CASES:

CHAPTER I
Nature and Form of the Contract
Elements (essential)
Manila Metal Container Corp v. PNB [2006]
A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service. Under
Article 1318 of the New Civil Code, 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.

Contracts are perfected by mere consent which is manifested by the meeting of

the offer and the acceptance upon the thing and the cause which are to constitute the
contract.
Once perfected, they bind other contracting parties and the obligations arising
therefrom have the form of law between the parties and should be complied with in
good faith. The parties are bound not only to the fulfillment of what has been
expressly stipulated but also to the consequences which, according to their nature,
may be in keeping with good faith, usage and law.
By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of and deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent. The absence of any of the essential
elements will negate the existence of a perfected contract of sale.
A contract of sale is consensual in nature and is perfected upon mere meeting of
the minds. When there is merely an offer by one party without acceptance of the
other, there is no contract. When the contract of sale is not perfected, it cannot, as an
independent source of obligation, serve as a binding juridical relation between the
parties.
A qualified acceptance or one that involves a new proposal constitutes a counter-
offer and a rejection of the original offer. A counter-offer is considered in law, a
rejection of the original offer and an attempt to end the negotiation between the
parties on a different basis. Consequently, when something is desired which is not
exactly what is proposed in the offer, such acceptance is not sufficient to guarantee
consent because any modification or variation from the terms of the offer annuls the
offer. The acceptance must be identical in all respects with that of the offer so as to
produce consent or meeting of the minds.

Toyota Shaw, Inc v. Court of Appeals [1995]

It is not a contract of sale. No obligation on the part of Toyota to transfer
ownership of a determinate thing to Sosa and no correlative obligation on the part of
 the latter to pay therefor a price certain appears therein. The provision on the
downpayment of P100,000.00 made no specific reference to a sale, it could only refer
to a sale on installment basis, as the VSP executed the following day confirmed. But
nothing was mentioned about the full purchase price and the manner the installments
were to be paid.
This Court had already ruled that a definite agreement on the manner of payment
of the price is an essential element in the formation of a binding and enforceable
contract of sale. This is so because the agreement as to 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. Definiteness as to the price is an essential element of a
binding agreement to sell personal property.
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota
and Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware
from its title that he was not dealing with Toyota but with Popong Bernardo and that
the latter did not misrepresent that he had the authority to sell any Toyota vehicle. He
knew that Bernardo was only a sales representative of Toyota and hence a mere agent
of the latter. It was incumbent upon Sosa to act with ordinary prudence and
reasonable diligence to know the extent of Bernardo's authority as an agent in
respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent.
At the most, Exhibit "A" may be considered as part of the initial phase of the
generation of negotiation stage of a contract sale. There are three stages in the
contract of sale, namely:
(a) preparation, conception, or generation, which is the period of negotiation
and bargaining, ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties
come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the
terms agreed upon in the contract.

The second phase of the generation or negotiation stage in this case was the
execution of the VSP. It must be emphasized that thereunder, the downpayment of
the purchase price was P53,148.00 while the balance to be paid on installment should
be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A
Finance Corp. Was acceptable to Toyota, otherwise it should not have mentioned
B.A. Finance in the VSP.

Effect if agreement for exclusive sale of beds where the other party is entitled to
commission, among others
Quiroga v. Parsons Hardware Co [1918]
In order to classify a contract, due regard must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is
that the plaintiff was to furnish the defendant with the beds which the latter might order,
at the price stipulated) and that the defendant was to pay the price in the manner
stipulated. The price agreed upon was the one determined by the plaintiff for the sale of
these beds in Manila, with a discount of from 20 to 25 per cent, according to their class.
Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in
cash, if the defendant so preferred, and in these last two cases an additional discount was
to be allowed for prompt payment. 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 the part 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 received 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. By virtue of the contract between the plaintiff and the defendant, the latter, on
receiving the beds, was necessarily obliged to pay their price within the term fixed,
without any other consideration and regardless as to whether he had or had not sold the
beds.
It would be enough to hold, as we do, that the contract by and between the defendant
and the plaintiff is one of purchase and sale, in order to show that it was not one made on
the basis of a commission on sales, as the plaintiff claims it was, for these contracts are
incompatible with each other. But, besides, examining the clauses of this contract, none
of them is found that substantially supports the plaintiff's contention. Not a single one of
these clauses necessarily conveys the idea of an agency. The words commission on sales
used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a
mere discount on the invoice price. The word agency, also used in articles 2 and 3, only
expresses that the defendant was the only one that could sell the plaintiff's beds in the
Visayan Islands. With regard to the remaining clauses, the least that can be said is that
they are not incompatible with the contract of purchase and sale.
For the foregoing reasons, we are of opinion that the contract by and between the
plaintiff and the defendant was one of purchase and sale, and that the obligations the
breach of which is alleged as a cause of action are not imposed upon the defendant, either
by agreement or by law.

Nature of transactions of company engaged in the design, supply and installation of

certain type of air conditioning system
Commissioner of Internal Revenue v. Engineering Equipment and Supply Co, 64 SCRA
590
The arguments of both the Engineering and the Commissioner call for a clarification
of the term contractor as well as the distinction between a contract of sale and 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 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.
Our New Civil Code, likewise distinguishes a contract of sale from a contract for a
piece of work thus:
"Art. 1467. A contract for the delivery at a certain price of an article which
the vendor in the ordinary course of his business manufactures or procures for
the general market, whether the same is on hand at the time or not, is a contract
of sale, but if the goods are to be manufactured specially for the customer and
upon his special order and not for the general market, it is a contract for a piece
of work."
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 as was held in the cases of
Luzon Stevedoring Co., vs. Trinidad 43, Phil. 803, 807-808, and La Carlota Sugar Central
vs. Trinidad 43, Phil. 816, 819, 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.
The facts and circumstances support the theory that Engineering is a contractor rather
than a manufacturer.

Option defined
Eulogio v. Apeles [2009]
An option is a contract by which the owner of the property agrees with another
person that the latter shall have the right to buy the former's property at a fixed price
within a certain time. It is a condition offered or contract by which the owner stipulates
with another that the latter shall have the right to buy the property at a fixed price within
a certain time, or under, or in compliance with certain terms and conditions; or which
gives to the owner of the property the right to sell or demand a sale. An option is not of
itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a
sale of the right to purchase. It is simply a contract by which the owner of the property
agrees with another person that he shall have the right to buy his property at a fixed price
within a certain time.
He does not sell his land; he does not then agree to sell it; but he does sell something,
i.e., the right or privilege to buy at the election or option of the other party. Its
distinguishing characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer.
 It is also sometimes called an "unaccepted offer" and is sanctioned by Article 1479 of
the Civil Code:
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.
The second paragraph of Article 1479 provides for the definition and consequent
rights and obligations under an option contract. For an option contract to be valid and
enforceable against the promissor, there must be a separate and distinct consideration that
supports it.
The doctrine requiring the payment of consideration in an option contract enunciated
in Southwestern Sugar is resonated in subsequent cases and remains controlling to this
day.
Without consideration that is separate and distinct from the purchase price, an option
contract cannot be enforced; that holds true even if the unilateral promise is already
accepted by the optionee.
The consideration is "the why of the contracts, the essential reason which moves the
contracting parties to enter into the contract". This definition illustrates that the
consideration contemplated to support an option contract need not be monetary. Actual
cash need not be exchanged for the option. However, by the very nature of an option
contract, as defined in Article 1479, the same is an onerous contract for which the
consideration must be something of value, although its kind may vary.

Right of first refusal

Asuncion v. Court of Appeals [1994]
Until the contract is perfected, it cannot, as an independent source of obligation,
serve as a binding juridical relation. In sales, particularly, to which the topic for
discussion about the case at bench belongs, the contract is perfected when a person,
called the seller, obligates himself, for a price certain, to deliver and to transfer ownership
of a thing or right to another, called the buyer, over which the latter agrees.
An unconditional mutual promise to buy and sell, as long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted.
An accepted unilateral promise which specifies the thing to be sold and the price to
be paid, when coupled with a valuable consideration distinct and separate from the price,
is what may properly be termed a perfected contract of option. This contract is legally
binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil
Code.
Observe, however, that the option is not the contract of sale itself. The optionee has
the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer
is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and
both parties are then reciprocally bound to comply with their respective undertakings.
A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is
merely an offer. Public advertisements or solicitations and the like are ordinarily
construed as mere invitations to make offers or only as proposals. These relations, until a
contract is perfected, are not considered binding commitments. Thus, at any time prior to
the perfection of the contract, either negotiating party may stop the negotiation. The offer,
at this stage, may be withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when the offeree learns of the
withdrawal (Laudico vs. Arias, 43 Phil. 270 ). Where a period is given to the offeree
within which to accept the offer, the following rules generally govern:
(1) If the period is not itself founded upon or supported by a consideration,
the offeror is still free and has the right to withdrawal the offer before its
acceptance, or, if an acceptance has been made, before the offeror's coming to
know of such fact, by communicating that withdrawal to the offeree. The right to
withdraw, however, must not be exercised whimsically or arbitrarily; otherwise,
it could give rise to a damage claim under Article 19 of the Civil Code which
ordains that "every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is
deemed perfected, and it would be a breach of that contract to withdraw the offer
during the agreed period. The option, however, is an independent contract by
itself, and it is to be distinguished from the projected main agreement (subject
matter of the option) which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance (exercise of the
option) by the optionee-offeree, the latter may not sue for specific performance
on the proposed contract ("object" of the option) since it has failed to reach its
own stage of perfection. The optioner-offeror, however, renders himself liable
for damages for breach of the option. In these cases, care should be taken of the
real nature of the consideration given, for if, in fact, it has been intended to be
part of the consideration for the main contract with a right of withdrawal on the
part of the optionee, the main contract could be deemed perfected; a similar
instance would be an "earnest money" in a contract of sale that can evidence its
perfection (Art. 1482, Civil Code).

In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, it cannot be deemed a perfected contract of sale under
Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its
normal concept, per se be brought within the purview of an option under the second
paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 of the
same Code. An option or an offer would require, among other things, a clear certainty on
both the object and the cause or consideration of the envisioned contract.
In a right of first refusal, while the object might be made determinate, the exercise of
the right, however, would be dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but also on terms, including the price,
that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as
merely belonging to a class of preparatory juridical relations governed not by contracts
(since the essential elements to establish the vinculum juris would still be indefinite and
inconclusive) but by, among other laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its existence, nor would it sanction an
action for specific performance without thereby negating the indispensable element of
consensuality in the perfection of contracts. It is not to say, however, that the right of first
refusal would be inconsequential for, such as already intimated above, an unjustified
disregard thereof, given, for instance, the circumstances expressed in Article 19 of the
Civil Code, can warrant a recovery for damages.

The contract of sale may be absolute

Ramos v. Heruela [2005]
Article 1458 of the Civil Code provides that a contract of sale may be absolute or
conditional. A contract of sale is absolute when title to the property passes to the vendee
upon delivery of the thing sold. A deed of sale is absolute when there is no stipulation in
the contract that title to the property remains with the seller until full payment of the
purchase price. The sale is also absolute if there is no stipulation giving the vendor the
right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed
period. In a conditional sale, as in a contract to sell, ownership remains with the vendor
and does not pass to the vendee until full payment of the purchase price. The full payment
of the purchase price partakes of a suspensive condition, and non-fulfillment of the
condition prevents the obligation to sell from arising.
In this case, the agreement of the parties is embodied in a one-page, handwritten
document. The document does not contain the usual terms and conditions of a formal
deed of sale. The original document, elevated to this Court as part of the Records, is torn
in part. Only the words "LMENT BASIS" is legible on the title. The names and addresses
of the parties and the identity of the property cannot be ascertained.

Heirs of Mascunana v. Court of Appeals [2005]

While it is true that Jesus Mascuñana executed the deed of absolute sale over the
property on August 12, 1961 in favor of Diosdado Sumilhig for P4,690.00, and that it was
only on July 6, 1962 that TCT No. 967 was issued in his name as one of the co-owners of
Lot No. 124, Diosdado Sumilhig and the respondents nevertheless acquired ownership
over the property. The deed of sale executed by Jesus Mascuñana in favor of Diosdado
Sumilhig on August 12, 1961 was a perfected contract of sale over the property. It is
settled that a perfected contract of sale cannot be challenged on the ground of the non-
transfer of ownership of the property sold at that time of the perfection of the contract,
since it is consummated upon delivery of the property to the vendee. It is through
tradition or delivery that the buyer acquires ownership of the property sold. As provided
in Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing which is the
object of the contract, unless the contrary appears or can be inferred. The record of the
sale with the Register of Deeds and the issuance of the certificate of title in the name of
the buyer over the property merely bind third parties to the sale. As between the seller and
the buyer, the transfer of ownership takes effect upon the execution of a public instrument
covering the real property. Long before the petitioners secured a Torrens title over the
property, the respondents had been in actual possession of the property and had
designated Barte as their overseer.
Article 1458 of the New Civil Code provides:
By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of 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.

Thus, there are three essential elements of sale, to wit:

a) Consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.

In this case, there was a meeting of the minds between the vendor and the vendee,
when the vendor undertook to deliver and transfer ownership over the property covered
by the deed of absolute sale to the vendee for the price of P4,690.00 of which P3,690.00
was paid by the vendee to the vendor as down payment. The vendor undertook to have
the property sold, surveyed and segregated and a separate title therefor issued in the name
of the vendee, upon which the latter would be obliged to pay the balance of P1,000.00.
There was no stipulation in the deed that the title to the property remained with the
vendor, or that the right to unilaterally resolve the contract upon the buyer's failure to pay
within a fixed period was given to such vendor. Patently, the contract executed by the
parties is a deed of sale and not a contract to sell.
The condition in the deed that the balance of P1,000.00 shall be paid to the vendor by
the vendee as soon as the property sold shall have been surveyed in the name of the
vendee and all papers pertinent and necessary to the issuance of a separate certificate of
title in the name of the vendee shall have been prepared is not a condition which
prevented the efficacy of the contract of sale. It merely provides the manner by which the
total purchase price of the property is to be paid. The condition did not prevent the
contract from being in full force and effect.
Contract of Sale v. Contract to Sell
Ong v. Court of Appeals [1999]
Article 1191 of the New Civil Code refers to rescission applicable to reciprocal
obligations. Reciprocal obligations are those which arise from the same cause, and in
which each party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. 16 They are to be performed simultaneously
such that the performance of one is conditioned upon the simultaneous fulfillment of the
other. Rescission of reciprocal obligations under Article 1191 of the New Civil Code
should be distinguished from rescission of contracts under Article 1383.
Although both presuppose contracts validly entered into and subsisting and both
require mutual restitution when proper, they are not entirely identical.
A careful reading of the parties' "Agreement of Purchase and Sale" shows that it is in
the nature of a contract to sell, as distinguished from a contract of sale. In a contract of
sale, the title to the property passes to the vendee upon the delivery of the thing sold;
while in a contract to sell, ownership is, by agreement, reserved in the vendor and is not
to pass to the vendee until full payment of the purchase price. In a contract to sell, the
payment of the purchase price is a positive suspensive condition, the failure of which is
not a breach, casual or serious, but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force.
The non-fulfillment of the condition of full payment rendered the contract to sell
ineffective and without force and effect. It must be stressed that the breach contemplated
in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation
already extant, not a failure of a condition to render binding that obligation. Failure to
pay, in this instance, is not even a breach but merely an event which prevents the vendor's
obligation to convey title from acquiring binding force. Hence, the agreement of the
parties in the case at bench may be set aside, but not because of a breach on the part of
petitioner for failure to complete payment of the purchase price. Rather, his failure to do
so brought about a situation which prevented the obligation of respondent spouses to
convey title from acquiring an obligatory force.

Coronel v. Court of Appeals [1996]

The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere

consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
 Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, which for present purposes we shall take
as the full payment of the purchase price. What the seller agrees or obliges himself to do
is to fulfill his promise to sell the subject property when the entire amount of the purchase
price is delivered to him. In other words the full payment of the purchase price partakes
of a suspensive condition, the non-fulfillment of which prevents the obligation to sell
from arising and thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer.

Stated positively, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, the prospective seller's obligation to sell the subject
property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
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.

A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of
the purchase price.

Contract to sell v. Conditional Sale

Coronel v. Court of Appeals [1996]
It is essential to distinguish between a contract to sell and a conditional contract of
sale specially in cases where the subject property is sold by the owner not to the party the
seller contracted with, but to a third person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third person buying such property despite
the fulfillment of the suspensive condition such as the full payment of the purchase price,
for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek
the relief of reconveyance of the property. There is no double sale in such case. Title to
the property will transfer to the buyer after registration because there is no defect in the
owner-seller's title per se, but the latter, of course, may be sued for damages by the
intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the seller's title thereto.
In fact, if there had been previous delivery of the subject property, the seller's ownership
or title to the property is automatically transferred to the buyer such that, the seller will no
longer have any title to transfer to any third person. Applying Article 1544 of the Civil
Code, such second buyer of the property who may have had actual or constructive
knowledge of such defect in the seller's title, or at least was charged with the obligation to
discover such defect, cannot be a registrant in good faith. Such second buyer cannot
defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer
may seek reconveyance of the property subject of the sale.
A contract to sell as defined hereinabove, may not even be considered as a
conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may
or may not occur. If the suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated . However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already
been previous delivery of the property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which
is the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously delivered
to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale.

Nabus v. Pacson [2009]

A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of
the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a
conditional contract of sale where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition
is not fulfilled, the perfection of the contract of sale is completely abated. However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if
there had already been previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.
 In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The prospective seller
still has to convey title to the prospective buyer by entering into a contract of absolute
sale.
It is not the title of the contract, but its express terms or stipulations that determine
the kind of contract entered into by the parties. In this case, the contract entitled "Deed of
Conditional Sale" is actually a contract to sell. The contract stipulated that "as soon as the
full consideration of the sale has been paid by the vendee, the corresponding transfer
documents shall be executed by the vendor to the vendee for the portion sold." Where the
vendor promises to execute a deed of absolute sale upon the completion by the vendee of
the payment of the price, the contract is only a contract to sell." The aforecited stipulation
shows that the vendors reserved title to the subject property until full payment of the
purchase price.

Object
Lawful
Manlapat v. Court of Appeals [2005]
Eduardo was issued a title in 1976 on the basis of his free patent application.
Such application implies the recognition of the public dominion character of the land
and, hence, the five (5)-year prohibition imposed by the Public Land Act against
alienation or encumbrance of the land covered by a free patent or homestead should
have been considered.
The deed of sale covering the fifty (50)-square meter right of way executed by
Eduardo on 18 March 1981 is obviously covered by the proscription, the free patent
having been issued on 8 October 1976. However, petitioners may recover the portion
sold since the prohibition was imposed in favor of the free patent holder. In
Philippine National Bank v. De los Reyes, this Court ruled squarely on the point,
thus:
While the law bars recovery in a case where the object of the contract is
contrary to law and one or both parties acted in bad faith, we cannot here
apply the doctrine of in pari delicto which admits of an exception, namely,
that when the contract is merely prohibited by law, not illegal per se, and the
prohibition is designed for the protection of the party seeking to recover, he
is entitled to the relief prayed for whenever public policy is enhanced
thereby. Under the Public Land Act, the prohibition to alienate is predicated
on the fundamental policy of the State to preserve and keep in the family of
the homesteader that portion of public land which the State has gratuitously
given to him, and recovery is allowed even where the land acquired under
the Public Land Act was sold and not merely encumbered, within the
prohibited period.
Determinate or determinable
Sale by co-heir of definite portion of estate prior to partition
Vagilidad v.. Vagilidad [2006]
The mere fact that LORETO sold a definite portion of the co-owned lot by
metes and bounds before partition does not, per se, render the sale a nullity. We
held in Lopez v. Vda. De Cuaycong that the fact that an agreement purported to
sell a concrete portion of a co-owned property does not render the sale void, for
it is well established that the binding force of a contract must be recognized as
far as it is legally possible to do so.
In the case at bar, the contract of sale between LORETO and GABINO, JR.
on May 12, 1986 could be legally recognized. At the time of sale, LORETO had
an aliquot share of one-third of the 4,280-square meter property or some 1,426
square meters but sold some 1,604 square meters to GABINO, JR. We have
ruled that if a co-owner sells more than his aliquot share in the property, the sale
will affect only his share but not those of the other co-owners who did not
consent to the sale. Be that as it may, the co-heirs of LORETO waived all their
rights and interests over Lot No. 1253 in favor of LORETO in an Extrajudicial
Settlement of Estate dated January 20, 1987. They declared that they have
previously received their respective shares from the other estate of their parents
ZOILO and PURIFICACION. The rights of GABINO, JR. as owner over Lot
No. 1253-B are thus preserved. These rights were not effectively transferred by
LORETO to WILFREDO in the Deed of Absolute Sale of Portion of Land. Nor
were these rights alienated from GABINO, JR. upon the issuance of the title to
the subject property in the name of WILFREDO.

Effect of agreement where the exact number of palay to be sold was not
fixed
National Grains Authority v. Intermediate Appellate Court [1989]
Article 1458 of the Civil Code of the Philippines defines sale as a contract
whereby one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other party to pay
therefore a price certain in money or its equivalent. A contract, on the other hand,
is a meeting of minds between two (2) persons whereby one binds himself, with
respect to the other, to give something or to render some service (Art. 1305,
Civil Code of the Philippines).
The essential requisites of contracts are:
(1) consent of the contracting parties, (2) object certain which is the subject
matter of the contract, and (3) cause of the obligation which is established (Art.
1318, Civil Code of the Philippines.)
In the case at bar, Soriano initially offered to sell palay grains produced in
his farmland to NFA. When the latter accepted the offer by noting in Soriano's
Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting
 of the minds between the parties. The object of the contract, being the palay
grains produced in Soriano's farmland and the NFA was to pay the same
depending upon its quality. The fact that the exact number of cavans of palay to
be delivered has not been determined does not affect the perfection of the
contract. Article 1349 of the New Civil Code provides: ". . . 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."
In this case, there was no need for NFA and Soriano to enter into a new
contract to determine the exact number of cavans of palay to be sold. Soriano
can deliver so much of his produce as long as it does not exceed 2,640 cavans.

Existing, or Future or Contingent

Sale of future inheritance
Tanedo v. Court of Appeals [1996]
The sale made in 1962 involving future inheritance is not really at issue
here. In context, the assailed Decision conceded "it may be legally correct that a
contract of sale of anticipated future inheritance is null and void."
But to remove all doubts, we hereby categorically rule that, pursuant to
Article 1347 of the Civil Code, "(n)o contract may be entered into upon a future
inheritance except in cases expressly authorized by law."
Consequently, said contract made in 1962 is not valid and cannot be the
source of any right nor the creator of any obligation between the parties.

Transferability of ownership
Sale by mortgage of land not proper subject subject of mortgage
Cavite Development Bank v. Lim [2000]
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give
what one does not have. In applying this precept to a contract of sale, a
distinction must be kept in mind between the "perfection" and "consummation"
stages of the contract.
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. It is,
therefore, not required that, at the perfection stage, the seller be the owner of the
thing sold or even that such subject matter of the sale exists at that point in time.
Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a thing
which, at that time, was not his, but later acquires title thereto, such title passes
by operation of law to the buyer or grantee. This is the same principle behind the
 sale of "future goods" under Art. 1462 of the Civil Code. However, under Art.
1459, at the time of delivery or consummation stage of the sale, it is required that
the seller be the owner of the thing sold. Otherwise, he will not be able to
comply with his obligation to transfer ownership to the buyer. It is at the
consummation stage where the principle of nemo dat quod non habet applies.
In this case, the sale by CDB to Lim of the property mortgaged in 1983 by
Rodolfo Guansing must, therefore, be deemed a nullity for CDB did not have a
valid title to the said property To be sure, CDB never acquired a valid title to the
property because the foreclosure sale, by virtue of which the property had been
awarded to CDB as highest bidder, is likewise void since the mortgagor was not
the owner of the property foreclosed.
There is, however, a situation where, despite the fact that the mortgagor is
not the owner of the mortgaged property, his title being fraudulent, the mortgage
contract and any foreclosure sale arising therefrom are given effect by reason of
public policy. This is the doctrine of "the mortgagee in good faith" based on the
rule that all persons dealing with property covered by a Torrens Certificate of
Title, as buyers or mortgagees, are not required to go beyond what appears on
the face of the title. The public interest in upholding the indefeasibility of a
certificate of title, as evidence of the lawful ownership of the land or of any
encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied
upon what appears on the face of the certificate of title.
In this case, there is no evidence that CDB observed its duty of diligence in
ascertaining the validity of Rodolfo Guansing's title. It appears that Rodolfo
Guansing obtained his fraudulent title by executing an Extra-Judicial Settlement
of the Estate With Waiver where he made it appear that he and Perfecto
Guansing were the only surviving heirs entitled to the property, and that Perfecto
had waived all his rights thereto. This self-executed deed should have placed
CDB on guard against any possible defect in or question as to the mortgagor's
title. Moreover, the alleged ocular inspection report by CDB's representative was
never formally offered in evidence. Indeed, petitioners admit that they are aware
that the subject land was being occupied by persons other than Rodolfo
Guansing and that said persons, who are the heirs of Perfecto Guansing, contest
the title of Rodolfo.

Conveyance of privilege to purchase land before it is awarded to tenant or

occupant
Hermosilla v. Remoquillo [2007]
It is undisputed that petitioners' houses occupy the questioned property and
that respondents have not been in possession thereof. Since there was no actual
need to reconvey the property as petitioners remained in possession thereof, the
action took the nature of a suit for quieting of title, it having been filed to enforce
an alleged implied trust after Jaime refused to segregate title over Lot 19. One
who is in actual possession of a piece of land claiming to be the owner thereof
may wait until his possession is disturbed or his title is attacked before taking
steps to vindicate his right. From the body of the complaint, this type of action
denotes imprescriptibility.
As priorly stated, however, when the Kasunduan was executed in 1972 by
Jaime in favor of Salvador — petitioners' predecessor-in-interest — Lot 19, of
which the questioned property forms part, was still owned by the Republic.
Nemo dat quod non habet. Nobody can give what he does not possess. Jaime
could not thus have transferred anything to Salvador via the Kasunduan.

Heirs of Reyes v. Beltran [2008]

Petitioners cannot derive title to the subject property by virtue of the
Contract to Sell. It was unmistakably stated in the Contract and made clear to
both parties thereto that the vendor, Miguel R. Socco, was not yet the owner of
the subject property and was merely expecting to inherit the same as his share as
a co-heir of Constancia's estate. It was also declared in the Contract itself that
Miguel R. Socco's conveyance of the subject to the buyer, Arturo Reyes, was a
conditional sale. It is, therefore, apparent that the sale of the subject property in
favor of Arturo Reyes was conditioned upon the event that Miguel Socco would
actually inherit and become the owner of the said property. Absent such
occurrence, Miguel R. Socco never acquired ownership of the subject property
which he could validly transfer to Arturo Reyes.
Under Article 1459 of the Civil Code on contracts of sale, "The thing must
be licit and the vendor must have a right to transfer ownership thereof at the time
it is delivered." The law specifically requires that the vendor must have
ownership of the property at the time it is delivered. Petitioners claim that the
property was constructively delivered to them in 1954 by virtue of the Contract
to Sell. However, as already pointed out by this Court, it was explicit in the
Contract itself that, at the time it was executed, Miguel R. Socco was not yet the
owner of the property and was only expecting to inherit it. Hence, there was no
valid sale from which ownership of the subject property could have transferred
from Miguel Socco to Arturo Reyes. Without acquiring ownership of the subject
property, Arturo Reyes also could not have conveyed the same to his heirs,
herein petitioners.
Price
General principles in the agreement as to price
Boston Bank of the Philippines v. Manalo [2006]
We agree with petitioner's contention that, for a perfected contract of sale or
contract to sell to exist in law, there must be an agreement of the parties, not only on
the price of the property sold, but also on the manner the price is to be paid by the
vendee.
Under Article 1458 of the New Civil Code, in a contract of sale, whether
absolute Under Article 1458 of the New Civil Code, in a contract of sale, whether
absolute or conditional, one of the contracting parties obliges himself to transfer the
ownership of and deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent. A contract of sale is perfected at the moment there
is a meeting of the minds upon the thing which is the object of the contract and the
price. From the averment of perfection, the parties are bound, not only to the
fulfillment of what has been expressly stipulated, but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.
On the other hand, when the contract of sale or to sell is not perfected, it cannot, as
an independent source of obligation, serve as a binding juridical relation between the
parties.
A definite agreement as to the price is an essential element of a binding
agreement to sell personal or real property because it seriously affects the rights and
obligations of the parties. Price is an essential element in the formation of a binding
and enforceable contract of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price fixed by one of the contracting
parties, if accepted by the other, gives rise to a perfected sale.
It is not enough for the parties to agree on the price of the property. The parties
must also agree on the manner of payment of the price of the property to give rise to
a binding and enforceable contract of sale or contract to sell. This is so because the
agreement as to 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.
In a contract to sell property by installments, it is not enough that the parties
agree on the price as well as the amount of downpayment. The parties must, likewise,
agree on the manner of payment of the balance of the purchase price and on the other
terms and conditions relative to the sale. Even if the buyer makes a downpayment or
portion thereof, such payment cannot be considered as sufficient proof of the
perfection of any purchase and sale between the parties.

The price must be real

Effect if price is simulated
Cruzado v. Bustos [1916]
To judge from the evidence adduced in this case, there is ample ground for
holding that the said deed of sale of a parcel of 65 balitas of land was simulated, not
to defraud any creditor or other person interested in the land nor for the purpose of
eluding any lawful obligation on the part of its owner, Estefania Bustos, but for the
sole purpose of doing a favor, of rendering a special service to Agapito Geronimo
Cruzado, father of the plaintiff Santiago Cruzado.
The above-related facts conclusively prove that Estefania Bustos executed the
deed of sale Exhibit A in favor of the deceased Cruzado in order to enable the latter,
by showing that he was a property owner, to hold the office of procurador. This
position he held for many years, thanks to the liberality of the pretended vendor,
who, notwithstanding the statements contained in the deed of sale, does not appear to
have been paid anything as a result of the sham sale, a sale which was effected, not in
prejudice or fraud of any person, nor those who were entitled to hold Cruzado liable
for the proper discharge of the duties of his office, because, had the need arisen, any
liability of his could have been covered by the value of the land, the sale of which
was fictitiously set forth in that deed as lawfully belonging to Cruzado, and then
Estefania Bustos would have had no right either to object to or escape the
consequences of that alienation, although simulated.
The action brought by the plaintiff is evidently one for recovery of possession,
founded on the right transmitted to him by his father at his death, — a right arising
from the said simulated deed of sale of the land in question. This action is of course
improper, not only because the sale was simulated, but also because it was not
consummated. The price of the land was not paid nor did the vendee take possession
of the property from the 7th of September, 1875, when the said sale was feigned,
until the time of his death; nor did any of his successors, nor the plaintiff himself
until the date of his claim, enter into possession of the land.
It is true that the deed of sale Exhibit A remained in possession of the vendee
Cruzado, but the sale is not to be considered as consummated by this because the said
vendee never entered into possession of the land and neither did his son the plaintiff.
The latter, moreover, was unable to prove that at any time as owner of the land
he collected the fruits harvested thereon, or that any other person cultivated the said
land in the name and representation of his deceased father or of the plaintiff himself.
The fiction created by means of the execution and delivery of a public instrument
produces no effect if the person acquiring it never takes possession of the thing sold
or acquired, as happened in the case at bar.

Effect if there is no consideration

Doles v. Angeles [2006]
A further scrutiny of the record shows, however, that the sale might have been
backed up by another consideration that is separate and distinct from the debt:
respondent averred in her complaint and testified that the parties had agreed that as a
condition for the conveyance of the property the respondent shall assume the balance
of the mortgage loan which petitioner allegedly owed to the NHMFC. This Court in
the recent past has declared that an assumption of a mortgage debt may constitute a
 valid consideration for a sale.
In view of these anomalies, the Court cannot entertain the possibility that
respondent agreed to assume the balance of the mortgage loan which petitioner
allegedly owed to the NHMFC, especially since the record is bereft of any factual
finding that petitioner was, in the first place, endowed with any ownership rights to
validly mortgage and convey the property. As the complainant who initiated the case,
respondent bears the burden of proving the basis of her complaint. Having failed to
discharge such burden, the Court has no choice but to declare the sale void for lack of
cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue
of whether duress or intimidation had been foisted upon petitioner upon the
execution of the sale.

In money or its equivalent

Torres v. Court of Appeals, 320 SCRA 428
Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.
The Joint Venture Agreement clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first stipulation states that
petitioners did not actually receive payment for the parcel of land sold to respondent.
Consideration, more properly denominated as cause, can take different forms, such as the
prestation or promise of a thing or service by another.
In this case, the cause of the contract of sale consisted not in the stated peso value of
the land, but in the expectation of profits from the subdivision project, for which the land
was intended to be used. As explained by the trial court, "the land was in effect given to
the partnership as [petitioner's] participation therein. . . . There was therefore a
consideration for the sale, the [petitioners] acting in the expectation that, should the
venture come into fruition, they [would] get sixty percent of the net profits."

Certain or Ascertainable (determinable)

By third person
Barreto v. Sta. Marina, 26 Phil 200
Under article 1450, supra there are two indispensable requisites in a perfected
sale: (1) There must be an agreement upon the thins which is the object of the
contract; and (2) the contracting parties must agree upon the price. The object of the
contract in the case at bar was the whole of the plaintiff's right, title, and interest in
La Insular. This whole was 4/173 of the entire net value of the business. The parties
agreed that the price should be 4/173 of the total net value. The fixing of such net
value was unreservedly left to the judgment of the appraisers. As to the thing and the
 price the minds of the contracting parties met, and all questions relating thereto were
settled. Nothing was left unfinished in so far as the contracting parties were
concerned. Neither party could withdraw from the contract without the consent of the
other. The result is that the two essential requisites necessary to constitute a perfected
sale were present.
The appraisers were appointed to ascertain and fix the total net value so that the
true present value, 4/173 of the whole net value, of the plaintiff's interest might be
segregated and paid for.

By reference to invoices
McCulough v. Aenlle, 3 Phil 285
The document of August 27 was a completed contract of sale. (Art. 1450, Civil
Code.) The articles which were the subject of the sale were definitely and finally
agreed upon. The appellee agreed to buy, among other things, all of the leaf tobacco
then in the factory. This was sufficient description of the thing sold. The price of each
article was fixed. It is true that the price of this tobacco, for example , was not stated
in dollars and cents in the contract. But by its terms the appellee agreed to pay
therefor the amount named in the invoices then in existence. The price could be made
certain by a mere reference to those invoices. In this respect the contract is covered
by article 1447 of the Civil Code. By the instrument of August 27 the contract was
perfected and thereafter each party could compel the other to fulfill it. (Art. 1258,
Civil Code.) By its term the appellee was bound to take all the leaf tobacco then
belonging to the factory and to pay therefor the prices named in the invoices. This
obligation was absolute and did not depend at all upon the quality of the tobacco or
its value. The appellee did not, in this contract, reserve the right to reject the tobacco
if it were not of a specified crop. He did not buy tobacco of a particular kind, class,
or quality. He bought all the tobacco which the appellant owned and agreed to pay
for it what the defendant had paid for it. The plaintiff testified that this was the
express agreement.

Effect of indeterminability
Sale of improvements introduced in hacienda
Robles v. Hermanos, 50 Phil 389
In this connection it is claimed that the true meaning of the proven verbal
agreement is that, in case the parties should fail to agree upon the price, after an
appraisal of the property, the agreement would not be binding; in other words, that
the stipulation for appraisal and agreement as to the price was a suspensive condition
in the contract: and since the parties have never arrived at any agreement on the price
 (except as to the carabao), it is contended that the obligation of the defendant has
never become effective. We are of the opinion that the stipulation with respect to the
appraisal of the property did not create a suspensive condition. The true sense of the
contract evidently was that the defendant would take over the movables and the
improvements at an appraised valuation, and the defendant obligated itself to
promote the appraisal in good faith. As the defendant partially frustrated the
appraisal, it violated a term of the contract and made itself liable for the true value of
the things contracted about, as such value may be established in the usual course of
proof. Furthermore, it must occur to any one, as the trial judge pointed out, that an
unjust enrichment of the defendant would result from allowing it to appropriate the
movables without compensating the plaintiff therefor.
Attention is here directed to the fact that the improvements placed on the
hacienda by the plaintiff became a part of the realty and as such passed to the
defendant by virtue of the transfer effected by the three owners in the deed of
conveyance (Exhibit B). It is therefore insisted that, the defendant having thus
acquired the improvements, the plaintiff should not be permitted to recover their
value again from the defendant. This criticism misses the point. There can be no
doubt that the defendant acquired the fixed improvements when it acquired the land,
but the question is whether the defendant is obligated to indemnify the plaintiff for
his outlay in making the improvements. It was upon the consideration of the
defendant's promise so to indemnify the plaintiff that the latter agreed to surrender
the lease nearly two years before it was destined to terminate. There can be no doubt
as to the validity of the promise made under these circumstances to the plaintiff.

Effect of inadequacy of price

Askay v. Cosalan [1924]
Gross inadequacy naturally suggest fraud is some evidence thereof, so that it may be
sufficient to show it when taken in connection with other circumstances, such as
ignorance or the fact that one of the parties has an advantage over the other. But the fact
that the bargain was a hard one, coupled with mere inadequacy of price when both parties
are in a position to form an independent judgment concerning the transaction, is not a
sufficient ground for the cancellation of a contract.

Aguilar v. Rubiato [1919]

In addition to the evidence, there is one very cogent reason which impels us to the
conclusion that Rubiato is only responsible to the plaintiff for a loan. It is — that the
inadequacy of the price which Vila obtained for the eight parcels of land belonging to
Rubiato is so great that the mind revolts at it. It is an agreement which a reasonable man
would neither directly nor indirectly be likely to enter into or to consent to. To hold that
the power of attorney signed by Rubiato authorized Vila to enter into the instant contract
of sale would be equivalent to holding, if we may be permitted to use the language of
Lord Hardwicke, that "a man in his senses and not under delusion" would dispose of
lands worth P26,000 for P1,000, and would pay interest thereon at the rate of 60 per cent
per annum.

Effect of failure of consideration

Sps Buenaventura v. Court of Appeals [2003]
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.
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.
Indeed, there is no requirement that the price be equal to the exact value of the
subject matter of sale. All the respondents believed that they received the commutative
value of what they gave.
In the instant case, the trial court found that the lots were sold for a valid
consideration, and that the defendant children actually paid the purchase price stipulated
in their respective Deeds of Sale. Actual payment of the purchase price by the buyer to
the seller is a factual finding that is now conclusive upon us.

Earnest Money (1482)

Manila Metal Container Corp v. PNB [2006]
We do not agree with petitioner's contention that the P725,000.00 it had remitted to
respondent was "earnest money" which could be considered as proof of the perfection of
a contract of sale under Article 1482 of the New Civil Code. The provision reads:
ART. 1482. Whenever earnest money is given in a contract of sale, it shall
 be considered as part of the price and as proof of the perfection of the contract.

Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase
price of the property, in the event that respondent would approve the recommendation of
SAMD for respondent to accept petitioner's offer to purchase the property for
P1,574,560.47.
Unless and until the respondent accepted the offer on these terms, no perfected
contract of sale would arise. Absent proof of the concurrence of all the essential elements
of a contract of sale, the giving of earnest money cannot establish the existence of a
perfected contract of sale.
In sum, then, there was no perfected contract of sale between petitioner and
respondent over the subject property.

Serrano v. Caguiat [2007]

It is true that Article 1482 of the Civil Code provides that "Whenever earnest money
is given in a contract of sale, it shall be considered as part of the price and proof of the
perfection of the contract." However, this article speaks of earnest money given in a
contract of sale . In this case, the earnest money was given in a contract to sell. The
earnest money forms part of the consideration only if the sale is consummated upon full
payment of the purchase price. Now, since the earnest money was given in a contract to
sell, Article 1482, which speaks of a contract of sale, does not apply.

Form
Verbal Agreement of sale
Caoili v. Court of Appeals, 314 SCRA 345
The absence of a formal deed of sale does not render the agreement null and void
or without any effect. The provision of Article 1358 of the Civil Code on the
necessity of a public document is only for convenience, not for validity or
enforceability. It does not mean that no contract has been perfected so long as the
essential requisites of consent of the contracting parties, object, and cause of the
obligation concur.
 Effect of lack of technical description in the contract
Naranja v. Court of Appeals [2009]
The Court does not agree with petitioners' contention that a deed of sale must
contain a technical description of the subject property in order to be valid. Petitioners
anchor their theory on Section 127 of Act No. 496, 21 which provides a sample form
of a deed of sale that includes, in particular, a technical description of the subject
property.
To be valid, a contract of sale need not contain a technical description of the
subject property. Contracts of sale of real property have no prescribed form for their
validity; they follow the general rule on contracts that they may be entered into in
whatever form, provided all the essential requisites for their validity are present. The
requisites of a valid contract of sale under Article 1458 of the Civil Code are: (1)
consent or meeting of the minds; (2) determinate subject matter; and (3) price certain
in money or its equivalent.
The failure of the parties to specify with absolute clarity the object of a contract
by including its technical description is of no moment. What is important is that there
is, in fact, an object that is determinate or at least determinable, as subject of the
contract of sale. The form of a deed of sale provided in Section 127 of Act No. 496 is
only a suggested form. It is not a mandatory form that must be strictly followed by
the parties to a contract.

Perfection
Coronel v. CA [1996]
However, if the suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the buyer by operation
of law without any further act having to be performed by the seller.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies
to the case at bench.
Art. 1475. The 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. From
that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition.
Manila Mining Corp v. Tan [2009]
Worth stressing, Article 1475 of the Civil Code provides the manner by which a
contract of sale is perfected:
ART. 1475. The 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. From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
In this case, the purchase orders constituted accepted offers when Tan supplied the
electrical materials to MMC. Hence, petitioner cannot evade its obligation to pay by
claiming lack of consent to the perfected contracts of sale. The invoices furnished the
details of the transactions.

Sales at Auction
Validity of Supplemental Minutes on Sheriff’s Sale
Dizon v. Dizon [2007]
Article 1476, paragraph 2 of the Civil Code provides:
Article 1476. In the case of a sale by auction:
xxx xxx xxx
(2) A sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner. Until such
announcement is made, any bidder may retract his bid; and the auctioneer may
withdraw the goods from the sale unless the auction has been announced to be
without reserve.

During the public auction conducted on April 3, 1997 which ended at 10:25 a.m.,
the sheriff declared petitioner the highest bidder. Considering that the auction sale
had already been perfected, a supplemental sale with higher consideration at the
instance of only one party (herein petitioner) could no longer be validly executed.
We therefore rule that in denying respondent's motion to quash the
"Supplemental Minutes on Sheriff's Sale," and declaring the supplemental sale valid,
the trial court gravely abused its discretion.

Auction sale when seller reserved the right to reject any and all bids
Leoquinco v. Postal Savings Bank, 47 Phil 772
Appellant set forth and admitted in his pleadings that in the resolution adopted
by the board of directors authorizing the sale at public auction of the land, as well as
in the notice announcing the auction, the appellees had expressly reserved to
themselves the right to reject any and all bids. By taking part in the auction and
 offering his bid, the appellant voluntarily submitted to the terms and conditions of the
auction sale, announced in the notice, and clearly acknowledged the right so reserved
to the appellees. The appellees making use of that right, rejected his offer. Clearly,
the appellant has no ground of action to compel them to execute a deed of sale of the
land in his favor, nor to compel them to accept his bid or offer. "The owner of
property offered for sale at auction has the right to prescribe the manner, conditions
and terms of sale, and where these are reasonable and are made known to the buyer,
they are binding upon him, and he cannot acquire a title in opposition to them, and
against the consent of the owner. . . ."
The owner of property offered for sale either at public or private auction has the
right to prescribe the manner, conditions and terms of such sale. He may provide that
all of the purchase price shall be paid at the time of the sale or any portion thereof, or
that time will be given for the payment.
The conditions of a public sale, announced by an auctioneer or the owner of the
property at the time and place of the sale, are binding upon a purchaser, whether he
knew them or not.

Sale by Sample and/or description

Sale of refrigerating machine as described in the contract
Pacific Commercial Co. V. Ermita Market, 56 Phil 617
After a careful examination of the record, we have not the least doubt that the
plaintiff delivered the machine as described in the sales contract, and the fact that the
defendant could not use it satisfactorily in the three cold stores divisions cannot be
attributed to plaintiff's fault; as far as we can see, the machine was strictly in
accordance with the written contract between the parties, and the defendant can
hardly honestly say that there was any deception by the plaintiff.
But it is clear that the defendant company did not fully understand the use of the
motor. If complains that the machine would not properly refrigerate the refrigerating
rooms, but it is evident that the machine could not operate automatically when the
defendant had three refrigerating rooms which it expected to maintain at three
different temperatures.
The defendant also complained that the machine was not equipped with a
thermostat and that the lack of it obstructed the work of the refrigerating. In the first
place, the thermostat was not included in the sales contract and in the second place it
would not have been of any service to defendant because it could not possibly
operate automatically at three different temperatures with the defendant's insufficient
equipment.
The defendant's complaint that the machine did not contain an oil separator is
not true; the oil separator is combined with the receiver and condenser in a single
combined piece in the machine.
The evidence in this case is clear to us, and we cannot find any errors committed
by the court below. It may be that the machine could have given satisfaction to the
 defendant if the coils had been installed properly and the machine had been operated
by competent persons. Any deficiency in this regard could not be the plaintiff's fault;
the coils were supplied and installed by someone other than the plaintiff, and the
machine was being operated by the defendant itself.

Sale of Personalty payable by installments

Promissory note with chattel mortgage
Macondray & Co v. De Santos, 61 Phil 370
Granting that there was a contract between the parties for the sale of personal
property payable in installments, which does not clearly appear in the record before
this court, the complaint does not allege nor does it appear in the record that there
was a failure to pay two or more installments. On the contrary the promissory note,
copied in the complaint, was executed January 11, 1934, and, according to the
complaint, on or about January 21, 1934, the automobile, while in the possession of
the defendant, was wrecked and by reason of the failure of the defendant to replace
said automobile or to pay the value thereof the plaintiff foreclosed the mortgage on
what remained of the wrecked automobile and brought this suit to recover the
balance due on the promissory note executed in its favor.
In order to apply the provisions of article 1454-A of the Civil Code it must
appear that there was a contract for the sale of personal property payable in
installments and that there has been a failure to pay two or more installments.

Sale of car on straight term

Hermanos v. Gervacio, 69 Phil 52
The contract, in the instant case, while a sale of personal property, is not,
however, one on installments, but on straight term, in which the balance, after
payment of the initial sum, should be paid in its totality at the time specified in the
promissory note. The transaction is not, therefore, the one contemplated in Act No.
4122 and accordingly the mortgagee is not bound by the prohibition therein
contained as to its right to the recovery of the unpaid balance.
Undoubtedly, the law is aimed at those sales where the price is payable in several
installments, for, generally, it is in these cases that partial payments consist in
relatively small amounts, constituting thus a great temptation for improvident
purchasers to buy beyond their means. There is no such temptation where the price is
to be paid in cash, or, as in the instant case, partly in cash and partly in one term, for,
in the latter case, the partial payments are not so small as to place purchasers off their
guard and delude them to a miscalculation of their ability to pay. Theoretically,
perhaps, there is no difference between paying the price in two installments and
paying the same partly in cash and partly in one installment, in so far as the size of
each partial payment is concerned; but in actual practice the difference exists, for,
according to the regular course of business, in contracts providing for payment of the
price in two installments, there is generally a provision for initial payment. But all
these considerations are immaterial, the language of the law being so clear as to
require no construction at all.
A cash payment cannot be considered as a payment by installment, and even if it
can be so considered, still the law does not apply, for it requires non-payment of two
or more installments in order that its provisions may be invoked. Here, only one
installment was unpaid.

Sale of truck on installment where foreclosure was not pursued

Dela Cruz v. Asian Consumer & Ind’l Finance Corp [1992
In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are
alternative and not cumulative; the exercise of one would preclude the other
remedies. Consequently, should the vendee-mortgagor default in the payment of two
or more of the agreed installments, the vendor-mortgagee has the option to avail of
any of these three (3) remedies: either to exact fulfillment of the obligation, to cancel
the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted.
It is thus clear that while ASIAN eventually succeeded in taking possession of
the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by
the fact that no auction sale of the vehicle was ever conducted.
Consequently, in the case before Us, there being no actual foreclosure of the
mortgaged property, ASIAN is correct in resorting to an ordinary action for
collection of the unpaid balance of the purchase price.
We note however that the trial court, as well as the Court of Appeals failed to
consider that the vehicle was already in the possession of ASIAN when it directed
petitioners herein to pay P184,466.67 representing the balance of the purchase price
of the mortgaged property. Law and equity will not permit ASIAN to have its cake
and eat it too, so to speak. By allowing ASIAN to retain possession of the vehicle and
then directing petitioners to pay the unpaid balance would certainly result in unjust
enrichment of the former. Accordingly, the ownership and possession of the vehicle
should be returned to petitioners by ASIAN in the condition that it was when
delivered to it, and if this be no longer feasible, to deduct from the adjudged liability
of petitioners the amount of P60,000.00, its corresponding appraised value.
 Magna Financial Services Group v. Colarina [2005]
Article 1484, paragraph 3, provides that if the vendor has availed himself of the
right to foreclose the chattel mortgage, "he shall have no further action against the
purchaser to recover any unpaid balance of the purchase price. Any agreement to the
contrary shall be void." In other words, in all proceedings for the foreclosure of
chattel mortgages executed on chattels which have been sold on the installment plan,
the mortgagee is limited to the property included in the mortgage.
Contrary to petitioner's claim, a contract of chattel mortgage, which is the
transaction involved in the present case, is in the nature of a conditional sale of
personal property given as a security for the payment of a debt, or the performance of
some other obligation specified therein, the condition being that the sale shall be void
upon the seller paying to the purchaser a sum of money or doing some other act
named. If the condition is performed according to its terms, the mortgage and sale
immediately become void, and the mortgagee is thereby divested of his title. On the
other hand, in case of non payment, foreclosure is one of the remedies available to a
mortgagee by which he subjects the mortgaged property to the satisfaction of the
obligation to secure that for which the mortgage was given. Foreclosure may be
effected either judicially or extrajudicially, that is, by ordinary action or by
foreclosure under power of sale contained in the mortgage. It may be effected by the
usual methods, including sale of goods at public auction. Extrajudicial foreclosure, as
chosen by the petitioner, is attained by causing the mortgaged property to be seized
by the sheriff, as agent of the mortgagee, and have it sold at public auction in the
manner prescribed by Section 14 of Act No. 1508, or the Chattel Mortgage Law. This
rule governs extrajudicial foreclosure of chattel mortgage.
In sum, since the petitioner has undeniably elected a remedy of foreclosure under
Article 1484(3) of the Civil Code, it is bound by its election and thus may not be
allowed to change what it has opted for nor to ask for more. On this point, the Court
of Appeals correctly set aside the trial court's decision and instead rendered a
judgment of foreclosure as prayed for by the petitioner.

Be that as it may, although no actual foreclosure as contemplated under the law

has taken place in this case, since the vehicle is already in the possession of Magna
Financial Services Group, Inc. and it has persistently and consistently avowed that it
elects the remedy of foreclosure, the Court of Appeals, thus, ruled correctly in
directing the foreclosure of the said vehicle without more.

Leases of Personalty with Option to Buy

Elisco Tool Mfg v. Court of Appeals, 307 SCRA 731
In the case at bar, although the agreement provides for the payment by private
respondents of "monthly rentals," the fifth paragraph thereof gives them the option to
purchase the motor vehicle at the end of the 5th year or upon payment of the 60th monthly
rental when "all monthly rentals shall be applied to the payment of the full purchase price
of the car." It is clear that the transaction in this case is a lease in name only. The so-
called monthly rentals are in truth monthly amortizations on the price of the car.
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise
of one bars the exercise of the others. This limitation applies to contracts purporting to be
leases of personal property with option to buy by virtue of Art. 1485. The condition that
the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose
of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint
for replevin to recover possession of movable property. By virtue of the writ of seizure
issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and
thereby deprived private respondents of its use. The car was not returned to private
respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance
by the Court of Appeals of a writ of execution.
Notwithstanding this impossibility in petitioner's choice of remedy, this case should
be considered as one for specific performance, pursuant to Art. 1484(1), consistent with
its prayer with respect to the unpaid installments as of May 1986. In this view, the prayer
for the issuance of a writ of replevin is only for the purpose of insuring specific
performance by private respondents.

PCI Leasing and Finance v. Giraffe X Imaging [2007]

On the whole, then, we rule, as did the trial court, that the PCI LEASING-GIRAFFE
lease agreement is in reality a lease with an option to purchase the equipment. This has
been made manifest by the actions of the petitioner itself, foremost of which is the
declarations made in its demand letter to the respondent. There could be no other
explanation than that if the respondent paid the balance, then it could keep the equipment
for its own; if not, then it should return them. This is clearly an option to purchase given
to the respondent. Being so, Article 1485 of the Civil Code should apply.
The present case reflects a situation where the financing company can withhold and
conceal — up to the last moment — its intention to sell the property subject of the
finance lease, in order that the provisions of the Recto Law may be circumvented. It may
be, as petitioner pointed out, that the basic "lease agreement" does not contain a
"purchase option" clause. The absence, however, does not necessarily argue against the
idea that what the parties are into is not a straight lease, but a lease with option to
purchase. This Court has, to be sure, long been aware of the practice of vendors of
personal property of denominating a contract of sale on installment as one of lease to
prevent the ownership of the object of the sale from passing to the vendee until and
unless the price is fully paid.
Sale of real property on installments/ RA 6552- Maceda Law
In case of cancelletion of sale- when cancellation takes effect
Pagtalunan v. De Manzano [2002]
The CA correctly ruled that R.A No. 6552, which governs sales of real estate
on installment, is applicable in the resolution of this case.
R.A. No. 6552, otherwise known as the "Realty Installment Buyer
Protection Act," recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the contract
upon non-payment of an installment by the buyer, which is simply an event that
prevents the obligation of the vendor to convey title from acquiring binding
force. The Court agrees with petitioner that the cancellation of the Contract to
Sell may be done outside the court particularly when the buyer agrees to such
cancellation.
However, the cancellation of the contract by the seller must be in accordance
with Sec. 3 (b) of R.A. No. 6552, which requires a notarial act of rescission and
the refund to the buyer of the full payment of the cash surrender value of the
payments on the property. Actual cancellation of the contract takes place after 30
days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
Clearly, the demand letter is not the same as the notice of cancellation or
demand for rescission by a notarial act required by R.A No. 6552. Petitioner
cannot rely on Layug v. Intermediate Appellate Court to support his contention
that the demand letter was sufficient compliance. Layug held that "the additional
formality of a demand on [the seller's] part for rescission by notarial act would
appear, in the premises, to be merely circuitous and consequently superfluous"
since the seller therein filed an action for annulment of contract, which is a
kindred concept of rescission by notarial act.
Evidently, the case of unlawful detainer filed by petitioner does not exempt
him from complying with the said requirement.
In addition, Sec. 3 (b) of R.A. No. 6552 requires refund of the cash
surrender value of the payments on the property to the buyer before cancellation
of the contract. The provision does not provide a different requirement for
contracts to sell which allow possession of the property by the buyer upon
execution of the contract like the instant case. Hence, petitioner cannot insist on
compliance with the requirement by assuming that the cash surrender value
payable to the buyer had been applied to rentals of the property after respondent
failed to pay the installments due.
There being no valid cancellation of the Contract to Sell, the CA correctly
recognized respondent's right to continue occupying the property subject of the
Contract to Sell and affirmed the dismissal of the unlawful detainer case by the
RTC.
Rules when the buyer paid less than 2 years installments
Ramos v. Heruela
In this case, the spouses Heruela paid less than two years of installments. Thus,
Section 4 of RA 6552 applies. However, there was neither a notice of cancellation
nor demand for rescission by notarial act to the spouses Heruela. In Olympia
Housing, Inc. V. Panasiatic Travel Corp ., the Court ruled that the vendor could go to
court to demand judicial rescission in lieu of a notarial act of rescission. However, an
action for reconveyance is not an action for rescission.
In the present case, there being no valid rescission of the contract to sell, the
action for reconveyance is premature. Hence, the spouses Heruela have not lost the
statutory grace period within which to pay. The trial court should have fixed the
grace period to sixty days conformably with Section 4 of RA 6552.

Sale of subdivision lot on installments where the buyer defaulted

Active Realty & Development v. Daroya [2002]
The contract to sell in the case at bar is governed by Republic Act No. 6552 —
"The Realty Installment Buyer Protection Act," or more popularly known as the
Maceda Law — which came into effect in September 1972. Its declared public policy
is to protect buyers of real estate on installment basis against onerous and oppressive
conditions. The law seeks to address the acute housing shortage problem in our
country that has prompted thousands of middle and lower class buyers of houses, lots
and condominium units to enter into all sorts of contracts with private housing
developers involving installment schemes. Lot buyers, mostly low income earners
eager to acquire a lot upon which to build their homes, readily affix their signatures
on these contracts, without an opportunity to question the onerous provisions therein
as the contract is offered to them on a "take it or leave it" basis. Most of these
contracts of adhesion, drawn exclusively by the developers, entrap innocent buyers
by requiring cash deposits for reservation agreements which oftentimes include, in
fine print, onerous default clauses where all the installment payments made will be
forfeited upon failure to pay any installment due even if the buyers had made
payments for several years. Real estate developers thus enjoy an unnecessary
advantage over lot buyers who they often exploit with iniquitous results. They get to
forfeit all the installment payments of defaulting buyers and resell the same lot to
another buyer with the same exigent conditions. To help especially the low income
lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies
of lot buyers and protect them from one-sided and pernicious contract stipulations.
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the
buyer in case of default in the payment of succeeding installments, where he has
already paid at least two (2) years of installments, thus:
"(a) To pay, without additional interest, the unpaid installments due
within the total grace period earned by him, which is hereby fixed at the rate
of one month grace period for every one year of installment payments made;
 ...
(b) If the contract is cancelled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty per
cent of the total payments made; provided, that the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the buyer."

PD 957
Far East Bank and Trust Co v. Marquez [2004]
It is undisputed that the subject 52.5-square-meter lot with a three-storey town house
unit denominated as Unit No. 10 (the "lot") is part of the property mortgaged to petitioner
and is covered by TCT No. 156254. The lot was technically described and segregated in a
Contract to Sell that had been entered into before the mortgage loan was contracted. The
fact that the lot had no separate TCT did not make it less of a "subdivision lot" entitled to
the protection of PD 957.
That the subject of the mortgage loan was the entire land, not the individual
subdivided lots, does not take the loan beyond the coverage of Section 18 of PD 957.
Undeniably, the lot was also mortgaged when the entire parcel of land, of which it was a
part, was encumbered.
Concededly, PD 957 aims to protect innocent lot buyers. Section 18 of the decree
directly addresses the problem of fraud committed against buyers when the lot they have
contracted to purchase, and which they have religiously paid for, is mortgaged without
their knowledge. The avowed purpose of PD 957 compels the reading of Section 18 as
prohibitory — acts committed contrary to it are void. Such construal ensures the
attainment of the purpose of the law: to protect lot buyers, so that they do not end up still
homeless despite having fully paid for their home lots with their hard-earned cash.
The lot was mortgaged in violation of Section 18 of PD 957. Respondent, who was
the buyer of the property, was not notified of the mortgage before the release of the loan
proceeds by petitioner. Acts executed against the provisions of mandatory or prohibitory
laws shall be void. Hence, the mortgage over the lot is null and void insofar as private
respondent is concerned.

Tamayo v. Huang [2006]

The SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE
directs every owner and developer of real property to provide the necessary facilities,
improvements, infrastructures and other forms of development, failure to carry out which
is sufficient cause for the buyer to suspend payment, and any sums of money already paid
shall not be forfeited.
In case the developer of a subdivision or condominium fails in its obligation under
Section 20, Section 23 gives the buyer the option to demand reimbursement of the total
amount paid, or to wait for further development of the subdivision, and when the buyer
opts for the latter alternative, he may suspend payment of installments until such time that
the owner or developer had fulfilled its obligation to him.
As noted earlier, petitioner, by letter of December 24, 1986, informed respondents
that he desisted from further paying monthly installments and that he would resume
payment if the development of the subdivision had been completed. Yet respondents sent
no notarized notice or any notice of cancellation at all. In fact, it was only after petitioner
filed on July 24, 1997 the complaint before the HLURB that respondents offered to
reimburse petitioner of the total amount he had already paid.
The contract not having been cancelled in accordance with law, it has remained valid
and subsisting. It was, therefore, within petitioner's right to maintain his option to await
the completion of the development of and introduction of improvements in the
subdivision and thereafter, upon full payment of the purchase price, without interest,
compel respondents to execute a deed of absolute sale.

Cantemprate v. CRS Realty Development Corporation [2009]

The only requisite for a contract of sale or contract to sell to exist in law is the
meeting of minds upon the thing which is the object of the contract and the price,
including the manner the price is to be paid by the vendee. Under Article 1458 of the
New Civil Code, in a contract of sale, whether absolute or conditional, one of the
contracting parties obliges himself to transfer the ownership of and deliver a determinate
thing, and the other to pay therefor a price certain in money or its equivalent.
In the instant case, the failure by respondent CRS Realty to obtain a license to sell
the subdivision lots does not render the sales void on that ground alone especially that the
parties have impliedly admitted that there was already a meeting of the minds as to the
subject of the sale and price of the contract. The absence of the license to sell only
subjects respondent CRS Realty and its officers civilly and criminally liable for the said
violation under Presidential Decree (P.D.) No. 957 and related rules and regulations. The
absence of the license to sell does not affect the validity of the already perfected contract
of sale between petitioners and respondent CRS Realty.
Court ruled that the requisite registration and license to sell under P.D. No. 957 do
not affect the validity of the contract between a subdivision seller and buyer.
 CHAPTER II
Effect of sale of land to one’s own spouse
Uy Siu Pin v. Cantollas [1940]
The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because the
former had no right to dispose of the land in controversy in view of the existence of the
contract Exhibit A, but because such sale come within the prohibition of article 1458 of
the Civil Code.

Transfer in common law relationship

Ching v. Goyanko [2006]
The proscription against sale of property between spouses applies even to common
law relationships.
Additionally, the law emphatically prohibits the spouses from selling
property to each other subject to certain exceptions. Similarly, donations
between spouses during marriage are prohibited. And this is so because if
transfers or conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in civil law. It
was also designed to prevent the exercise of undue influence by one spouse over
the other, as well as to protect the institution of marriage, which is the
cornerstone of family law. The prohibitions apply to a couple living as
husband and wife without benefit of marriage, otherwise, "the condition of
those who incurred guilt would turn out to be better than those in legal union."
Those provisions are dictated by public interest and their criterion must be
imposed upon the will of the parties.

Sale to agent: Exception to prohibition against sale by principal in favor of his agent
Pelayo v. Perez [2005]
Petitioners, by signing the Deed of Sale in favor of respondent, are also deemed to
have given their consent to the sale of the subject property in favor of respondent, thereby
making the transaction an exception to the general rule that agents are prohibited from
purchasing the property of their principals.
Under paragraph (2) of the above article, the prohibition against agents
purchasing property in their hands for sale or management is not absolute. It
does not apply if the principal consents to the sale of the property in the hands of
the agent or administrator. In this case, the deeds of sale signed by Iluminada
Abiertas shows that she gave consent to the sale of the properties in favor of her
son, Rufo, who was the administrator of the properties. Thus, the consent of the
 principal Iluminada Abiertas removes the transaction out of the prohibition
contained in Article 1491(2).

Sale to guardians
Philippine Trust Co. V. Roldan [1956]
Remembering the general doctrine that guardianship is a trust of the highest order,
and the trustee cannot be allowed to have any inducement to neglect his ward's interest
and in line with the court's suspicion whenever the guardian acquires the ward's property
we have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan
took by purchase her ward's parcels thru Dr. Ramos, and that Article 1459 of the Civil
Code applies.
Hence, from both the legal and equitable standpoints these three sales should not be
sustained: the first two for violation of article 1459 of the Civil Code; and the third
because Socorro Roldan could pass no title to Emilio Cruz. The annulment carries with is
(Article 1303 Civil Code) the obligation of Socorro Roldan to return the 17 parcels
together with their fruits and the duty of the minor, through his guardian to repay P14,700
with legal interest.

Sale to public officers

Maharlika Broadcasting Corp. v. Tagle, 142 SCRA 553
We declare it to be a policy of the law that public officers who hold positions of trust
may not bid directly or indirectly to acquire properties foreclosed by their offices and sold
at public auction.
In so providing, the Code tends to prevent fraud, or more precisely, tends not to give
occasion for fraud, which is what can and must be done (Francisco, Sales, p. 111). We,
therefore, reject the contention of respondents that the fact that Edilberto Tagle was, at the
time of the public bidding, a GSIS official, will not alter or change the outcome of the
case.
A Division Chief of the GSIS is not an ordinary employee without influence or
authority. The mere fact that he exercises ample authority with respect to a particular
activity, i.e., retirement, shows that his influence cannot be lightly regarded.
The point is that he is a public officer and his wife acts for and in his name in any
transaction with the GSIS. If he is allowed to participate in the public bidding of
properties foreclosed or confiscated by the GSIS, there will always be the suspicion
among other bidders and the general public that the insider official had access to
information and connections with his fellow GSIS officials as to allow him to eventually
acquire the property. It is precisely the need to forestall such suspicions and to restore
confidence in the public service that the Civil Code now declares such transactions to be
void from the beginning and not merely voidable (Rubias v. Batiller, 51 SCRA 120). The
reasons are grounded on public order and public policy. We do not comment on the
motives of the private respondents or the officers supervising the bidding when they
entered into the contract of sale. Suffice it to say that it falls under the prohibited
transactions under Article 1491 of the Civil Code and, therefore, void under Article 1409.

Sale/ transfer to attorney

Gurrea v. Suplico [2006]
It follows that, since at the time of execution of the deed of Transfer of Rights and
Interest, the subject property still formed part of the estate of Adelina, and there being no
evidence to show that material possession of the property was given to Ricardo, the
probate proceedings concerning Adelina's estate cannot be deemed to have been closed
and terminated and the subject property still the object of litigation.
Having been established that the subject property was still the object of litigation at
the time the subject deed of Transfer of Rights and Interest was executed, the assignment
of rights and interest over the subject property in favor of respondent is null and void for
being violative of the provisions of Article 1491 of the Civil Code which expressly
prohibits lawyers from acquiring property or rights which may be the object of any
litigation in which they may take part by virtue of their profession.

Sale of portions to a parcel of land (1) prior to the issuance and (2) within 5 years
from the issuance of free patent
Manlapat v. CA [2005]
Eduardo was issued a title in 1976 on the basis of his free patent application. Such
application implies the recognition of the public dominion character of the land and,
hence, the five (5)-year prohibition imposed by the Public Land Act against alienation or
encumbrance of the land covered by a free patent or homestead should have been
considered.
Within 5 years from the issuance of free patent
The deed of sale covering the fifty (50)-square meter right of way executed by
Eduardo on 18 March 1981 is obviously covered by the proscription, the free patent
having been issued on 8 October 1976. However, petitioners may recover the portion sold
since the prohibition was imposed in favor of the free patent holder.
“Under the Public Land Act, the prohibition to alienate is predicated on the
fundamental policy of the State to preserve and keep in the family of the
homesteader that portion of public land which the State has gratuitously given to
him, and recovery is allowed even where the land acquired under the Public
Land Act was sold and not merely encumbered, within the prohibited period.”
 Prior to the issuance
The sale of the 553 square meter portion is a different story. It was executed in 1954,
twenty-two (22) years before the issuance of the patent in 1976. Apparently, Eduardo
disposed of the portion even before he thought of applying for a free patent. Where the
sale or transfer took place before the filing of the free patent application, whether by the
vendor or the vendee, the prohibition should not be applied. In such situation, neither the
prohibition nor the rationale therefor which is to keep in the family of the patentee that
portion of the public land which the government has gratuitously given him, by shielding
him from the temptation to dispose of his landholding, could be relevant. Precisely, he
had disposed of his rights to the lot even before the government could give the title to
him.

Effect of verbal sale within 5-year prohibitory period

Manzano v. Ocampo [1940]
The law prohibiting any transfer or alienation of homestead land within five years
from the issuance of the patent does not distinguish between executory and consummated
sales; and it would hardly be in keeping with the primordial aim of this prohibition to
preserve and keep in the family of the homesteader the piece of land that the state had
gratuitously given to them, to hold valid a homestead sale actually perfected during the
period of prohibition but with the execution of the formal deed of conveyance and the
delivery of possession of the land sold to the buyer deferred until after the expiration of
the prohibitory period, purposely to circumvent the very law that prohibits and declares
invalid such transaction to protect the homesteader and his family. To hold valid such
arrangements would be to throw the door wide open to all possible fraudulent subterfuges
and schemes that persons interested in land given to homesteaders may devise to
circumvent and defeat the legal provisions prohibiting their alienation within five years
from the issuance of the homesteader's patent.
We, therefore, hold that the sale in question is illegal and void for having been made
within five years from the date of Manzano's patent, in violation of section 118 of the
Public Land Law. Being void from its inception, the approval thereof by the
Undersecretary of Agriculture and Natural Resources after the lapse of five years from
Manzano's patent did not legalize the sale.
 CHAPTER III
Article 1504 (1) applied
Gaisano Cagayan, Inc v. Insurance Company of North America [2006]
The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk
until the ownership therein is transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at the buyer's risk whether actual
delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership in the
goods has been retained by the seller merely to secure performance by the
buyer of his obligations under the contract, the goods are at the buyer's risk
from the time of such delivery; (Emphasis supplied) xxx xxx xxx

Thus, when the seller retains ownership only to insure that the buyer will pay its
debt, the risk of loss is borne by the buyer. Accordingly, petitioner bears the risk of loss of
the goods delivered.
IMC and LSPI did not lose complete interest over the goods. They have an insurable
interest until full payment of the value of the delivered goods. Unlike the civil law
concept of res perit domino, where ownership is the basis for consideration of who bears
the risk of loss, in property insurance, one's interest is not determined by concept of title,
but whether insured has substantial economic interest in the property.
Moreover, it must be stressed that the insurance in this case is not for loss of goods
by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days
after the fire. Accordingly, petitioner's obligation is for the payment of money. As
correctly stated by the CA, where the obligation consists in the payment of money, the
failure of the debtor to make the payment even by reason of a fortuitous event shall not
relieve him of his liability. The rationale for this is that the rule that an obligor should be
held exempt from liability when the loss occurs thru a fortuitous event only holds true
when the obligation consists in the delivery of a determinate thing and there is no
stipulation holding him liable even in case of fortuitous event. It does not apply when the
obligation is pecuniary in nature.
Thus, whether fire is a fortuitous event or petitioner was negligent are matters
immaterial to this case. What is relevant here is whether it has been established that
petitioner has outstanding accounts with IMC and LSPI.