SUBJECT MATTER For a contract of sale to be valid, there must be meeting of minds of the parties on the subject matter

at the time of its perfection. REQUISITES OF VALID SUBJECT MATTER (THING)

1. It must be a possible thing, existing, having potential existence, a future thing, or even

contingent or subject to a resolutory condition

2. It must be licit 3. It must be determinate or at least determinable

IMPORTANCE OF COMPLYING WITH THE 3 REQUISITES OF VALID SUBJECT MATTER It is to safeguard the realizability and enforceability of the primary obligations of the seller to transfer ownership, and deliver possession, of the subject matter. When the subject matter agreed upon fails to meet the requisites mentioned, the situation would either engender a no contract situation or the resulting contract would be void. RULES REGARDING THE SUBJECT MATTER IN A CONTRACT OF SALE 1. The thing must be LICIT (Art 1459)
Licit means lawful, thus within the commerce of man and all rights which are not

intransmissible. Illicit things may either be: a. Illicit per se (of its nature it is heinous, immoral or wrongful) b. Illicit per accidens (made illegal by provision of law)
If the thing is illicit, the contract is null and void, and cannot, therefore, be subsequently

ratified. The illegality of the subject matter undermines the demandability of the underlying obligation of the seller to deliver, and renders the sale void. The vendor must have the RIGHT to transfer OWNERSHIP at the time the object is delivered (Art 1459) The seller must be the owner of the thing sold. This stems from the principle that nobody can dispose of that which does not belong to him. But although the seller must be the owner, he need not be the owner at the time of the perfection of contract. It is sufficient that he is the owner at the time the object is delivered.
Be it noted also that right over a thing (not necessarily ownership of the thing itself) may

be sold. Hence, usufructuary may generally sell his usufructuary right. The rationale is

that the contract of sale by itself is not a mode of acquiring ownership. The contract transfers no real rights; it merely causes certain obligation to arise.
1. It must be DETERMINATE or at least Determinable (Art 1460)

Thing is determinate when it is particularly designated or physically segregated from all others of the same class.
It is not essential really that at the time of perfection of contract this requisite is already

satisfied. It is sufficient that the thing is capable of being made determinate without the necessity of a new or further agreement between the parties otherwise it would run counter to the principle of mutuality or obligatory force of every valid contract because the intention of the parties cannot be determined.
Determinability of the subject matter makes certain and unequivocal the basis upon

which to enforce sellers obligation to deliver, as well as the basis upon which to demonstrate breach because from the viewpoint of risk or loss, we cannot say that the object has been lost not until the object has really made determinate; for as we know, generic thing cannot be lost. A thing is determinable only when two (2) requisites are present: a. if at the perfection of the sale, the subject matter is capable of being made determinate (the capacity to segregate test) b. without the necessity of a new or further agreement between the parties (the no further agreement test)
1. Things having POTENTIAL EXISTENCE may be the object of contract of sale (Art 1461)

This is a future thing that may be sold. Examples:

1. Young animals not yet in existence or still ungrown fruits

2. The wine that a particular vineyard is expected to produce 3. The wool that shall, thereafter, grow upon sheep 4. All the rice harvest next year
The efficacy of the sale of a mere hope or expectancy is deemed subject to the

condition that the thing will come into existence. The hope or expectancy already exists; what does not yet exist is the expected thing. a. Emptio Rei Speratae (sale of an expected thing) If the parties make a contract which depends upon the existence of a thing, so that if the thing does not come into existence, the contract is considered as not made or entered into and there is no obligation to pay the price, such contract is valid under [Art. 1461 (2)]. Things of potential existence may be the object of the contract of sale subject to the condition that the thing will come into existence. Strictly, it is a contract covering future things subject to a suspensive condition. Necessarily also, it covers only contracts of sale whose subject matter are determinate or specific and have no application to determinable generic things.

b. Emptio Spei (sale of hope itself) If the parties intend the contract to exist at all event, so that the buyer will have to pay the price even if it does not actually come into existence, and the price should be paid, even if the thing does not come into existence. Emptio Rei Speratae vs. Emptio Spei Emptio rei speratae Emptio spei

Sale of a thing having a potential Sale of a mere hope or expectancy existence The uncertainty is with regard the The uncertainty is with regard the quantity and quality but not with regard existence of the thing the existence of the thing The contract deals with a future thing The sale is subject to the condition that the thing should exist, so that if it does not, there is no contract for lack of an essential requisite The contract deals with a present thing the hope or expectancy The sale produces effects eventhough the thing itself does not come into existence, since the subject matter is the hope itself

The sale of a vain hope or expectancy is void (Art 1461). If the parties intend the contract to exist at all events, so that the buyer will have

to pay the price even if the thing does not actually came into existence it does not matter whether the expected thing will materialize or not; what is important is that the hope itself validly exists. This contract is, however, void under Art. 1461. 4. The goods may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised or acquired by the seller after the perfection of the contract of sale FUTURE GOODS (Art 1462).

Future Goods that may be subject of a contract of sale

1. Goods to be manufactured yet 2. Goods to be acquired by the seller after the perfection of contract of sale 3. Goods that depends upon a contingency that may or may not happen 5. Things subject to a RESOLUTORY CONDITION may be the object of the contract of sale (Art 1465).
Resolutory condition- the happening of the event extinguishes the obligation. If the

resolutory condition extinguishes the thing, rule on Art. 1190 could be applied. This default rule preserves the commutative nature of sale. PARTICULAR KINDS OF SUBJECT MATTER

a. Generic Thing
What must be delivered by seller and received by buyer

Art. 1246. When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. The intention of the parties shall be taken into consideration. It is based on equity and justice. It is a question of relative appreciation because the seller cannot deliver object of worst quality nor the buyer demand a thing of superior quality. In case of disagreement, the law steps in and declares whether the obligation has been complied with or not depending upon the purpose of such obligation and other circumstances. b. Future Goods c. Sale of undivided interest or share in Specific Mass (Art. 1463- 1464)
Undivided interest is defined as an identical fractional or percentage interest or share

in each right, benefit, and obligation with respect to the subject matter of a contract. It also refers to the title to real property held by two or more persons without specifying the interests of each party by percentage or description of a portion.
In real property law, an undivided interest refers to the interest in property owned by

tenants whereby each tenant has an equal right to enjoy the entire property. For example, tenants in common own an undivided interest in the property, so if there are two tenants in common in an apartment, each owns a one-half interest in the apartment.

In finance law, an undivided interest is a complete or partial ownership of all parts of a whole. For example, an undivided interest in a pool of loans means the ownership or rights to a certain percent of each and every loan in the pool.

Purchase of an Undivided Share in Specific Mass of Fungible Goods Rules: 1. If the aliquot part purchased from the seller is more than the whole undetermined mass after it had been weighed or measured, then the buyer becomes the owner of the entire mass. 2. If the aliquot part purchased is less than the whole undetermined mass, the purchaser will become the co-owner of the whole mass in the proportion in which the number, weight or measure of what had been purchased bears to the number, weight or measure of the mass or stock.

Note: The sale involved a specific thing which is already determinable as to kind and identity but as to its quantity it is still unknown. Yet the buyer is willing to buy and the seller to sell. d. Sale of things in Litigation
Art. 1381.

The following contracts are rescissible: (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;
Art. 1385.

(2) Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. e. Things subject to a resolutory condition LACK OF ANY ESSENTIAL REQUISITE
Results in non-existent sale. When the subject matter agreed upon fails to meet all the requisites, the situation

would either engender a no-contract situation, or the resulting contract of sale would be void under the seven cases provided under Article 1409 of the Civil Code. In effect, in case of payment of the agreed price in a no-contract situation the buyer can still recover the amount based on the principle of unjust enrichment.