RULINGS.docx

7/30/2019 RULINGS.docx

1/28

SOUTHWESTERN SUGAR AND MOLASSESCOMPANY vs. ATLANTIC GULF & PACIFICCOMPANY, G.R. No. L-7382, June 29, 1955

There is no question that under article 1479 of the new CivilCode "an option to sell", or a "promise to buy or to sell", asused in said article, to be valid must be "supported by aconsideration distinct from the price." This is clearly inferred from the context of said article that a unilateral

promise to buy or sell, even if accepted, is only binding if supported by a consideration. In other words, "an acceptedunilateral promise" can only have a binding effect if supported by a consideration, which means that the optioncan still be withdrawn, even if accepted, if the same is notsupported by any consideration.

It is true that under article 1324 of the new Civil Code, thegeneral rule regarding offer and acceptance is that, whenthe offerer gives to the offeree a certain period to accept,"the offer may be withdrawn at any time before acceptance"except when the option is founded upon consideration, butthis general rule must be interpreted as modified by theprovision of article 1479 above referred to, which applies to"a promise to buy and sell" specifically. As already stated,this rule requires that a promise to sell to be valid must besupported by a consideration distinct from the price.

ENRICO S. EULOGIO vs. SPOUSES CLEMENTE APELES 1 and LUZ APELES, G.R. No. 167884,January 20, 2009

Enricos cause of action is founded on paragraph 5 of theContract of Lease with Option to Purchase vesting him withthe right to acquire ownership of the subject property afterpaying the agreed amount of consideration.

Held: An option is a contract by which the owner of theproperty agrees with another person that the latter shallhave the right to buy the formers 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 shallhave the right to buy the property at a fixed price within acertain time, or under, or in compliance with certain termsand conditions; or which gives to the owner of the property the right to sell or demand a sale.22 An option is not of itself a purchase, but merely secures the privilege to buy. It is nota sale of property but a sale of the right to purchase. It issimply a contract by which the owner of the property agrees with another person that he shall have the right to buy hisproperty at a fixed price within a certain time. He does notsell his land; he does not then agree to sell it; but he doessell something, i.e., the right or privilege to buy at the

election or option of the other party. Its distinguishingcharacteristic is that it imposes no binding obligation onthe person holding the option, aside from the considerationfor the offer.23

It is also sometimes called an "unaccepted offer" and issanctioned by Article 1479 of the Civil Code. The secondparagraph of Article 1479 provides for the definition andconsequent rights and obligations under an option contract.For an option contract to be valid and enforceable againstthe promissor, there must be a separate and distinctconsideration that supports it.24

In the landmark case of Southwestern Sugar and MolassesCompany v. Atlantic Gulf and Pacific Co.,25 we declared thatfor an option contract to bind the promissor, it must besupported by consideration:

There is no question that under Article 1479 of the new Civil Code "an option to sell," or "a promise to buy or tosell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is clearly

inferred from the context of said article that a unilateralpromise to buy or to sell, even if accepted, is only binding if supported by a consideration.In other words, "anaccepted unilateral promise" can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is notsupported by any consideration. Here it is notdisputed that the option is without consideration.It can therefore be withdrawn notwithstanding theacceptance made of it by appellee. (Emphasissupplied.)

The doctrine requiring the payment of consideration in anoption contract enunciated in Southwestern Sugar isresonated in subsequent cases and remains controlling tothis day. Without consideration that is separate and distinctfrom the purchase price, an option contract cannot beenforced; that holds true even if the unilateral promise isalready accepted by the optionee.

The consideration is "the why of the contracts, the essentialreason which moves the contracting parties to enter intothe contract." This definition illustrates that theconsideration contemplated to support an option contractneed not be monetary. Actual cash need not be exchangedfor the option. However, by the very nature of an optioncontract, as defined in Article 1479, the same is an onerouscontract for which the consideration must be something of

value, although its kind may vary .26

We have painstakingly examined the Contract of Lease withOption to Purchase, as well as the pleadings submitted by the parties, and their testimonies in open court, for any direct evidence or evidence aliunde to prove the existenceof consideration for the option contract, but we have foundnone.

In Bible Baptist Church v. Court of Appeals,27 we stressedthat an option contract needs to be supported by a separateconsideration. The consideration need not be monetary butcould consist of other things or undertakings. However, if the consideration is not monetary, these must be things or

undertakings of value, in view of the onerous nature of theoption contract. Furthermore, when a consideration for anoption contract is not monetary, said consideration must beclearly specified as such in the option contract or clause.

HEIRS OF CAYETANO PANGAN and CONSUELOPANGAN vs. SPOUSES ROGELIO PERRERAS andPRISCILLA PERRERAS, G.R. No. 157374, August27, 2009

RULING:
http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt1http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt1http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt22http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt22http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt22http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt23http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt23http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt23http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt24http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt24http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt24http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt25http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt25http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt25http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt26http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt26http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt26http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt27http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt27http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt27http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt27http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt26http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt25http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt24http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt23http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt22http://www.lawphil.net/judjuris/juri2009/jan2009/gr_167884_2009.html#fnt1


2/28

That a thing is sold without the consent of all the co-ownersdoes not invalidate the sale or render it void. Article 493 of the Civil Code8 recognizes the absolute right of a co-ownerto freely dispose of his pro indiviso share as well as thefruits and other benefits arising from that share,independently of the other co-owners.

The presence of Consuelos consent and, corollarily, theexistence of a perfected contract between the parties arefurther evidenced by the payment and receiptof P20,000.00, an earnest money by the contractingparties common usage. The law on sales, specifically Article 1482 of the Civil Code, provides thatwhenever 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. Although thepresumption is not conclusive, as the parties may treat theearnest money differently, there is nothing alleged in thepresent case that would give rise to a contrary presumption.

The petitioners-heirs posit that the proper characterization

of the contract entered into by the parties is significant inorder to determine the effect of the respondents breach of the contract (which purportedly consisted of a one-day delay in the payment of part of the purchase price) and theremedies to which they, as the non-defaulting party, areentitled.

A stipulation reserving ownership in the vendor until fullpayment of the price is, under case law, typical in a contractto sell.11 In this case, the vendor made no reservation on theownership of the subject properties. From this perspective,the parties agreeme nt may be considered a contract of sale.On the other hand, jurisprudence has similarly establishedthat the need to execute a deed of absolute sale uponcompletion of payment of the price generally indicates thatit is a contract to sell, as it implies the reservation of title inthe vendor until the vendee has completed the payment of the price. When the respondents instituted the action forspecific performance before the RTC, they prayed thatConsuelo be ordered to execute a Deed of Absolute Sale;this act may be taken to conclude that the parties only entered into a contract to sell.

In cases of breach due to nonpayment, the vendor may availof the remedy of rescission in a contractof sale .Nevertheless, the defaulting vendee may defeat the vendors ri ght to rescind the contract of sale if he pays the

amount due before he receives a demand for rescission,either judicially or by a notarial act, from the vendor. Thisright is provided under Article 1592 of the Civil Code

Nonpayment of the purchase price in contractsto sell ,however, does not constitute a breach; rather, nonpaymentis a condition that prevents the obligation from acquiringobligatory force and results in its cancellation.

As in the rescission of a contract of sale for nonpayment of the price, the defaulting vendee in a contract to sell may

defeat the vendors right to cancel by invoking the rightsgranted to him under Republic Act No. 6552 or the Realty Installment Buyer Protection Act (also known as theMaceda Law); this law provides for a 60-day grace period within which the defaulting vendee (who has paid less thantwo years of installments) may still pay the installmentsdue. Only after the lapse of the grace period with continuednonpayment of the amounts due can the actual cancellationof the contract take place. The pertinent provisions of theMaceda Law provide:

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments againstonerous and oppressive conditions.

Sec. 3. In all transactions or contracts involving the sale orfinancing of real estate on installment payments, includingresidential condominium apartments but excludingindustrial lots, commercial buildings and sales to tenantsunder Republic Act Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-threehundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the followingrights in case he defaults in the payment of succeedinginstallments:

xxxx

Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than 60 days from the date the installment becamedue. If the buyer fails to pay the installments due at theexpiration of the grace period, the seller may cancel thecontract after thirty days from the receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by notarial act. [Emphasis supplied.]

Significantly, the Court has consistently held that theMaceda Law covers not only sales on installments of realestate, but also financing of such acquisition; its Section 3 iscomprehensive enough to include both contracts of sale andcontracts to sell, provided that the terms on payment of theprice require at least two installments.

Nature of Contract of Sale (Art. 1458)

PUP vs. CA, GR No. 143513

It is elementary that a party to a contract cannotunilaterally withdraw a right of first refusal that standsupon valuable consideration.

A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer theownership of and to deliver a determinate thing to the otheror others who shall pay therefore a sum certain in money orits equivalent.32 It is therefore a general requisite for theexistence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrenceof the promise of the vendor to sell a determinate thing andthe promise of the vendee to receive and pay for theproperty so delivered and transferred. The Civil Code
http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt8http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt8http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt8http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/aug2009/gr_157374_2009.html#fnt8


3/28

provision is, in effect, a "catch-all" provision whicheffectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for aconsideration.

For it is axiomatic that every sale imposes upon the vendorthe obligation to transfer ownership as an essential elementof the contract. Transfer of title or an agreement to transfertitle for a price paid, or promised to be paid, is the very essence of sale

It is a settled principle in civil law that when a leasecontract contains a right of first refusal, the lessor is undera legal duty to the lessee not to sell to anybody at any priceuntil after he has made an offer to sell to the latter at acertain price and the lessee has failed to accept it.39 Thelessee has a right that the lessor's first offer shall be in hisfavor.

Only after the lessee-grantee fails to exercise its right underthe same terms and within the period contemplated can theowner validly offer to sell the property to a third person,again, under the same terms as offered to the grantee.

rescission of the sale which was made in violation of thelessee's right of first refusal.

Necessary Requisites of a Contract of Sale

Strarbright Sales v. Phil. Realty, G.R. No. 177936

Three elements are needed to create a perfected contract: 1)the consent of the contracting parties; (2) an object certain which is the subject matter of the contract; and (3) thecause of the obligation which is is0 established.[6] Underthe law on sales, a contract of sale is perfected when theseller, obligates himself, for a price certain, to deliver and totransfer ownership of a thing or right to the buyer, over which the latter agrees.[7] From that moment, the partiesmay demand reciprocal performance.

A subjective novation results through substitution of theperson of the debtor or through subrogation of a thirdperson to the rights of the creditor. To accomplish asubjective novation through change in the person of thedebtor, the old debtor needs to be expressly released fromthe obligation and the third person or new debtor needs toassume his place in the relation.

Novation serves two functions one is to extinguish anexisting obligation, the other to substitute a new one in itsplace requiring concurrence of four requisites: 1) aprevious valid obligation; 2) an agreement of all partiesconcerned to a new contract; 3) the extinguishment of theold obligation; and 4) the birth of a valid new obligation.

Coronel vs. CA, G.R. No. 103577

Sale, by its very nature, is a consensual contract because itis perfected by mere consent. The essential elements of acontract of sale are the following:

a) Consent or meeting of the minds, that is, consent totransfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contractto Sell may not beconsidered as a Contractof Sale because the first essentialelement is lacking. In a contract to sell, the prospectiveseller explicity reserves the transfer of title to theprospective buyer, meaning, the prospective seller does notas yet agree or consent to transfer ownership of theproperty subject of the contract to sell until the happeningof an event, which for present purposes we shall take as thefull payment of the purchase price. What the seller agreesor obliges himself to do is to fulfill is promise to sell the

subject property when the entire amount of the purchaseprice is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, thenon-fulfillment of which prevents the obligation to sellfrom arising and thus, ownership is retained by theprospective seller without further remedies by theprospective buyer .

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

A contract to sell as defined hereinabove, may not even beconsidered as a conditional contract of sale where the sellermay likewise reserve title to the property subject of the saleuntil the fulfillment of a suspensive condition, because in aconditional contract of sale, the first element of consent ispresent, although it is conditioned upon the happening of acontingent event which may or may not occur. If thesuspensive condition is not fulfilled, the perfection of thecontract of sale is completely abated (cf. Homesite andhousing Corp. vs. Court of Appeals, 133 SCRA 777 [1984])However, if the suspensive condition is fulfilled, thecontract of sale is thereby perfected, such that if there hadalready been previous delivery of the property subject of thesale to the buyer, ownership thereto automatically transfersto the buyer by operation of law without any further acthaving to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensivecondition which is the full payment of the purchase price,ownership will not automatically transfer to the buyeralthough the property may have been previously deliveredto him. The prospective seller still has to convey title to theprospective buyer by entering into a contract of absolutesale.
http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177936.htm#_ftn6


4/28

It is essential to distinguish between a contract to sell and aconditional contract of sale specially in cases where thesubject property is sold by the owner not to the party theseller contracted with, but to a third person, as in the caseat bench. In a contract to sell, there being no previous saleof the property, a third person buying such property despitethe fulfillment of the suspensive condition such as the fullpayment of the purchase price, for instance, cannot bedeemed a buyer in bad faith and the prospective buyercannot 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 isno defect in the owner-seller's titleper se , but the latter, of course, may be used for damages by the intending buyer.

In a conditional contract of sale, however, upon thefulfillment of the suspensive condition, the sale becomesabsolute and this will definitely affect the seller's titlethereto. In fact, if there had been previous delivery of thesubject property, the seller's ownership or title to theproperty 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, suchsecond buyer of the property who may have had actual orconstructive knowledge of such defect in the seller's title, orat least was charged with the obligation to discover suchdefect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title isissued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.

The governing principle isprius tempore , potior jure (firstin time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights except when the second buyer first registers in good faith thesecond sale

In a case of double sale, what finds relevance and

materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyerregisters such second sale in good faith, that is, withoutknowledge of any defect in the title of the property sold.

Manila Metal Container vs. PNB, G.R. No. 166862

A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, togive something or to render some service.[41] Under Article1318 of the New Civil Code, there is no contract unless thefollowing requisites concur:

(1) Consent of the contractingparties;

(2) Object certain which is thesubject matter of the contract;

(3) Cause of the obligation which is established.

Contracts are perfected by mere consent which ismanifested by the meeting of the offer and the acceptanceupon the thing and the cause which are to constitute the

contract.[42] Once perfected, they bind other contractingparties and the obligations arising therefrom have the formof law between the parties and should be complied with ingood faith. The parties are bound not only to thefulfillment of what has been expressly stipulated but also tothe consequences which, according to their nature, may bein keeping with good faith, usage and law .[43]

By the contract of sale, one of the contracting partiesobligates himself to transfer the ownership of and deliver adeterminate thing, and the other to pay therefor a pricecertain in money or its equivalent.[44] The absence of any of the essential elements will negate the existence of aperfected contract of sale. . As the Court ruled in Boston Bank of the Philippines v. Manalo :[45]

A definite agreement as to theprice is an essential element of a bindingagreement to sell personal or real

property because it seriously affects therights and obligations of theparties. Price is an essential element inthe formation of a binding andenforceable contract of sale. The fixing of the price can never be left to the decisionof one of the contracting parties. But aprice fixed by one of the contractingparties, if accepted by the other, givesrise to a perfected sale.[46]

A contract of sale is consensual in nature and isperfected upon mere meeting of the minds. When there ismerely an offer by one party without acceptance of the

other, there is no contract.[47] When the contract of sale isnot perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between theparties.[48]

In San Miguel Properties Philippines, Inc. v. Huang ,[49] the Court ruled that the stages of a contract of sale are as follows: (1)negotiation , covering the periodfrom the time the prospective contracting parties indicateinterest in the contract to the time the contract is perfected;(2) perfection , which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract andupon the price; and (3) consummation , which begins whenthe parties perform their respective undertakings under thecontract of sale, culminating in the extinguishment thereof.

A negotiation is formally initiated by an offer, which,however, must be certain.[50] At any time prior to theperfection of the contract, either negotiating party may stopthe negotiation. At this stage, the offer may be withdrawn;the withdrawal is effective immediately after itsmanifestation. To convert the offer into a contract, the
http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn43http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn43http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn43http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn44http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn44http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn44http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn45http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn45http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn45http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn46http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn46http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn46http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn47http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn47http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn47http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn48http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn48http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn48http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn49http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn49http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn49http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn50http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn50http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn50http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn51http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn51http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn51http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn52http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn52http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn52http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn52http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn51http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn50http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn49http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn48http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn47http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn46http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn45http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn44http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn43


5/28

acceptance must be absolute and must not qualify the termsof the offer; it must be plain, unequivocal, unconditionaland without variance of any sort from theproposal. In Adelfa Properties, Inc. v. Court of Appeals ,[51] the Court ruled that:

x x x The rule is that except wherea formal acceptance is so required,

although the acceptance must beaffirmatively and clearly made and must be evidenced by some acts or conductcommunicated to the offeror, it may beshown by acts, conduct, or words of theaccepting party that clearly manifest apresent intention or determination toaccept the offer to buy or sell. Thus,acceptance may be shown by the acts,conduct, or words of a party recognizingthe existence of the contract of sale.[52]

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, arejection of the original offer and an attempt to end thenegotiation between the parties on a different basis.[53] Consequently, when something is desired which isnot exactly what is proposed in the offer, such acceptance isnot sufficient to guarantee consent because any modification or variation from the terms of the offer annulsthe offer.[54] The acceptance must be identical in allrespects with that of the offer so as to produce consent ormeeting of the minds.

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.

Sanchez vs. Mapalad Realty Corp., G.R. No. 148516

A contract is defined as a juridical conventionmanifested in legal form, by virtue of which one or morepersons bind themselves in favor of another, or others, orreciprocally, to the fulfillment of a prestation to give, to do,or not to do. There can be no contract unless the followingconcur: (a) consent of the contracting parties;(b) objectcertain which is the subject matter of the contract;(c) cause of the obligation which is established.[25]

Specifically, by the contract of sale, one of thecontracting parties obligates himself to transfer ownershipof and to deliver a determinate thing and the other party topaytherefor a price certain in money or its equivalent.[26]

The essential requisites of a valid contract of saleare:

(1) Consent of the contracting parties by virtue of which the vendor obligates himself to transferownership of and to deliver a determinate thing, and the

vendee obligates himself to pay therefor a price certain inmoney or its equivalent.

(2) Object certain which is the subjectmatter of the contract. The object must be licit and at thesame time determinate or, at least, capable of being madedeterminate without the necessity of a new or furtheragreement between the parties.

(3) Cause of the obligation which isestablished. The cause as far as the vendor is concerned isthe acquisition of the price certain in money or itsequivalent, which the cause as far as the vendeeis concerned is the acquisition of the thing which is theobject of the contract.[27]

Contracts of sale are perfected by mere consent, which is manifested by the meeting of the offer and theacceptance upon the thing and the cause which are toconstitute the contract.[28]

Consent may be given only by a person with the legalcapacity to give consent. In the case of juridical personssuch as corporations like Mapalad, consent may only begranted through its officers who have been duly authorized by its board of directors.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is voidab initio .

Republic vs. Florendo, 549 SCRA 527

A compromise agreement is a contract whereby the parties make reciprocal concessions in order to resolvetheir differences and thus avoid litigation or to put an endto one already commenced.[28] When it complies with therequisites and principles of contracts, it becomes a validagreement which has the force of law between theparties.[29] It has the effect and authority of res judicata once entered into,[30] even without judicialapproval.[31]

A compromise agreement is a simple contract which isperfected by mere consent.[32] From that moment of themeeting of the minds of the parties, it becomes binding onthem. To be valid, judicial approval is not required.[33]

When a compromise agreement is given judicialapproval, it becomes more than a contract binding upon theparties. Having been sanctioned by the court, it is adetermination of the controversy and has the force and

effect of a judgment. It is immediately executory and notappealable, except for vices of consent, forgery, fraud,misrepresentation and coercion.[34] Thus, although acompromise agreement has the effect and authority of res judicata upon the parties even without judicial approval, noexecution may issue until it has received the approval of thecourt where the litigation is pending and compliance withthe terms of the agreement is thereupon decreed.

The compromise agreement the parties executed was in theform of a contract of sale. The elements of a valid contractof sale are: (a) consent or meeting of the minds; (b)determinate subject matter and (c) price certain in money
http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn53http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn53http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn53http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn54http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn54http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn54http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn55http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn55http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn55http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn56http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn56http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn56http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn26http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn26http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn26http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn26http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/148516.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn56http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn55http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn54http://sc.judiciary.gov.ph/jurisprudence/2006/december2006/166862.htm#_ftn53


6/28

or its equivalent.[36] All the elements are present here. Theparties agreed on the sale of a determinate object (the sevenlots) and the price certain (P26,951,250).

Features of a Contract of Sale

Nominate and Principal

Santos vs. CA, 337 SCRA 67

As we earlier pointed, in a contract to sell, title remains with the vendor and does not pass on to the vendee untilthe purchase price is paid in full, Thus, in contract to sell,the payment of the purchase price is a positive suspensivecondition. Failure to pay the price agreed upon is not amere breach, casual or serious, but a situation that preventsthe obligation of the vendor to convey title from acquiringan obligatory force.20 This is entirely different from thesituation in a contract of sale, where non-payment of theprice is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lostownership of the thing sold and cannot recover it, unlessthe contract of sale is rescinded and set aside.21 In acontract to sell, however, the vendor remains the owner foras long as the vendee has not complied fully with thecondition of paying the purchase. If the vendor should ejectthe vendee for failure to meet the condition precedent, heis enforcing the contract and not rescinding it . Article 1592speaks of non-payment of the purchase price as aresolutory condition. It does not apply to a contract tosell.22 As to Article 1191, it is subordinated to the provisionsof Article 1592 when applied to sales of immovableproperty .23 Neither provision is applicable in the presentcase.

Consensual

Del Prado vs. Caballero, 614 SCRA 102

In sales involving real estate, the parties may choose between two types of pricing agreement:a unit pricecontract wherein the purchase price is determined by way of reference to a stated rate per unit area (e.g ., P1,000 persquare meter), or a lump sum contract which states afull purchase price for an immovable the area of which may be declared based on the estimate or where both the areaand boundaries are stated (e.g ., P1 million for 1,000 squaremeters, etc .).

In a unit price contract, the statementof area of immovable is not conclusiveand the price may be reduced orincreased depending on the area actually delivered. If the vendor delivers less thanthe area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand forthe proportionate reduction of thepurchase price if delivery is notpossible. If the vendor delivers morethan the area stated in the contract, the vendee has the option to accept only theamount agreed upon or to accept the whole area, provided he pays for theadditional area at the contract rate.

x x x x

In the case where the area of animmovable is stated in the contract basedon an estimate, the actual area deliveredmay not measure up exactly with the areastated in the contract. According to Article 1542 of the Civil Code, in the saleof real estate, made for a lump sum andnot at the rate of a certain sum for a unitof measure or number, there shall be noincrease or decrease of the price,although there be a greater or less areasor number than that stated in thecontract. . . .

x x x x

Where both the area and the boundaries of the immovableare declared, the area covered within theboundaries of the immovable prevails over thestated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area,calculated with more or less certainty, mentioned in its

description, but the boundaries therein laid down, asenclosing the land and indicating its limits. In a contractof sale of land in a mass, it is well established that thespecific boundaries stated in the contract must control overany statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed orcontract of sale of land should disclose the area withmathematical accuracy. It is sufficient if its extent isobjectively indicated with sufficient precision to enable oneto identify it. An error as to the superficial area isimmaterial. Thus, the obligation of the vendor is to delivereverything within the boundaries, inasmuch as it is theentirety thereof that distinguishes the determinate object.

Contracts are the law between the contracting parties. Sale,

by its very nature, is a consensual contract, because it isperfected by mere consent. The essential elements of acontract of sale are the following: (a) consent or meeting of the minds, that is, consent to transfer ownership inexchange for the price; (b) determinate subject matter; and(c) price certain in money or its equivalent.

(Heirs of Venancio Bejenting vs. Baez)

Gabelo vs. CA, 316 SCRA 386

It is well-settled that a contract of sale is perfected themoment there is a meeting of the minds of the contractingparties upon the thing which is the object of the contractand upon the price. 2 From the time a party accepts the

other party's offer to sell within the stipulated period without qualification, a contract of sale is deemedperfected.

NHA vs. Grace Baptist Church, 424 SCRA 147

It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefromhave the force of law between the parties and should becomplied with in good faith.19 However, it must beunderstood that contracts are not the only source of law that govern the rights and obligations between the parties.More specifically, no contractual stipulation may contradict
http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn37http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn37http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn37http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt22http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt22http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt22http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt22http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/aug2000/gr_120820_2000.html#fnt20http://sc.judiciary.gov.ph/jurisprudence/2008/march2008/166866.htm#_ftn37


7/28

law, morals, good customs, public order or publicpolicy.20 Verily, the mere inexistence of a contract, which would ordinarily serve as the law between the parties, doesnot automatically authorize disposing of a controversy based on equitable principles alone. Notwithstanding theabsence of a perfected contract between the parties, theirrelationship may be governed by other existing laws whichprovide for their reciprocal rights and obligations.

It must be remembered that contracts in which theGovernment is a party are subject to the same rules of contract law which govern the validity and sufficiency of contract between individuals. All the essential elements andcharacteristics of a contract in general must be present inorder to create a binding and enforceable Governmentcontract.

In Vda. de Urbano v. Government Service Insurance System ,22 it was ruled that a qualified acceptanceconstitutes a counter-offer as expressly stated by Article1319 of the Civil Code.

Thus, the alleged contract involved in this case should be

more accurately denominated asinexistent . There being noconcurrence of the offer and acceptance, it did not pass thestage of generation to the point of perfection.25 As such, it is without force and effect from the very beginning or from itsincipiency, as if it had never been entered into, and hence,cannot be validated either by lapse of time orratification.26 Equity can not give validity to a voidcontract,27 and this rule should apply with equal force toinexistent contracts.

Cabotaje v. Pudunan, 436 SCRA 423

One of the essential requirements of a valid contract,including a contract of sale, is the consent of the owner of the property .[31] Absent such consent, the contract is nulland voidab initio .[32] A void contract is absolutely wantingin civil effects; it is equivalent to nothing.[33] It produces noeffects whatsoever either against or in favor of anyone;hence, it does not create, modify, or extinguish the judicialrelation to which it refers.

Special disqualifications (Arts. 1491-1492)

Absolute incapacity (Arts. 1327, 1397, 1399)

Capacity of parties (Arts. 1489-1492)

Subject Matter

A. Requisites of a valid subject matter (Arts. 1459-1465)

B. Particular kinds

Pineda v. CA, 409 SCRA 438

The title refers to the ownership of the Property covered by the transfer certificate of title while the transfer certificateof title merely evidences that ownership. A certificate of title is not equivalent to title as the Court explained inLeeTek Sheng v. Court of Appeals:21

xxxThe certificate referred to is that document issued by the Register of Deeds known as theTransfer Certificate of Title (TCT). By title, the lawrefers to ownership which is represented by that document. Petitioner apparently confuses certificate withtitle. Placing a parcel of land under the mantle of theTorrens system does not mean that ownership thereof canno longer be disputed. Ownership is different from acertificate of title. The TCT is only the best proof of ownership of a piece of land. Besides, the certificate cannotalways be considered as conclusive evidence of ownership.Mere issuance of the certificate of title in the name of any person does not foreclose the possibility that the realproperty may be under co-ownership with persons notnamed in the certificate or that the registrant may only be atrustee or that other parties may have acquired interestsubsequent to the issuance of the certificate of title.Torepeat, registration is not the equivalent of title,but is only the best evidence thereof. Title as aconcept of ownership should not be confused withthe certificate of title as evidence of suchownership although both are interchangeable

A mortgage is merely an encumbrance on the property and

does not extinguish the title of the debtor who does not losehis principal attribute as owner to dispose of theproperty .22 The law even considers void a stipulationforbidding the owner of the property from alienating themortgaged immovable

The rule is that a mortgage annotated on a void title is validif the mortgagee registered the mortgage in good faith.

To bind third parties to an unregistered encumbrance, thelaw requires actual notice.

The settled rule is that the auction sale retroacts to the dateof the registration of the mortgage,28 putting the auctionsale beyond the reach of any intervening lis pendens, sale or

attachment. ()

Heirs of San Andres v. Rodriguez, 332 SCRA 769

Concomitantly, the object of the sale is certain anddeterminate. Under Article 1460 of the New Civil Code, athing sold is determinate if at the time the contract isentered into, the thing is capable of being determinate without necessity of a new or further agreement betweenthe parties. Here, this definition finds realization.

In Dignos v . Court of Appeals (158 SCRA 375), we havesaid that, although denominated a "Deed of ConditionalSale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated,e.g ., until or unless the price is paid.Ownership will then be transferred to the buyer upon actualor constructive delivery (e.g ., by the execution of a publicdocument) of the property sold. Where the condition isimposed upon the perfection of the contract itself, thefailure of the condition would prevent such perfection. If the condition is imposed on the obligation of a party whichis not fulfilled, the other party may either waive thecondition or refuse to proceed with the sale.

A deed of sale is considered absolute in nature where thereis neither a stipulation in the deed that title to the property
http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn33http://www.lawphil.net/judjuris/juri1998/jul1998/115402.htmhttp://www.lawphil.net/judjuris/juri1998/jul1998/115402.htmhttp://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt21http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt21http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt21http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt22http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt22http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt22http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt28http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt28http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt28http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt28http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt22http://www.lawphil.net/judjuris/juri2003/aug2003/gr_114172_2003.html#fnt21http://www.lawphil.net/judjuris/juri1998/jul1998/115402.htmhttp://www.lawphil.net/judjuris/juri1998/jul1998/115402.htmhttp://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2004/aug2004/134712.htm#_ftn31


8/28

sold is reserved in the seller until full payment of the price,nor one giving the vendor the right to unilaterally resolvethe contract the moment the buyer fails to pay within afixed period.

Johannes Schuback v. CA, 227 SCRA 719

Although the quantity to be ordered was made determinateonly on December 29, 1981, quantity is immaterial in the

perfection of a sales contract. What is of importance is themeeting of the minds as to theobject and cause , whichfrom the facts disclosed, show that as of December 24,1981, these essential elements had already occurred. ()

National Grains Authority v. IAC, 171 SCRA 131

It is axiomatic, that while the registration of the conditionalsale with right of repurchase may be binding on thirdpersons, it is by provision of law "understood to be withoutprejudice to third party who has better right"

Time and time again, this Court has ruled that theproceedings for the registration of title to land under theTorrens System is an actionin rem not in personam , hence,personal notice to all claimants of the res is not necessary inorder that the court may have jurisdiction to deal with anddispose of theres . Neither may lack of such personal notice vitiate or invalidate the decree or title issued in aregistration proceeding, for the State, as sovereign over theland situated within it, may provide for the adjudication of title in a proceedingin rem or one in the nature of or akin ato proceeding in rem which shall be binding upon allpersons, known or unknown

that "The real purpose of the Torrens System is to quiet titleto land and to stop forever any question as to its legality."Once a title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court,or sitting on the "mirador su casato," avoid the possibility of losing his land." "An indirect or collateral attack on aTorrens Title is not allowed

The only exception to this rule is where a person obtains acertificate of title to a land belonging to another and he hasfull knowledge of the rights of the true owner. He is thenconsidered as guilty of fraud and he may be compelled totransfer the land to the defrauded owner so long as theproperty has not passed to the hands of an innocent purchaser for value

Well settled is the rule that all persons dealing withproperty covered by a torrens certificate of title are notrequired to go beyond what appears on the face of the title. When there is nothing on the certificate of title to indicateany cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required toexplore further than what the torrens title upon its faceindicates in quest for any hidden defect or inchoate rightthat may subsequently defeat his right thereto

More specifically, the Court has ruled that a bank is notrequired before accepting a mortgage to make aninvestigation of the title of the property being given assecurity ]), and where innocent third persons like

mortgagee relying on the certificate of title acquire rightsover the property, their rights cannot be disregarded

doctrine of indefeasibility of title under the Torrens System, because it is an established principle that a petition forreview of the decree of registration will not prosper even if filed within one year from the entry of the decree if the titlehas passed into the hands of an innocent purchaser for value. The setting aside of the decree of registration issued

in land registration proceedings is operative only betweenthe parties to the fraud and the parties defrauded and theirprivies, but not against acquirers in good faith and for valueand the successors in interest of the latter; as to them thedecree shall remain in full force and effect forever.

Obligations of the Seller to Transfer Ownership

Sale by a person not the owner at time of delivery (Arts. 1462, 1505, 1459)

Exceptions

EDILBERTO NOEL vs. COURT OF APPEALS G.R.No. 59550 January 11, 1995

RULING:

In a contract of sale, it is essential that the seller is theowner of the property he is selling. The principal obligationof a seller is "to transfer the ownership of" the property sold(Civil Code of the Philippines, Art. 1458). This law stemsfrom the principle that nobody can dispose of that whichdoes not belong to him (Azcona v. Reyes, 59 Phil. 446[1934]; Coronel v. Ona, 33 Phil. 456 [1916). NEMO DAT QUAD NON HABET .

While it cannot be said that fraud attended the sale toprivate respondent, clearly there was a mistake on the partof Hilaria and Virgilio in selling an undivided interest in theproperty which belonged to the collateral heirs of Gregorio.

The sale, having been made in 1954, was governed by theCivil Code of the Philippines. Under Article 1456 of saidCode, an implied trust was created on the one-half undivided interest over the 34.7-hectare land in favor of thereal owners.

Said Article provides:

If property is acquired through mistakeor fraud, the person obtaining it is, by

force of law, considered a trustee of animplied trust for the benefit of the personfrom whom the property comes.

In Diaz v. Gorricho , 103 Phil. 261 (1958), the Court saidthat Article 1456 merely expresses a rule recognizedinGayondato v. Insular Treasurer , 49 Phil. 244 (1926). Applying said rule, theGayondato court held that the buyerof a parcel of land at a public auction to satisfy a judgmentagainst a widow acquired only one-half interest the landcorresponding to the share of the window and the other half


9/28

belonging to the heirs of her husband became impressed with a constructive trust in behalf of said heirs.

The action to recover the undivided half-interest of thecollateral heirs of Gregorio prescribes in ten years. Thecause of action is based on Article 1456 of the Civil Code of the Philippines, which made private respondent a trustee of an implied trust in favor of the said heirs. Under Article1144 of the Civil Code of the Philippines, actions basedupon an obligation created by law, can be brought withinten years from the time the right of action accrues (Rosario v. Auditor General, 103 Phil. 1132 [1958]).

The ten-year prescriptive period within which the collateralheirs of Gregorio could file an action to recover their sharein the property sold to private respondent (prescripcionextintiva ) accrued only on march 2, 1954, when the deed of sale was registered with the Register of Deeds (Cf. Arradaza v. Court of Appeals, 170 SCRA 12 [1987]). From march 2,1954 to April 30, 1963, when the complaint for the recovery of the property was filed, less than ten years had elapsed.Therefore, the action had not been barred by prescription.

ARRA REALTY CORPORATION vs. GUARANTEEDEVELOPMENT CORPORATION ANDINSURANCE AGENCY G.R. No. 142310September 20, 2004

The parties had agreed on the three elements of subjectmatter, price, and terms of payment. Hence, the contract of sale was perfected, it being consensual in nature, perfected by mere consent, which, in turn, was manifested themoment there was a meeting of the minds as to the offerand the acceptance thereof.35 The perfection of the sale isnot negated by the fact that the property subject of the sale was not yet in existence. This is so because the ownership

by the seller of the thing sold at the time of the perfection of the contract of sale is not an element of its perfection. A perfected contract of sale cannot be challenged on theground of non-ownership on the part of the seller at thetime of its perfection. What the law requires is that theseller has the right to transfer ownership at the time thething is delivered. Perfection per se does not transferownership which occurs upon the actual or constructivedelivery of the thing sold.

In May 1983, respondent Pealoza took possession of aportion of the second floor of the building sold to her withan area of 552 square meters. She put up her office andoperated the St. Michael International Institute of Technology. Thenceforth, respondent Pealoza became theowner of the property, conformably to Article 1477 of theNew Civil Code which reads:

Art. 1477. The ownership of the thing sold shall betransferred to the vendee upon the actual or constructivedelivery thereof.

In a contract of sale, until and unless the contract isresolved or rescinded in accordance with law, the vendorcannot recover the thing sold even if the vendee failed to

pay in full the initial payment for the property. The failureof the buyer to pay the purchase price within the stipulatedperiod does not by itself bar the transfer of ownership orpossession of the property sold, nor ipso facto rescind thecontract.37 Such failure will merely give the vendor theoption to rescind the contract of sale judicially or by notarial demand as provided for by Article 1592 of the New Civil Code.

Admittedly, respondent Pealoza failed to pay thedownpayment on time. But then, the petitioner ARCaccepted, without any objections, the delayed payments of the respondent; hence, as provided in Article 1235 of theNew Civil Code, the obligation of the respondent is deemedcomplied with.

Under Article 1590 of the New Civil Code, a vendee maysuspend the payment of the price of the property sold:

Art. 1590. Should the vendee be disturbed in the possessionor ownership of the thing acquired, or should he have

reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor hascaused the disturbance or danger to cease, unless the lattergives security for the return of the price in a proper case, orit has been stipulated that, notwithstanding any suchcontingency, the vendee shall be bound to make thepayment. A mere act of trespass shall not authorize thesuspension of the payment of the price.

In view of the failure of the petitioner ARC to transfer thetitle of the property to her name because of the mortgagethereof to China Banking Corporation and the subsequentsale thereof to the GDCIA, respondent Pealoza is entitledto the refund of the amount she paid to the petitioner ARC,conformably to Article 1398 of the New Civil Code.

Meaning of price (Arts. 1469-1474)

INCHAUSTI AND CO. vs. ELLIS CROMWELL G.R.No. L-6584, October 16, 1911

The word "price" signifies the sum stipulated as theequivalent of the thing sold and also every incident takeninto consideration for the fixing of the price, put to thedebit of the vendee and agreed to by him.

When a person stipulates for the future sale of articles which he is habitually making, and which at the time arenot made or finished, it is essentially a contract of sale andnot a contract for labor. It is otherwise when the article ismade pursuant to agreement.

If the article ordered by the purchaser is exactly such as theplaintiff makes and keeps on hand for sale to anyone, andno change or modification of it is made at the defendant'srequest, it is a contract of sale, even though it may be


10/28

entirely made after, and in consequence of, the defendant'sorder for it.

.) It has been held in Massachusetts that a contract to makeis a contract of sale if the article ordered is already substantially in existence at the time of the order andmerely requires some alteration, modification, or adoptionto the buyer's wishes or purposes. It is also held in thatstate that a contract for the sale of an article which the vendor in the ordinary course of his business manufacturesor procures for the general market, whether the same is onhand at the time or not, is a contract for the sale of goods to which the statute of frauds applies. But if the goods are to be manufactured especially for the purchaser and upon hisspecial order, and not for the general market, the case is not within the statute.

Requisites for a valid price

IMELDA ONG vs. ALFREDO ONG G.R. No. L-67888October 8, 1985

.. although the cause is not stated in the contract it ispresumed that it is existing unless the debtor proves thecontrary (Article 1354 of the Civil Code). One of thedisputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court). It is alegal presumption of sufficient cause or considerationsupporting a contract even if such cause is not statedtherein (Article 1354, New Civil Code of the Philippines.)This presumption cannot be overcome by a simpleassertion of lack of consideration especially when thecontract itself states that consideration was given, and thesame has been reduced into a public instrument with alldue formalities and solemnities. To overcome thepresumption of consideration the alleged lack of

consideration must be shown by preponderance of evidencein a proper action. (Samanilla vs, Cajucom, et al., 107 Phil.432).

The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation.(Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).

Indeed, bad faith and inadequacy of the monetary consideration do not render a conveyance inexistent, forthe assignor's liberality may be sufficient cause for a validcontract (Article 1350, Civil Code), whereas fraud or badfaith may render either rescissible or voidable, although valid until annulled, a contract concerning an object certainentered into with a cause and with the consent of thecontracting parties, as in the case at bar."

LUCIA CARLOS ALIO vs. HEIRS OF ANGELICA A. LORENZO G.R. No. 159550 June 27, 2008

It is a cardinal rule in the interpretation of contracts thatthe intention of the parties shall be accorded primordialconsideration.29 Such intention is determined from theexpress terms of their agreement,30 as well as theircontemporaneous and subsequent acts.31 When the parties

do not intend to be bound at all, the contract is absolutely simulated; if the parties conceal their true agreement, thenthe contract is relatively simulated.32Characteristic of simulation is that the apparent contract is not really desiredor intended to produce legal effects or in any way alter the juridical situation of the parties.

In Suntay v. Court of Appeals ,34 the Court held that themost protuberant index of simulation is the complete

absence of an attempt in any manner on the part of the vendee to assert his rights of ownership over the disputedproperty.

It is well-settled that actual possession of land consists inthe manifestation of acts of dominion over it of such anature as those a party would naturally exercise over hisown property .44 It is not necessary that the owner of aparcel of land should himself occupy the property assomeone in his name may perform the act. In other words,the owner of real estate has possession, either when hehimself is physically in occupation of the property, or whenanother person who recognizes his rights as owner is insuch occupancy.

Furthermore, Lucia religiously paid the realty taxes on thesubject lot from 1980 to 1987.46 While tax receipts anddeclarations of ownership for taxation purposes are not, inthemselves, incontrovertible evidence of ownership, they constitute at least proof that the holder has a claim of titleover the property ,47 particularly when accompanied by proof of actual possession.48 They are goodindicia of thepossession in the concept of owner, for no one in his rightmind would be paying taxes for a property that is not in hisactual or at least constructive possession.49 The voluntary declaration of a piece of property for taxation purposesmanifests not only one's sincere and honest desire to obtaintitle to the property and announces his adverse claimagainst the State and all other interested parties, but also

the intention to contribute needed revenues to theGovernment.50 Such an act strengthensone's bona fide claim of acquisition of ownership.

It is well-settled that an action for reconveyance prescribesin 10 years, the reckoning point of which is the date of registration of the deed or the date of issuance of thecertificate of title over the property. In an action forreconveyance, the decree of registration is highly regardedas incontrovertible. What is sought instead is the transfer of the property or its title, which has been erroneously or wrongfully registered in another person's name, to itsrightful or legal owner or to one who has a better right.

However, in a number of cases in the past, the Court hasconsistently ruled that if the person claiming to be theowner of the property is in actual possession thereof, theright to seek reconveyance, which in effect seeks to quiettitle to the property, does not prescribe.55 The reason forthis is that one who is in actual possession of a piece of landclaiming to be the owner thereof may wait until hispossession is disturbed or his title is attacked before takingsteps to vindicate his right.56 The reason being, that hisundisturbed possession gives him the continuing right toseek the aid of a court of equity to ascertain the nature of the adverse claim of a third party and its effect on his title, which right can be claimed only by one who is in
http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt29http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt29http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt29http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt30http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt30http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt30http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt31http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt31http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt31http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt32http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt32http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt32http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt34http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt34http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt34http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt44http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt44http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt44http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt46http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt46http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt46http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt47http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt47http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt47http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt48http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt48http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt48http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt49http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt49http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt49http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt50http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt50http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt50http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt55http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt55http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt55http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt56http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt56http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt56http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt56http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt55http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt50http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt49http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt48http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt47http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt46http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt44http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt34http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt32http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt31http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt30http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt29


11/28

possession.57 Thus, considering that Lucia continuously possessed the subject lot, her right to institute a suit to clearthe cloud over her title cannot be barred by the statute of limitations.

Suffice it to state that the concept of inadequacy or non-payment of price is irreconcilable with the concept of simulation. If there exists an actual consideration fortransfer evidenced by the alleged act of sale, no matter how

inadequate it be, the transaction could not be a "simulatedsale."

How price is determined

AMPARO GONZALEZ vs. PRIMITIVOTRINIDAD G.R. No. L-45965 April 29, 1939

Articles 1305 and 1306 of the Civil Code are not applicableto the contract entered into by the parties because they refer to contracts with an illegal consideration or subjectmatter, whether the facts constitute an offense ormisdemeanor or whether the consideration is only rendered illegal. The contract of sale, being onerous, has forits cause or consideration the price of P10,000 (article 1274of the Civil Code); and both this consideration as well as thesubject matter of the contract, namely, the property, arelawful and not penalized by law. However, as the contract was in itself fictitious and simulated price, theconsideration being thus lacking, said contract is null and voidper se or nonexistent (article 1261 of the Civil Code). As has been held by the Court of Appeals, the object of thecontracting parties or the motives which the vendors had inentering into the simulated contract should not be confused with the consideration which was not be confused with theconsideration which was not present in the transaction. Theformer, although illegal, neither determine nor take theplace of the consideration. The author, Manresa, in hisCommentaries on the Civil Code, volume 8, pages 618, 619,commenting on the distinction between the considerationand the motives, uses the following language:

But when the notion of consideration is applied tocontracts, it represents, as it already meant inRome, the why of the contacts, the essentialreason which moves the contracting parties toenter into the contract. In this sense, expressed inthe provisions of the Code, the consideration isrelated to the personal element of the contract, because it represents the demand of reasonableand legal motives for the determination of the wills which concur in consent. But while this istrue, not less true is the relation of the

consideration with the subject matter of thecontract, which is so close that at times itdistinction offers a real problem. In fact, in acontract like that of a sale, the thing and the priceare the subject matter of the contract; but inconsideration thereof, the consideration for thepurchaser and the vendor is determined asindicated by the first of the definitions containedin article 1274.

Considering the concept of the consideration asthe explanation and motive of the contract, it isrelated to the latter's object and even more to its

motives with which it is often confused. It isdifferentiated from them, however, in that theformer is the essential reason for the contract, while the latter are the particular reasons of acontracting party which do not affect the otherparty and which do not preclude the existence of adifferent consideration. To clarify by an example: A thing purchased constitutes the considerationfor the purchaser and not the motives which haveinfluenced his mind, like its usefulness, itsperfection, it relation to another, the use thereof which he may have in mind, etc., a very importantdistinction, which precludes the annulment of thecontract by the sole influence of the motives,unless the efficacy of the former had beensubordinated to compliance with the latteras conditions .

The jurisprudence shows some cases wherein thisimportant distinction is established. Theconsideration of contracts, states the decision of February 24, 1904, is distinct from the motive which may prompt the parties in executing them.The inaccuracies committed in expressing itsaccidental or secondary details do not imply lack of consideration or false consideration, wherefore,they do not affect the essence and validity of thecontract. In a loan the consideration in its essenceis, for the borrower the acquisition of the amount,and for the lender the power to demand its return, whether the money be for the the former or foranother person and whether it be invested asstated or otherwise.

MARIQUITA MACAPAGAL vs. CATALINA O.REMORIN G.R. No. 158380 May 16, 2005

The fact that the deed of sale between respondents Corazon

and Laurelia did not accurately reflect the trueconsideration thereof is not cause for declaration of itsnullity. When the parties intended to be bound by thecontract except that it did not reflect the actual purchaseprice of the property, there is only a relative simulation of the contract which remains valid and enforceable.25 Itcannot be declared null and void since it does not fall underthe category of an absolutely simulated or fictitiouscontract.26 The contract of sale is valid but subject toreformation.

Inadequacy of price (Arts. 1355, 1470)

GAMALIEL C. VILLANUEVA and IRENE C. VILLANUEVA vs. COURT OF APPEALS G.R. No.107624 January 28, 1997

As has been said in an old case, the price of the leased landnot having been fixed, the essential elements which give lifeto the contract were lacking. It follows that the lesseecannot compel the lessor to sell the leased land tohim. 21 The price must be certain, it must be real, notfictitious.22 It is not necessary that the certainty of theprice be actual or determined at the time of executing thecontract. The fact that the exact amount to be paid thereforis not precisely fixed, is no bar to an action to recover suchcompensation, provided the contract, by its terms,
http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt57http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt57http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt57http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt25http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt25http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt25http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt26http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt26http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt26http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt26http://www.lawphil.net/judjuris/juri2005/may2005/gr_158380_2005.html#fnt25http://www.lawphil.net/judjuris/juri2008/jun2008/gr_159550_2008.html#fnt57


12/28

furnishes a basis or measure for ascertaining the amountagreed upon. 23 The price could be made certain by theapplication of known factors; where, in a sale of coal, a basic price was fixed, but subject to modification "inproportion to variations in calories and ash content, andnot otherwise," the price was held certain.24 A contract of sale is not void for uncertainty when the price, though notdirectly stated in terms of pesos and centavos, can be madecertain by reference to existing invoices identified in theagreement. In this respect, the contract of sale isperfected. 25 The price must be certain, otherwise there isno true consent between the parties.26 There can be no sale without a price.

True, the statute of frauds applies only to executory contracts and not to partially or completely executedones. 32 However, there is no perfected contract in thiscase, therefore there is no basis for the application of thestatute of frauds. The application of such statutepresupposes the existence of a perfected contract andrequires only that a note or memorandum be executed inorder to compel judicial enforcement thereof. Also, the civillaw rule on double sale finds no application because there was no sale at all to begin with.

At bottom, what took place was only a prolongednegotiation to buy and to sell, and at most, an offer and acounter-offer but no definite agreement was reached by theparties. Hence, the rules on perfected contract of sale,statute of frauds and double sale find no relevance norapplication.

Manner of payment must be agreed upon

SPS. ALFREDO R. EDRADA and ROSELLA L.EDRADA vs. CARMENCITA RAMOS G.R. No.154413 August 31, 2005

A contract of sale is defined as an agreement whereby oneof the contracting parties obligates himself to transfer theownership of and to deliver a determinate thing, and theother to pay therefore a price certain in money or itsequivalent.17 It must evince the consent on the part of theseller to transfer and deliver and on the part of the buyer topay .18

An examination of the document reveals that there is noperfected contract of sale. The agreement may confirm thereceipt by respondents of the two vessels and theirpurchase price. However, there is no equivocal agreementto transfer ownership of the vessel, but a mere commitmentthat "documents pertaining to the sale and agreement of payments[are] to follow." Evidently, the document ordocuments which would formalize the transfer of ownership and contain the terms of payment of thepurchase price, or the period when such would become dueand demandable, have yet to be executed. But no suchdocument was executed and no such terms were stipulatedupon.

The fact that there is a stated total purchase price shouldnot lead to the conclusion that a contract of sale had beenperfected. In numerous cases,19 the most recent of whichis Swedish Match, AB v. Court of Appeals ,20 we held that before a valid and binding contract of sale can exist, the

manner of payment of the purchase price must first beestablished, as such stands as essential to the validity of thesale. After all, such agreement on the terms of payment isintegral to the element of a price certain, such that adisagreement on the manner of payment is tantamount to afailure to agree on the price.

Assumingarguendo that the document evinces a perfectedcontract of sale, the absence of definite terms of payment

therein would preclude its enforcement by the respondentsthrough the instant Complaint . A requisite for the judicialenforcement of an obligation is that the same is due anddemandable. The absence of a stipulated period by whichthe purchase price should be paid indicates that at the timeof the filing of the complaint, the obligation to pay was not yet due and demandable.

In order that respondents could have a valid cause of action, it is essential that there must have been a stipulatedperiod within which the payment would have become dueand demandable. If the parties themselves could not comeinto agreement, the courts may be asked to fix the period of the obligation, under Article 1197 of the Civil Code.22 Therespondents did not avail of such relief prior to the filing of the instant Complaint ; thus, the action should fail owing toits obvious prematurity.

A contract is perfected when there is concurrence of the wills of the contracting parties with respect to the objectand the cause of the contract. In this case, the agreementmerely acknowledges that a purchase price had been agreedon by the parties. There was no mutual promise to buy onthe part of petitioners and to sell on the part of respondents. Again, the aforestated proviso in theagreement that documents pertaining to the sale andagreement of payments between the parties will follow clearly manifests lack of agreement between the parties asto the terms of the contract to sell, particularly the object

and cause of the contract.The agreement in question does not create any obligatory force either for the transfer of title of the vessels, or therendition of payments as part of the purchase price. Atmost, this agreement bares only their intention to enterinto either a contract to sell or a contract of sale.

SPS. JORGE NAVARRA vs. PLANTERSDEVELOPMENT BANK G.R. No. 172674 July 12, 2007

In general, contracts undergo three distinct stages, to wit:negotiation, perfection or birth, and consummation.

Negotiation begins from the time the prospectivecontracting parties manifest their interest in the contractand ends at the moment of their agreement. Perfection or birth of the contract takes place when the parties agreeupon the essential elements of the contract, i.e., consent,object and price. Consummation occurs when the partiesfulfill or perform the terms agreed upon in the contract,culminating in the extinguishment thereof.

A negotiation is formally initiated by an offer which should be certain with respect to both the object and the cause orconsideration of the envisioned contract. In order toproduce a contract, there must be acceptance, which may
http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt17http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt17http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt17http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt18http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt18http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt18http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt19http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt19http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt19http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt20http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt20http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt20http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt22http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt22http://www.lawphil.net/judjuris/juri2005/aug2005/gr_154413_2005.html#fnt22http://www.lawphil.net/judjuris/juri2005/aug2005/

Documents

RULINGS.docx