SALES
(SUMMARY OF CASES)
CASES
Gaite v. Fonacier
Buenaventura v. CA
Celestino & Co. v. Collector
CIR v. Engineering Equipment &
Supply Co.
MIDTERM
TOPIC DOCTRINE
THE NATURE OF SALE
Onerous Commutative and onerous nature of contract of sale; Contingent character of obligation must
clearly appear.—A contract of sale is normally commutative and onerous; not only does each
of the parties assume a correlative obligation, but each party anticipates performance by the
other from the very start. Although the obligation of one party can be lawfully subordinated to
an uncertain event, so that the other understands that he assumes the risk of receiving nothing
for what he gives, it is not in the usual course of business to do so; hence, the contingent
character of the obligation must clearly appear.
Cummutative If there is a meeting of the minds of the parties as to the price, the contract of sale is valid despite
the manner of payment, or even the breach of that manner of payment. —A contract of sale is
not a real contract, but a consensual contract. As a consensual contract, a contract of sale
becomes a binding and valid contract upon the meeting of the minds as to price. If there is
a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the
manner of payment, or even the breach of that manner of payment. If the real price is not
stated in the contract, then the contract of sale is valid but subject to reformation. If there
is no meeting of the minds of the parties as to the price, because the price stipulated in the
contract is simulated, then the contract is void. Article 1471 of the Civil Code states that if
the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale; Failure to
pay the consideration is different from lack of consideration; Failure to pay the consideration
results in a right to demand the fulfillment or cancellation of the obligation under an existing
valid contract while lack of consideration prevents the existence of a valid contract.—It is not
the act of payment of price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the
obligation under an existing valid contract while the latter prevents the existence of a valid
contract.
SALE DISTINGUISHED FROM OTHER CONTRACTS
Contract for a Piece of Work MANUFACTURER; FILING ORDERS ACCORDING TO SPECIPICATIONS DOES NOT
ALTER CHARACTER OF ESTABLISHMENT.—A factory which habitually makes sash,
windows and doors, and sells the goods to the public is a manufacturer. The fact that the
windows and doors are mafde by it only when customers place their orders and according to
such form or combination. As suit the fancy of the purchasers does not alter the nature of
the establishment.
Distinction between a contract of sale and a contract for furnishing services; labor and
materials.—The distinction between a contract of sale and one for work, labor and materials is
tested by the inquiry whether the thing transferred is one not in existence and which never would
have existed but for the order of the party desiring to acquire it, or a thing which would have

Quiroga v. Parsons
Puyat v. Arco Amusement Co.
Lo v. KJS Eco-Formwork System
Phil.
existed and has been the subject of sale to some other persons even if the order had not been
given. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on
hand for sale to anyone, and no change or modification of it is made at defendant’s request, it
is a contract of sale, even though it may be entirely made after, and in consequence of, the
defendants order for it.
Test to determine whether a person a contractor or not.—The word “contractor” has come to be
used with special reference to a person who, in the pursuit of the independent business,
undertakes to do a specific job or piece of work for other persons, using his own means and
methods without submitting himself to control as to the petty details. The true test of a contractor
would seem to be that he renders service in the course of an independent occupation,
representing the will of his employer only as to the result of his work, and not as to the means
by which it is accomplished.
Agency to Sell INTERPRETATION OF CONTRACT.—For the classification of contracts, due regard must
be paid to their essential clauses. In the contract in the instant case, what was essential,
constituting its cause and subject matter, was that the plaintiff was to furnish the defendant with
the beds which the latter might order, at the stipulated price, and that the defendant was to pay
this price in the manner agreed upon. These are precisely the essential features of a contract of
purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and,
on that of the defendant, to pay their price. These features exclude the legal conception of an
agency or order to sell whereby the mandatory or agent receives the thing to sell it, and does
not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a
third person, and if he does not succeed in selling it, he returns it. Held: That this contract is
one of purchase and sale, and not of commercial agency.
The testimony of the person who drafted this contract, to the effect that his purpose was to be
an agent for the beds and to collect a commission on the sales, is of no importance to prove that
the contract was one of agency, inasmuch as the agreements contained in the contract constitute,
according to law, covenants of purchase and sale, and not of commercial agency. It must be
understood that a contract is what the law defines it to be, and not what it is called by the
contracting parties.
The contract is the law between the parties and should include all the things they are
supposed to have been agreed upon. What does not appear on the face of the contract should
be regarded merely as "dealer's" or "trader's talk", which cannot bind either party. (Nolbrook v.
Conner, 56 So., 576; 11 Am. Rep., 212; Bank v. Brosscell, 120 111., 161; Bank v. Palmer, 47
111., 92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters, Exhíbits
1 and 2, by which the respondent accepted the prices of $1,700 and $1,600, respectively, for the
sound reproducing equipment subject of its contract with the petitioner, are clear in their terms
and admit of no other interpretation than that the respondent agreed to purchase from the
petitioner the equipment in question at the prices indicated which are fixed and determinate.
The respondent admitted in its complaint filed with the Court of First Instance of Manila that
the petitioner agreed to sell to it the first sound reproducing equipment and machinery.
Dacion En Pago An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,

Paragas v. Heirs of Dominador
Balacano
PARTIES TO A CONTRACT OF SALES
Minors, Insane and Demented
Persons, Deaf-Mute
who acquires the power to enforce it to the same extent as the assignor could enforce it against
the debtor.
Dacion En Pago; In dacion en pago, as a special mode of payment, the debtor offers another
thing to the creditor who accepts it as equivalent of payment of an outstanding debt; Requisites
in order that there be a valid dation in payment.— Corollary thereto, in dacion en pago, as a
special mode of payment, the debtor offers another thing to the creditor who accepts it as
equivalent of payment of an outstanding debt. In order that there be a valid dation in payment,
the following are the requisites:
(1) There must be the performance of the prestation in lieu of payment (animo solvendi) which
may consist in the delivery of a corporeal thing or a real right or a credit against the third person;
(2) There must be some difference between the prestation due and that which is given in
substitution (aliud pro alio);
(3) There must be an agreement between the creditor and debtor that the obligation is
immediately extinguished by reason of the performance of a prestation different from that due.
The assignment of credit, which is in the nature of a sale of personal property, produced the
effects of a dation in payment which may extinguish the obligation.—It may well be that the
assignment of credit, which is in the nature of a sale of personal property, produced the effects
of a dation in payment which may extinguish the obligation. However, as in any other contract
of sale, the vendor or assignor is bound by certain warranties. More specifically, the first
paragraph of Article 1628 of the Civil Code provides: The vendor in good faith shall be
responsible for the existence and legality of the credit at the time of the sale, unless it should
have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly
stipulated or unless the insolvency was prior to the sale and of common knowledge.
Nobody can dispose of that which does not belong to him.—Based on the foregoing, the Court
of Appeals concluded that Gregorio’s consent to the sale of the lots was absent, making the
contract null and void. Consequently, the spouses Paragas could not have made a subsequent
transfer of the property to Catalino Balacano. Indeed, nemo dat quod non habet. Nobody can
dispose of that which does not belong to him.
Capacity of Parties; A contract of the sale executed by one who is already of advanced age
and senile is null and void; While the general rule is that a person is not incompetent to
contract merely because of advanced years or by reason of physical infirmities, EXCEPTION:
when such age or infirmities have impaired the mental faculties so as to prevent the person from
properly, intelligently or firmly protecting his property rights, then he is undeniably
incapacitated; The circumstances that the seller was an octogenarian at the time of alleged
execution of the Deed of Sale and was suffering from liver cirrhosis at that raise grave doubts
on his physical and mental capacity to freely give consent to the contract.—In Domingo v. Court
of Appeals, the Court declared as null and void the deed of sale therein inasmuch as the seller,
at the time of the execution of the alleged contract, was already of advanced age and senile. We
held—. . . She died an octogenarian on March 20, 1966, barely over a year when the deed was
allegedly executed on January 28, 1965, but before copies of the deed were entered in the
registry allegedly on May 16 and June 10, 1966. The general rule is that a person is not
incompetent to contract merely because of advanced years or by reason of physical infirmities.

Calimlim-Canullas v. Fortun
However, when such age or infirmities have impaired the mental faculties so as to prevent the
person from properly, intelligently, and firmly protecting her property rights then she is
undeniably incapacitated. The unrebutted testimony of Zosima Domingo shows that at the time
of the alleged execution of the deed, Paulina was already incapacitated physically and mentally.
She narrated that Paulina played with her waste and urinated in bed. Given these circumstances,
there is in our view sufficient reason to seriously doubt that she consented to the sale of and the
price for her parcels of land. Moreover, there is no receipt to show that said price was paid to
and received by her. Thus, we are in agreement with the trial court’s finding and conclusion on
the matter: . . . In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his
death bed in the hospital. Gregorio was an octogenarian at the time of the alleged execution of
the contract and suffering from liver cirrhosis at that— circumstances which raise grave doubts
on his physical and mental capacity to freely consent to the contract. Adding to the dubiety of
the purported sale and further bolstering respondents’ claim that their uncle Catalino, one of the
children of the decedent, had a hand in the execution of the deed is the fact that on 17 October
1996, petitioners sold a portion of Lot 1175-E consisting of 6,416 square meters to Catalino for
P60,000.00. One need not stretch his imagination to surmise that Catalino was in cahoots with
petitioners in maneuvering the alleged sale.
Between Spouses Husband and Wife; Where conjugal house is constructed on land belonging exclusively to the
husband, the land ipso facto becomes conjugal, but husband is entitled to reimbursement of
value of land.—We hold that pursuant to the foregoing provision both the land and the
building belong to the conjugal partnership but the conjugal partnership is indebted to
the husband for the value of the land. The spouse owning the lot becomes a creditor of the
conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation
of the conjugal partnership.

Consent of wife needed for validity of sale of land of husband on which conjugal house
was constructed.—The foregoing premises considered, it follows that FERNANDO could not
have alienated the house and lot to DAGUINES since MERCEDES had not given her consent
to said sale.

Rubias v. Batiller
Others Relatively Disqualified;
Attorney
Sale to concubine null and void.—Anent the second issue, we find that the contract of sale
was null and void for being contrary to morals and public policy. The sale was made by a
husband in favor of a concubine after he had abandoned his family and left the conjugal home
where his wife and children lived and from whence they derived their support. That sale was
subversive of the stability of the family, a basic social institution which public policy cherishes
and protects.
Prohibition against purchase by lawyer of property in litigation from his client; Article 1491,
paragraph (5) of the Philippine Civil Code construed.—Article 1491 of the Civil Code of the
Philippines (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs
certain persons, by reason of the relation of trust or their peculiar control either directly
or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents;
(3) administrators; (4) public officers and employees; (5) judicial officers and employees,
prosecuting attorneys, and lawyers; and (6) others specially disqualified by law.

Prohibited purchase void and produces no legal effect. —Castan's rationale for his conclusion
that fundamental considerations of public policy render void and inexistent such expressly

Philippine Trust Co. v. Roldan
Fabillo v. IAC
Polytechnic University
prohibited purchases (e.g. by public officers and employees of government property intrusted
to them and by justices, judges, fiscals and lawyers of property and rights in litigation submitted
to or handled by them, under Article 1491, paragraphs (4) and (5) of the Civil Code of the
Philippines) has been adopted in a new article of the Civil Code of the Philippines, viz, Article
1409 declaring such prohibited contracts as "inexistent and void from the beginning."
Nullity of such prohibited contracts cannot be cured by ratification.—The nullity of such
prohibited contracts is definite and permanent and cannot be cured by ratification. The public
interest and public policy remain paramount and do not permit of compromise or ratification.
Nullity of such prohibited contracts differentiated from the nullity of contracts of purchase by
the guardians, agents and administrators.—The permanent disqualification of public and
judicial officers and lawyers grounded on public policy differs from the first three cases of
guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions,
its has been opined, may be "ratified" by means of and "in the form of a new contract, in
which case its validity shall be determined only by the circumstances at the time of execution
of such new contract. The causes of nullity which have ceased to exist cannot impair the validity
of the new contract. Thus, the object which was illegal at the time of the first contract, may have
already become lawful at the time of ratification or second contract; or the service which was
impossible may have become possible; or the intention which could not be ascertained may
have been clarified by the parties. The ratification or second contract would then be valid from
its execution; however, it does not retroact to the date of the first contract.
Guardian, Agents and GUARDIANS AND WARD; PURCHASE OF WARD's PROPERTY BY GUARDIAN OR
Administrators THROUGH INTERMEDIARY.—As Guardianship is a trust of the highest order, the trustee
cannot be allowed to have any inducement to neglect his ward's interest; and whenever the
guardian acquires the ward's property through an intermediary, he violates the provision of
Article 1459 of the Civil Code and such transaction and subsequent ones emanating therefrom
shall be annulled.
Lawyers; Contingent Fee Arrangements; Attorney’s Lien; A contract between a lawyer and
his client stipulating a contingent fee is not covered by the prohibition under Art. 1491 (5)
because the payment of said fee is not made during the pendency of the litigation but only
after judgment has been rendered in the case handled by the lawyer.—The contract of
services did not violate said provision of law. Article 1491 of the Civil Code, specifically
paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial
auction, properties and rights which are the objects of litigation in which they may take part by
virtue of their profession. The said prohibition, however, applies only if the sale or assignment
of the property takes place during the pendency of the litigation involving the client’s property.
Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by
said prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not
made during the pendency of the litigation but only after judgment has been rendered in the
case handled by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a
lawyer may have a lien over funds and property of his client and may apply so much thereof as
may be necessary to satisfy his lawful fees and disbursements.
SUBJECT MATTER OF SALE
Sales; Words and Phrases; A contract of sale, as defined in the Civil Code, is a contract
where one of the parties obligates himself to transfer the ownership of and to deliver a
determinate thing to the other or others who shall pay therefore a sum certain in money or its
equivalent; The Civil Code provision on sale is, in effect, a “catch-all” provision which
effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is
ceded for a consideration.—A contract of sale, as defined in the Civil Code, is a contract where
one of the parties obligates himself to transfer the ownership of and to deliver a determinate
thing to the other or others who shall pay therefore a sum certain in money or its equivalent. It
is therefore a general requisite for the existence of a valid and enforceable contract of sale that
it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to
sell a determinate thing and the promise of the vendee to receive and pay for the property so
delivered and transferred. The Civil Code provision is, in effect, a “catchall” provision which
effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is
ceded for a consideration.

Government-Owned and Controlled Corporations; The National Development

Corporation and the Polytechnic University of the Philippines have their respective charters
and therefore each possesses a separate and distinct individual personality; Beyond cavil, a
government owned and controlled corporation has a personality of its own distinct and separate
from that of the government.—Contrary to what petitioners PUP and NDC propose, there is not
just one party involved in the questioned transaction. Petitioners NDC and PUP have their
respective charters and therefore each possesses a separate and distinct individual personality.
The inherent weakness of NDC’s proposition that there was no sale as it was only the
government which was involved in the transaction thus reveals itself. Tersely put, it is not
necessary to write an extended dissertation on government owned and controlled corporations
and their legal personalities. Beyond cavil, a government owned and controlled corporation has
a personality of its own, distinct and separate from that of the government. The intervention in
the transaction of the Office of the President through the Executive Secretary did not change
the independent existence of these entities. The involvement of the Office of the President was
limited to brokering the consequent relationship between NDC and PUP. But the withdrawal of
the appeal by the Executive Secretary is considered significant as he knew, after a review of the
records, that the transaction was subject to existing liens and encumbrances, particularly the
priority to purchase the leased premises in favor of FIRESTONE.

Same; Same; Since the conduct of the parties to a contract may be sufficient to establish
the existence of an agreement and the terms thereof, it becomes necessary for the courts to
examine the contemporaneous behavior of the parties in establishing the existence of their
contract.—True that there may be instances when a particular deed does not disclose the real
intentions of the parties, but their action may nevertheless indicate that a binding obligation has
been undertaken. Since the conduct of the parties to a contract may be sufficient to establish the
existence of an agreement and the terms thereof, it becomes necessary for the courts to examine
the contemporaneous behavior of the parties in establishing the existence of their contract.

Same; Same; Lease; Where the stipulation for a right of first refusal is part and parcel of
the contract of lease, the consideration for the lease is the same as that for the option.—In the
instant case, the right of first refusal is an integral and indivisible part of the contract of lease
and is inseparable from the whole contract. The consideration for the right is built into the
reciprocal obligations of the parties. Thus, it is not correct for petitioners to insist that there was

Atilan v. Atilano Must be Determinate or At least
“Determinable”
Melliza v. City of Iloilo Generic things may be object of
sale
no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the
stipulation is part and parcel of the contract of lease making the consideration for the lease the
same as that for the option.
Same; Same; Same; When a lease contract contains a right of first refusal, the lessor is
under a legal duty to the lessee not to sell to anybody at any price until after he has made an
offer to sell to the latter at a certain price and the lessee has failed to accept it.—It is a settled
principle in civil law that when a lease contract contains a right of first refusal, the lessor is
under a legal duty to the lessee not to sell to anybody at any price until after he has made an
offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a
right that the lessor’s first offer shall be in his favor.
Same; Same; Sales; In contracts of sale, the basis of the right of first refusal must be the
current offer of the seller to sell or the offer to purchase of the prospective buyer.—It now
becomes apropos to ask whether the courts a quo were correct in fixing the proper
consideration of the sale at P1,500.00 per square meter. In contracts of sale, the basis of the
right of first refusal must be the current offer of the seller to sell or the offer to purchase of the
prospective buyer. Only after the lessee-grantee fails to exercise its right under the same terms
and within the period contemplated can the owner validly offer to sell the property to a third
person, again, under the same terms as offered to the grantee. It appearing that the whole NDC
compound was sold to PUP for P554.74 per square meter, it would have been more proper for
the courts below to have ordered the sale of the property also at the same price. However, since
FIRESTONE never raised this as an issue, while on the other hand it admitted that the value of
the property stood at P1,500.00 per square meter, then we see no compelling reason to modify
the holdings of the courts a quo that the leased premises be sold at that price.
Contracts; Reformation of instruments; Remedy where there is simple mistake in the
drafting of the document.—The remedy where there is simple mistake in the drafting of the
document of sale in designating the land object of the sale, is reformation of the instrument,
there being a meeting of the minds of the parties to a contract.
Mistake; When not a ground for annulment of contract of sale.—Where the real intention
of the parties is the sale of a piece of land but there is a mistake in designating the particular lot
to be sold in the document, the mistake does not vitiate the consent of the parties, or affect the
validity and binding effect of the contract.
Reason.—The reason is that when one sells or buys real property—a piece of land, for
example—one sells or buys the property as he sees it, in its actual setting and by its physical
metes and bounds, and not by the mere lot number assigned to it in the certificate of title.
When reconveyance, not reformation of instrument, is proper.—In this case, the deed of
sale need not be reformed. The parties have retained possession of their respective properties
conformably to the real intention of the parties to that sale, and all they should do is to
execute mutual deeds of conveyance.
Object of sale must be determinate- or capable of being determinate.—The requirement of
the law is that a sale must have for its object a determinate thing and this requirement is
fulfilled as long as, at the time the contract is entered into, the object of the sale is

Yu Tek & Co. v. Gonzales
Johannes Shuback & Sons Phil.
Trading Corp. v. CA
Nool v. CA
Quantity of Subject Matter Not
Essential for Perfection
Seller’s Ownership Need Not Exist
at Perfection
capable of being made determinate without the necessity of a new or further agreement
between the parties (Art. 1273, old Civil Code; Art. 1460, new Civil Code).
PAROL EVIDENCE TO VARY TERMS OF WRITTEN INSTRUMENT.—A written
contract provided that the defendant was to sell to the plaintiff 600 piculs of sugar. The
defendant sought to prove by parol evidence that it was the understanding of the parties that
the sugar was to be procured from the defendant's growing crop. There was nothing in the
writing which could be construed to limit the agreement to the defendant's own crop of
sugar. Held, That the evidence in question was incompetent as varying the terms of the
writing.
SALES; REQUISITES OF CONTRACT; CONSIDERATION.—A contract of sale is not
perfected until the parties have agreed upon the price and the thing sold. A contract whereby a
party obligates himself to sell for a price a certain specified quantity of sugar of a given
quality, without designating any particular lot of sugar, is not perfected until the quantity
agreed upon has been selected and is capable of being physically designated and distinguished
from all other sugar.
When contract of sale is perfected; A contract of sale is perfected at the moment there
is a meeting of minds upon the thing which is the object of the contract and upon the price.—
We reverse the decision of the Court of Appeals and reinstate the decision of the trial court. It
bears emphasizing that a “contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price x x x.”
Letter of Credit; The opening of a letter of credit in favor of a vendor is only a mode of
payment; It is not among the essential requirements of a contract of sale enumerated in Arts.
1305 and 1474 of the Civil Code and therefore does not prevent the perfection of the contract
between the parties.—On the part of the buyer, the situation reveals that private respondent
failed to open an irrevocable letter of credit without recourse in favor of Johannes Schuback of
Hamburg, Germany. This omission, however, does not prevent the perfection of the contract
between the parties, for the opening of a letter of credit is not to be deemed a suspensive
condition. The facts herein do not show that petitioner reserved title to the goods until private
respondent had opened a letter of credit. Petitioner, in the course of its dealings with private
respondent, did not incorporate any provision declaring their contract of sale without effect until
after the fulfillment of the act of opening a letter of credit. The opening of a letter of credit in
favor of a vendor is only a mode of payment. It is not among the essential requirements of a
contract of sale enumerated in Articles 1305 and 1474 of the Civil Code, the absence of any of
which will prevent the perfection of the contract from taking place.
Void Contracts; Article 1370 of the Civil Code is applicable only to valid and enforceable
contracts.—We cannot sustain petitioners’ view. Article 1370 of the Civil Code is applicable
only to valid and enforceable contracts. The Regional Trial Court and the Court of Appeals
ruled that the principal contract of sale contained in Exhibit C and the auxiliary contract of
repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find
support in Dignos vs. Court of Appeals, where the Court held: “Be that as it may, it is evident
that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the
same and the sale is null and void.”
 A void contract cannot give rise to a valid one.—In the present case, it is clear that the
sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D, the
alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A
void contract cannot give rise to a valid one. Verily, Article 1422 of the Civil Code provides
that “(a) contract which is the direct result of a previous illegal contract, is also void and
inexistent.”

Where the sellers can no longer deliver the object of the sale to the buyers, as the buyers
themselves have already acquired title and delivery thereof from the rightful owner, such
contract may be deemed to be inoperative and may thus fall, by analogy, under item No. 5 of
Article 1409 of the Civil Code—“Those which contemplate an impossible service.”—In the
present case however, it is likewise clear that the sellers can no longer deliver the object of the
sale to the buyers, as the buyers themselves have already acquired title and delivery thereof
from the rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and
may thus fall, by analogy, under item No. 5 of Article 1409 of the Civil Code: “Those which
contemplate an impossible service.” Article 1459 of the Civil Code provides that “the vendor
must have a right to transfer the ownership thereof [object of the sale] at the time it is
delivered.” Here, delivery of ownership is no longer possible. It has become impossible.

Pacto de Retro; The right to repurchase presupposes a valid contract of sale between
the same parties.—One “repurchases” only what one has previously sold. In other words, the
right to repurchase presupposes a valid contract of sale between the same parties.
Undisputedly, private respondents acquired title to the property from DBP, and not from
petitioners.

Options; An accepted unilateral promise to buy or 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.—Assuming arguendo that Exhibit D is separate and distinct from Exhibit C
and is not affected by the nullity of the latter, still petitioners do not thereby acquire a right to
repurchase the property. In that scenario, Exhibit D ceases to be a “right to repurchase”
ancillary and incidental to the contract of sale; rather, it becomes an accepted unilateral
promise to sell. Article 1479 of the Civil Code, however, provides that “an accepted unilateral
promise to buy or 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.” In the present case, the
alleged written contract of repurchase contained in Exhibit D is bereft of any consideration
distinct from the price. Accordingly, as an independent contract, it cannot bind private
respondents.
PRICE AND OTHER CONSIDERATION
Mapalo v. Mapalo When Price “Simulated” Purchase and sale; Contracts without cause or consideration; Statement of false
consideration.—The rule under the Civil Code, be it the old or the new, is that
contracts without a cause or consideration produce no effect whatsoever. (Art. 1275, Old
Civil Code; Art. 1352, New Civil Code.) Nonetheless, under the Old Civil Code, the statement
of a false consideration renders the contract voidable, unless it is proven that it is
supported by another real and licit consideration. (Art. 1276, Old Civil Code.)
 Annulment of contract on the ground of falsity of consideration; Prescription.—The
action for annulment of a contract on the ground of falsity of consideration shall last four years,
the term to run from the date of the consummation of the contract. (Art. 1301, Old Civil Code.)

Contract that states false consideration construed.—A contract that states a false
consideration is one that has in fact a real consideration but the same is not the one stated
in the document.

Contract without consideration; Effect of statement of consideration in the document.—

Where there was in fact no consideration, the statement of one in the deed will not suffice
to bring it under the rule of Article 1276 of the Old Civil Code as stating a false consideration.

Statement that purchase price was paid but in fact never been paid to the vendor.—A
contract of purchase and sale is void and produces no effect whatsoever where the same is
without cause or consideration in that the purchase price, which appears thereon as paid, has in
fact never been paid by the purchaser to the vendor.

Inexistent contract cannot be the subject of prescription.—The inexistence of a contract

is permanent and incurable and cannot be the subject of prescription.
Mate v. CA Sales; The filing of the criminal cases was a tacit admission by petitioner that there was a
consideration of the pacto de retro sale.—As admitted by petitioner, by virtue of the sale with
pacto de retro, Josie Rey gave him, as vendor-a-retro, a postdated check in the amount of P1.4
Million, which represented the repurchase price of the two (2) lots. Aside from the P1.4 Million
check, Josie gave another postdated check to petitioner in the amount of P420,000.00, ostensibly
as interest for six (6) months but which apparently was his fee for having executed the pacto de
retro document. Josie thus assumed the responsibility of paying the repurchase price on behalf
of petitioner to private respondent. Unfortunately, the two checks issued by Josie Rey were
worthless. Both were dishonored upon presentment by petitioner with the drawee banks.
However, there is absolutely no basis for petitioner to file a complaint against private respondent
Tan and Josie Rey to annul the pacto de retro sale on the ground of lack of consideration,
invoking his failure to encash the two checks. Petitioner’s cause of action was to file criminal
actions against Josie Rey under B.P. 22, which he did. The filing of the criminal cases was a
tacit admission by petitioner that there was a consideration of the pacto de retro sale.
Ong v. Ong Must be in Money or Its Equivalent Sales; Consideration; Conveyance of property for P1.00 consideration and other valuable
considerations, valid.—A careful perusal of the subject deed reveals that the conveyance of the
one-half (½) undivided portion of the above-described property was for and in consideration of
the One (P1.00) Peso and the other valuable considerations (italics supplied) paid by private
respondent Sandra Maruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong.
Stated differently, the cause or consideration is not the One (P1.00) Peso alone but also the other
valuable considerations.

Bad faith and inadequacy of monetary consideration do not render a conveyance inexistent, as
the assignor's liability may be sufficient cause for a valid contract.—lt is not unusual, however,
in deeds of conveyance adhering to the AngloSaxon practice of stating that the consideration
given is the sum of P1.00, although the actual consideration may have been much more.
Moreover, assuming that said consideration of P1.00 is suspicious, this circumstance, alone,

Bagnas v. CA
Republic v. Phil. Resources
Development
Navarra v. Planters Dev. Bank
does not necessarily justify the inference that Reyes and the Abellas were not purchasers in
good faith and for value. Neither does this inference warrant the conclusion that the sales were
null and void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do
not render a conveyance inexistent, for the assignor's liberality may be sufficient cause for
a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may render either
rescissible or voidable, although valid until annulled, a contract concerning an object certain
entered into with a cause and with the consent of the contracting parties, as in the case at bar."
vd Sales; Consideration; The apparent gross disproportion between the stipulated price and the
undisputably valuable real estate allegedly sold, demonstrates that the deeds of sale in question
state a false consideration, thereby making them not merely voidable, but void ab initio.—
Without necessarily according all these assertions its full concurrence, but upon the
consideration alone that the apparent gross, not to say enormous, disproportion between the
stipulated price (in each deed) of P1.00 plus unspecified and unquantified services and the
undisputably valuable real estate allegedly sold—worth at least P10,500.00 going only by
assessments for tax purposes which, it is well-known, are notoriously low indicators of actual
value—plainly and unquestionably demonstrates that they state a false and fictitious
consideration, and no other true and lawful cause having been shown, the Court finds both said
deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.
PLEADING AND PRACTICE; INTERVENTION, WHERE INTERVENOR PosSESS
LEGAL INTEREST IN THE MATTER IN LITIGATION; RIGHT TO INTERVENE.—In the
exercise of discretion under section 3 of Rule 13 of the Rules of Court, the court shall consider
whether the intervention will unduly delay the adjudication of the rights of the original parties
and whether the intervenor's rights may be fully protected in a separate proceeding. Although
the respondent corporation is entitled to bring a separate action against any or all the parties
thereto, yet as the determination of the issues joined by the parties in the case would vitally
affect the rights not only of the original parties but also of the herein respondent corporation;
and as the allowance of the complaint in intervention, far from unduly delaying the adjudication
of the rights of the original parties or bringing confusion in the original case, would help clarify
the vital issue of the ownership of the materials involved and would prevent multiplicity of
suits, intervention should be allowed.
OBLIGATION AND CONTRACT; PAYMENT; KINDS OF PAYMENT; IN TERMS OF
MONEY OR ITS EQUIVALENT.—Although Article 1458 of the new Civil Code provides
that price * * * is always paid in terms of money and the supposed payment being in kind
it is no payment at all," yet the same article provides that the purchaser may pay "a price
certain in money or its equivalent" which means that payment of the price need not be
money.
CORPORATION; POWER TO SUE AND BE SUED; BOARD OF DIRECTORS NOT THE
PRESIDENT.—The power of a corporation to sue and be sued in any court is lodged in the
board of directors that exercised its corporate powers, and not in the president.
Manner of Payment of Price Stages; In general, contracts undergo three distinct stages, to wit: negotiation, perfection
Essential or birth, and consummation.—In general, contracts undergo three distinct stages, to wit:
negotiation, perfection or birth, and consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and ends at the moment of
their agreement. Perfection or birth of the contract takes place when the parties agree upon the
essential elements of the contract, i.e., consent, object and price. Consummation occurs when
the parties fulfill or perform the terms agreed upon in the contract, culminating in the
extinguishment thereof.

A negotiation is formally initiated by an offer which should be certain with respect to both
the object and the cause or consideration of the envisioned contract—there must be acceptance,
which may be express or implied, but it must not qualify the terms of the offer.—A negotiation
is formally initiated by an offer which should be certain with respect to both the object and the
cause or consideration of the envisioned contract. In order to produce a contract, there must
be acceptance, which may be express or implied, but it must not qualify the terms of the offer.
The acceptance of an offer must be unqualified and absolute to perfect the contract. In other
words, it must be identical in all respects with that of the offer so as to produce consent or
meeting of the minds.

Before a valid and binding contract of sale can exist, the manner of payment of the
purchase price must first be established since the agreement on the manner of payment goes
into the price such that a disagreement on the manner of payment is tantamount to a failure to
agree on the price.—While the foregoing letters indicate the amount of P300,000.00 as down
payment, they are, however, completely silent as to how the succeeding installment payments
shall be made. At most, the letters merely acknowledge that the down payment of P300,000.00
was agreed upon by the parties. However, this fact cannot lead to the conclusion that a contract
of sale had been perfected. Quite recently, this Court held that before a valid and binding
contract of sale can exist, the manner of payment of the purchase price must first be
established since the agreement on the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree on the price.

Same; Same; A letter/offer that merely stated that the “purchase price will be based on
the redemption value plus accrued interest at the prevailing rate up to the date of the sales
contract” fails to specify a definite amount of the purchase price—the ambiguity of such
statement only bolsters the uncertainty of the “offer.”—The Navarras’ letter/offer failed to
specify a definite amount of the purchase price for the sale/repurchase of the subject properties.
It merely stated that the “purchase price will be based on the redemption value plus accrued
interest at the prevailing rate up to the date of the sales contract.” The ambiguity of this
statement only bolsters the uncertainty of the Navarras’ so-called “offer” for it leaves much
rooms for such questions, as: what is the redemption value? what prevailing rate of interest shall
be followed: is it the rate stipulated in the loan agreement or the legal rate? when will the date
of the contract of sale be based, shall it be upon the time of the execution of the deed of sale or
upon the time when the last installment payment shall; have been made? To our mind, these
questions need first to be addressed, discussed and negotiated upon by the parties before a
definite purchase price can be arrived at.

The absence of a stipulated period within which the repurchase price shall be paid all the
more adds to the indefiniteness of the offer to purchase.—The offer was not clear insofar as
concerned the exact number of years that will comprise the longterm payment scheme. As we
see it, the absence of a stipulated period within which the repurchase price shall be paid all the
more adds to the indefiniteness of the Navarras’ offer.

Elements.—The lack of a definite offer on the part of the spouses could not possibly serve
as the basis of their claim that the sale/repurchase of their foreclosed properties was perfected.
The reason is obvious: one essential element of a contract of sale is wanting: the price certain.
There can be no contract of sale unless the following elements concur: (a) consent or meeting
of the minds; (b) determinate subject matter; and (c) price certain in money or its equivalent.
Such contract is born or perfected from the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. Here, what is dramatically clear is that
there was no meeting of minds vis-à-vis the price, expressly or impliedly, directly or
indirectly.kkie