. Characteristics of contract of sale
C. Essential elements of contract of sale: an overview (Art. 1318) Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. (1261)
i. Consent (Art. 1319)
Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1262a)
ii. Object (Arts. 1347-1349) SECTION 2. - Object of Contracts
Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a)
Art. 1348. Impossible things or services cannot be the object of contracts. (1272)
Art. 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. (1273)
iii. Cause (Art. 1350) SECTION 3. - Cause of Contracts
Art. 1350. In onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor. (1274)
D. Kinds of contract of sale i. Absolute ii. Conditional III. Parties to the contract of sale
A. Persons who may enter into a contract of sale (Art. 1489)
Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles.
Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 290. (1457a)
B. Type of incapacity i. Absolute ii. Relative
C. Rules applicable to specific sellers
i. Minors (Art. 1327, 1390; Family Code, art. 209) Art. 1327. The following cannot give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)
Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. (n)
Art. 209. Pursuant to the natural right and duty of parents over the person and property of their unemancipated children, parental authority and responsibility shall include the caring for and rearing them for civic consciousness and efficiency and the development of their moral, mental and physical character and well-being. (n)
ii. Husband and wife (Arts. 1409, 1490, 1492) Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. Art. 1490. The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 191. (1458a)
Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n)
iv. Persons disqualified to buy specific properties (Art. 1409, 1491, 1492) Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
Art. 1491. The following persons cannot acquire by purchase, 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 entrusted to them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) 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;
(5) 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. (6) Any others specially disqualified by law. (1459a)
Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n)
iv. Other persons
D. Practice notes: parties to contract of sale i. Husband or wife
ii. Corporation
SALES REVIEWER WEEK II-III (update with outline) IV. Formation and perfection of contract of sale
A. Consent/offer and acceptance i. In general
a) Form of offer
Art. 1325. Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer.
Art. 1326. Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.
b) Form of acceptance ii. Promise to buy and sell
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.
iii. Practice notes: offer and acceptance - counterpart signing
B. Object or subject matter: DETERMINATE, LICIT, EXISTING/FUTURE GOODS, OWNER W/ RIGHT TO TRANSFER OWNERSHIP
i. Thing must be determinate a) When thing determinate
Art. 1458. By the contract of sale one of the contracting parties 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 conditional.
Art. 1460. A thing is DETERMINATE when it is particularly designated or physical segregated from all other of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. (n)
WHEN SATISFIED: If at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties
b) Sale of an undivided interest in a thing
Art. 1463. The sole owner of a thing may sell an undivided interest therein. SALE OF UNDIVIDED INTEREST IN A THING
(1) By sole owner – The sole owner of a thing may sell the entire thing; or only a specific portion thereof; or an undivided interest therein and such interest may be designated as an aliquot part of the whole.
LEGAL EFFECT: To make buyer a co-owner of the thing sold. As co-owner, he acquires full ownership of his part and he may, therefore, sell it. However, such sale is limited to the portion which may be allotted to him in the division of the thing upon the termination of the co-ownership.
(2) By co-owner – The co-owners can dispose of their shares even without the consent of the other co-owners. The effect of the alienation shall be limited to the portion which may be allotted to the vendor in the division of the property upon the termination of the co-ownership.
c) Sale of undivided share of a specific mass
Art. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains LESS than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, UNLESS a contrary intent appears.
SALE OF AN UNDIVIDED SHARE OF A SPECIFIC MASS
The Civil Code classifies movable goods into consumable or non consumable thereby discarding the old classification into fungible and non fungible. This change in classification seems to be in name only as the definition of fungible goods as those which cannot be used without being consume under the old Civil Code is precisely othat of consumable goods.
DEFINITION FUNGIBLE: Capable of being consumed; means goods which any unit is equivalent of another unit eg. Oil, gas Art. 1464. This right is an incorporeal right; ownership transfers by INTENTION of the parties
EFFECT OF SALE – The owner of a mass of goods may sell only an undivided share thereof, provided the mass is SPECIFIC or CAPABLE OF BEING MADE DETERMINATE
o By such sale, the buyer becomes CO-OWNER with the seller of the whole mass in the proportion in which the definition share bought bears to the mass
o The aliquot share of each owner can be determined only by the measurement of the entire mass
RISK OF LOSS – As co-owner, the whole mass is at risk of all the parties interested in it, including the buyer, in proportion to their various holdings
APPLICABILITY TO NONFUNGIBLE GOODS – It may also be applied to goods not strictly fungible in nature. o Eg. Barrels of flour, bales of cotton, cattle, sheep
ii. Thing must be licit
Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. a) In general
REQUISITES CONCERNING OBJECT:
(1) Things. Aside from being (a) determinate, the law requires that the subject matter must be (b) licit or lawful, that is, it should not be contrary to law, morals, good customs, public order, public policy and should not be (c) impossible. In other words, like any other object of a contract, the thing must be within the commerce of men.
(2) Rights. All rights which are not intransmissible or personal may also be the object of sale, like the right of usufruct, the right of conventional redemption, credit, etc.
EX. Intransmissible by law: Right to vote, right to public office, marital and parental rights, etc.
EX. Personal in character: Right to be a partner in partnership, right to act as an agent of another, right of the bailee to use the thing loaned in a contract of commodatum
NOT ALLOWED:
- No contract may be entered upon future inheritance EXCEPT in cases expressly authorized by law. - While services may be the object of a contract, they cannot be the object of a contract of sale.
b) Illicit things
If subject matter of the sale is ILLICIT, the contract is VOID and cannot, therefore, be RATIFIED. In such a case, the rights and obligations of the parties are determined by applying the following articles of the Civil Code (IN PARI DELICTO RULE):
Art. 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise.
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply his promise.
Art. 1409. The following contracts are INEXISTENT and VOID from the beginning:
