Sales-Chan

Sales – SY 2010 Atty. Joanne Cañete-Chan I. Nature and form of a contract of sale a. Article 1458 and 1318, essential requisites of a contact
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (1445a) Art. 1318. There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. (1261)

b. Article 1409, contracts that are contrary to law, void contracts
Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived

c. Article 1330, 1390 voidable contracts
Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a) Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. (n)

d. Article 1381 (3) and (4) rescissible contract
Art. 1381. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; (5) All other contracts specially declared by law to be subject to rescission. (1291a)

e. Article 1403, Statue of Frauds, unenforceable contracts
Art. 1403. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be

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Sales – SY 2010 Atty. Joanne Cañete-Chan
unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; (f) A representation as to the credit of a third person. (3) Those where both parties are incapable of giving consent to a contract.

f. Article 1466 to 1468 – Sale as distinguished from Agency, Contract for a piece of work, Lease of things and Barter
Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. (n) 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. (n) Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. (1446a)

g. p.10-16 Baviera C. Sales and Other Transaction Distinguished Sec. 12 Distinguished from Contract for a Piece of Work SALES CONTRACT FOR A PIECE OF WORK A contract for the delivery at a certain If the goods are manufactured specially price of manufactures or procures for the for the customer and upon his special general market, whether on hand at the order, and not for the general market. time or not Importance of Distinction Application of Stature of Frauds 2

Sales – SY 2010 Atty. Joanne Cañete-Chan In Sales - the test is 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 w/c would have existed and been the subject of sale to some other person, even if the order had not been given - When a person stipulates a future sale of articles which he is habitually making, and which at the time are not made or finished –CONTRACT OF SALE - if the article ordered by the purchase is exactly 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, even made after and in consequence of the defendant’s order for it. In Pc. Of Work -The fact that the windows and doors were made by it only when customers placed their orders. - A position habitually to manufacture -Accepts a job that requires the use of extraordinary or additional equipment, or involved services not generally performed by it. - a contractor imported item which were used in executing the contracts for the desing, supply and installation of aircon units -Contractor – a person who in 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 petty details Sec.13 Distinguished from Lease of Things SALE Downpayment, monthly rents and duration of payments have been fixed by agreement of the parties, the total rents being equal to the value of the thing leased LEASE The lessee is given the option to buy the thing leased, for a small consideration at the end of the term , after crediting to the price all the so-called rents already paid, or with the stipulation that if the rents throughout the term have been paid, the lessor shall transfer to the lessee full ownership (lease in name only) -to prevent evasion of Art. 1484 of the NCC, art. 1485 provides that the provisions of the preceding article shall be applied also to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of a thing

Sec. 14 Distinguished for Agency to Buy or Sell SALE AGENCY TO BUY OR SELL A person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter 3

Sales – SY 2010 Atty. Joanne Cañete-Chan Transfer of title or agreement to transfer The delivery to the agent of the goods as it for the price paid or promised : not as the latter’s property but of the essence of sale principal who remains the owner and has the right to control the sales by the agent, fix the price and terms, demand and receive the proceeds of the sales less than the agent’s commission: essence of agency Agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal, the latter must indemnify the former for all damages which he incur in carrying out the agency without fault on his part. Unforeseen events: unfavourable to the defendant, change of price, mistake in quotation, loos of good not carried with insurance, or failure of the manufacturer to properly fill the order as per specifications; plaintiff might still legally hold defendant to the price fixed in their agreement, or its return Sec. 15 Distinguished form Barter or Exchange SALE BARTER or EXCHANGE Parties bind himself to give one thing in consideration of the other’s promise to give another thing if the value of the thing given as a part If partly money and partly another thing: of the consideration EXCEED the amount Transaction shall be characterized by the of the money or its equivalent manifestation of the parties If not specifically provided in the Title of Barter. Sales shall govern -in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered; manifested by ostensible signs Sec. 16 Distinguished for Dacion en pago SALES DACION EN PAGO Art.1245 whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by sales. Obligations are created from the Presupposes pre-existing debt and perfection of the contract and the fixing extinguishes the debt (Manresa) of the price is more freely agreed upon that the value of the thing giving in dation in payment.(Manresa) There is novation of contract – when 4

Sales – SY 2010 Atty. Joanne Cañete-Chan creditor acceptsa thing in payment of the debt Sec.17 Distinguished from Chattel Mortgage - a conditional sale of personal property as security for the payment of debt or performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchase a sum of money or doing some other act named. -personal property is recorded in the chattel mortgage register as a security for the performance of the obligation II. Perfection of the contract a. Article 1475, meeting of the minds
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. (1450a)

i.p.22-25 Baviera B.Offer and Acceptance Sec. 26 In General Contract of Sale -perfected at the moment there is meeting of the minds upon the thing which is the object of the contract and upon the price. -parties may reciprocally demand performance, subject to the provisions of the law governing form of contracts. Example of no meeting of the minds: *co owner did not give her consent to the sale of property under judicial administration * mistake of the broker *contract of subrogation *deposit was forfeited *applicant is found not to possess necessary qualifications –revocable contract to sell *if dependent on the offeror obtaining the loan *land bought for development for mass housing was not suitable and dangerous – govt is justified to cancel the agreement Sec.27 Form of Offer Offer must be certain “entertain” – has the position to deliberate for deciding to perform or not to perform Ex. Offer is not certain: *If offer was a mere invitation *Offer does not state the amount to paid in instalments Business Ads – not definite offers, simply invitations Sec.28 Forms of acceptance Acceptance must be absolute.

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Sales – SY 2010 Atty. Joanne Cañete-Chan If acceptance is not in accordance with the terms and condition of the offer, offer lapsed though the offeree was willing to accept, failure to open a LOC within the period agreed upon – suffices to prevent a juridical tie from being created. To bind the offeror, offeree must comply with the condition of the offer. Acceptance must be plain and unconditional -it will no be so if it involves a new proposal. Qualified acceptance –constitutes a counter-offer which must in turn be accepted to give rise to a binding agreement May be express or implied Option to Purchase – the offerree may exercise his right by merely advising the grantor the option of his decision to buy or his readiness to pay the stipulated price, without the actual payment of the price, without the actual payment of the price so long as this is delivered upon the performance of the offeror’s part of the bargain. ii. Goyena v. Tambunting No. 956 November 18, 1902 –private document obligatory; even no original agreement as to area or price per meter; orginal agreement abandoned when new proposition was made by the vendee was not entirely accepted by the vendor because there was no meeting of the minds and no perfected contract.
FACTS: Goyena owned a tract f land and building at Ermita, Manila which contained 152.46 sqm. A broker, representing Goyena stated to Tambunting that the said lot and on its information measured 23 meters in front and 8 meters in depth. Goyena and Tambunting had negotiations on the sale. On Mar. 1901, defendant singed a document:”On this date I have bought from Goyena lot…for P3200, this money to be paid as soon as the bill of sale is signed. (Sgd.)Tambunting” Goyena signed a similar document. The negotiations between the parties were prior to signing of these documents does not appear. There is no evidence on record that they came to any agreement in regard to the sale other than the on contained in the papers of Mar. 12. The defendant took form the office of notary employed to make the formal transfer of the title papers and kept them from several days, and returned them to the notary. On the day for the execution of the instrument all the parties being in the office of the notary, the defendant told the latter to insert in the writing the price, P3200, and then refused to sign it because the lot did not contain the area which plaintiff , through the broker, had represented that it contained. He expressed willingness to sign if a proportional deduction was made. The plaintiff refused and brought this action under Art. 1451 of the Civil Code. ISSUE: Whether the private document is a contract of sale? HELD: The contract expresses a specific thing as the object of the contract (lot in Ermita). There is no question that this sum is there specified plainly and specifically, and without being made subject to any condition. There is nothing lacking for the existence of a perfect contract of a purchase and sale. Art. 1445 of the civil code states: “by the contract of purchase and sale one of the thing, and the other to pay therefore a price certain, in money or in some thing represent it.” Art. 1450 states” the sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the price, even when neither has been delivered” The private document is not subject to any term or condition. It contains a promise a promise to buy, not a mere project of sale according to Art. 1451, confers upon the contracting parties the right to reciprocally demand the performance of the contract. It the contract were not perfected, no right would accrue in favour of the contracting parties to reciprocally demand its performance. A thing which has no existence can produce no effect. Because it is merely a private document which contemplated the subsequent execution of a public instrument, it does not follow that it is not enforceable as it now stands. “Contracts”

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under art 1278, “shall be obligatory whatever may be the form in which they have been entered into, provided that the essential elements for their validity are present,” to wit, a determinate thing, a price certain, and a meeting of the minds with respect to the object of the contract. The contract in question is obligatory. Whether evidenced by a public instrument or a private document, the contract is what the words of the parties indicate. (art.1218 and 1225) There was considerable evidence regarding the agreement by the plaintiff to reduce the price. Based on the testimony it was only a conversation at the house of the defendant. The admission of the defendant is sufficient to prove a contract by measure in the face of the written document and the entire absence of other evidence. The rather construes that the willingness on the part of the plaintiff to abate a trifle from the what he was entitled to demand with the purpose of obltaining an amicable settlement and avoiding litigation Ruling: the judgment below is right, and it is accordingly affirmed with costs against the defendant.

iii. Johannes Schuback & Sons Phil. Trading Co. v. CA G.R No. 105387 November 11, 1984
FACTS: The case is a review on certiorari on the trial court’s ruling that a contact of sale had been perfected between the petitioner and private respondent over spare parts. Sometimein 1981, private respondent(Phil. SJ Industiral Trading through R.San Jose,Jr.) contacted the petitioner through Phil. Consulate General in Germany, that he wanted to purchase MAN bus spareparts fpr Schuback &Sons Co.(Schuback) On Oct. 16,1981, defendant submitted to petitioner a list of parts he wants to purchase with specific nos. and description. Petitioner sent to respondent a letter on Nov. enclosing its offer on the items listed by respondent On Dec. 17 1981, petitioner submitted its formal offer, containing the item no., quantity, part no., description, price and total to respondent. By the 24th, respondent informed his desire to abail of the prices of the part that time and enclosed its purchased order dated Dec. 14, 1981 and promise to submit the quantity per unit he wanted to order on Dec. 28 or 29. On Dec. 29, respondent, personally submitted the quantities he wanted to Reichert, General Manager of Schuback. The quantities were written in ink and purchase order was submitted and at the bottom with note that the P.O will include 3% discount and shall serve initial P.O. Petitioner immediately ordered the items need from Schuback to enable respondent to avail the old prices. Schuback ordered the items to NDK, supplier of MAN spare parts in Germany. Schuback sent petitioner the proforma invoice to used by the respondent to apply for a letter of credit. The invoice required that the LOC be opened in favor of Schuback. Respondent acknowledge the invoice. An order confirmation was sent by Schuback to petitioner and was forwarded and received by respondent on Feb. 3,1961. On Feb.16, the petitioner reminded respondent to open LOC to avoid delay of shipment and payment of interest. In repy, respondent that there was difficulty in securing the dollar allocation and applying LOC etc. Schuback received invoices to NDK for partial deliveries and was paid. On Oct 1982, petitioner again reminded the respondent and advised that the case will be endorsed to its lawyers. Respondent replied that he not make any valid P.I and that there was no definite contract between him and petitioner. Petitioner sent a rejoinder explaining that there is a valid P.O and suggesting that respondent either to proceed the order and open LOC or cancel and pay the cancellation fee 30% FOB value or petitioner will endorse the case with its lawyers. Schuback enclosed a debit note to the petitioner of 30% for cancellation fee, storage, interest charges for a total of DM 51,917.81 and was deducted to petitioners account. A demand letter was sent to respondent on March and June 1983 but was no avail.

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Sales – SY 2010 Atty. Joanne Cañete-Chan
RTC ruled in favour of the petitioner and ordering respondent to pay compensatory damages. The case was elevated in the CA. the decision was reversed and was dismissed ruling that there was no meeting of the minds as to the price in the contract. ISSUE: Whether or not a contracts of sale has been perfected between the parties. HELD: The court reversed the CA’s ruling. The contract of sale was perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Art. 1319 of NCC: “Consent is manifested of the offer and acceptance upon the thing and the cause whice are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitute a counter offer.” The facts in this case indicate that there was consent both sides. The offer by petitioner was manifested on Dec. 17, 1981 when petitioner submitted its proposal containing the item no., quantity, part no., description, unit price and total to respondent. On Dec. 24, respondent informed petitioner and simulated enclosed it P.O dated Dec. 14. At this stage, meeting of the minds between vendor and vendee has occurred and the object of the contract being the spare parts and the consideration, the price stated in petitioner’s offer dated Dec. 17 and accepted by respondent on Dec. 24. Although P.O did not contain the quantity he wanted, respondent made good his promise to communicate the same on Dec. 19. At this point the respondent was already in the process of executing the agreement previously reached between the parties. The statement made by the respondent in the Note in P.O was another indication of acceptance on the part of the vendee, for by requesting 3% discount he implicitly accepted the price 1st offered. The immediate acceptance by the vendee was impelled by the fact that there would be a 7% increase effective on Jan. 1982. The concurrence by the vendor with the discount was manifested when immediately ordered the items from Schuback then ordered from NDK. We differ in the trial courts decision as to the exact date when it occurred, for the perfection took place on Dec. 24. the quantity to be ordered was determinate only on Dec. 29, quantity is immaterial in the perfection of sales contract. What is of importance is the meeting of the minds as to the object and cause, which is from the facts disclosed show that Dec.24, theses essential elements concurred. The opening of a LOC is a mode of payment and not among the essential requirement of a contract of sale.. Failure of respondent to open an irrecovable LOC without recourse in favour of Schuback is not a condition, respondent did not incorporate any provision declaring their contract of sale without effect until after the fulfilment of the act of opening the letter. Wherefore petition is granted and the decision of trial court dated June 13, 1988 is reinstated with modification

iv. Soriano v. Latono No. L-3408 Dec. 23, 1950
FACTS: The case is an appeal from the decision of CFI Pangasinan regarding the annulment of a sale of land. The facts are as follows: Children’s mother was appointed guardian of the estate by the court on Oct.1982. The parcel of land was registered under the Land Registration Act in the name of the Soriano’s (Jose,Paciencia, Felicidad, Milagros & Teofilo) who were minor at that time. The court ordered the guardian to deliver and execute a deed of conveyance to Latiño’s in consideration for P1,000 and deed of mortgage for the 2nd parcel of land for P500 to be redeemed within a period of 5 years. The proceeds of the sale were used to pay off atty’s fees incurred in the registration of the property. In June 1933, the guardian executed a deed of sale favour to the vendees and they immediately entered upon the possession of the land and continued such. On Jan. 1944, the guardianship proceeding were ordered closed and the ward’s properties were turned over having attained the age of majority. On Mar. 1994, 12 years after the sale, the petitioner (Soriano’s) brought a suit against the petitioner to recover the land. They alleged that the sale was null and void because:1) it was

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Sales – SY 2010 Atty. Joanne Cañete-Chan
not approved by the probate court 2) the deed of conveyance were not authorized to act in Mun. of Bayambang CFI dismissed the case. It held that subsequent confirmation in unnecessary and document is not assailable on the ground of the lack of authority of Notary Public. Ordered defendants to proceed the deed and have a new title issued. ISSUE: W/N the sale of the property is null and void? No HELD: The court’s order expressly authorized the guardian “ to execute and deliver” to the purchasers named in the deed of conveyance to the parcel of land. The order was intended approval of the sale. We can make as inferences that the movant and the court had in mind a sale already perfected or agreed upon. A sale by the guardian may be approved before the deed is executed, depending on the intention of the court and providing faithful compliance of the conditions imposed has been made. If the DOS, had not been notarized, the same would be fully effective as between the parties under A. 1261 Old Civil Code in force at the time of the conveyance. All elements of a valid contract were present: 1) Subject Matter 2) Capacity of Consent 3) Lawful Consideration. The appealed decision is affirmed with costs against the plaintiffs and appellants. NOTE:lis pendens- a written notice of a pending suit involving property usu. Filed in appropriate office.

b. Article 1330, contracts entered into by mistake, fraud, violence, etc. i. p. 25-26 Baviera Sec.29 Vices Vitiating Consent -Voidable Fraud – through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract, which without them , he would not have agreed. Insidious Machinations – signifies the scheme or plot with an evil design or with fraudulent purpose. Deceit – Misrepresentation in words -failure to disclose facts when there is duty to reveal, as when parties are bound by confidential relations –FRAUD Mistake may invalidate consent – refer to substance of the thing which is the object of the contract. ii. Pineda v. Santos misrepresentation, fraud No. 34845 March 3, 1932 –

FACTS: M. Santos, judicial administratrix of the intestate estate of Natalio Santos. On July 14, 1925, she bound herself to sell a calcacerous (of nature containing lime) land in Montalban, Rizal. The said land belonged to N. Santos, for the sum of P8,000 subject to the approval of the probate the court. The appellee paid a part payment of P500. July 30, obtained a judicial approval and executed a deed. Appellant sold the land in fee simple the price stipulated and received a check of P7500. Appellee , entrusted to Atty. Sunico the drafting of the DOS and also acted as their Notary Public. In the deed, appellant stated that the property is “FREE of all charge, lien and liability.” At that time the property was registered under torrens title in favor of G. Cruz who previously executed a DOS in favor of N. Santos but it has not been presented for registration, no new transfer certificate was issued. Atty.Sunico examined the appellants transfer cert., saw no annotations of encumberance or of lis pendens. Atty. Sunico signed and took the transfer cert. to the Office of the Registrar of Deeds to record, cancel and issue a new transfer cet. In favor of the appellee. Atty. Sunico discovered that the lis pendens notice was entered on the TCT as of April 25, 1925 8:16 am. Atty.Sunico asked J.Tupas (registrar) about the annotation and was

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told that A.A. Adison had filed the lis pendens. Sunico left and informed his client, appellee, who took steps to have the DOS set aside and later borught action of nullity.[before discovery of lis pendens notice, appelle had conveyed the same property and price to Pineda, Ampil Mnfctg & Co., Inc. but found the notice and sought for the recission of the sale. While in the possession he was engaged in lime business and purchased the property and spent P2334.30 which the court had amended. ISSUE: Whether there was fraud in the comment vitiating appellees consent? YES HELD: The annotation was entered on the TCT after the execution of DOS, and the appellant stated the deed was absolutely free from all liens and encumberances was untrue and misled the appellee in giving his consent. The judgment appealed from being in accordance with the law is hereby affirmed to its entirety with the costs of this instance against the appellant.

c. Article 1483, Statute of Frauds, Article 1403
Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties. (n) CHAPTER 8 - UNENFORCEABLE CONTRACTS (n) Art. 1403. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; (f) A representation as to the credit of a third person. (3) Those where both parties are incapable of giving consent to a contract

i.Notes: (Baviera p.26-30) Formalities of a Contract Sec. 30 In General Subject to the provisions of Statute of Frauds and any other applicable statute Contract of sale – made in writing, or by word of mouth or partly in writing and partly by word of mouth, or by conduct of the parties

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Sales – SY 2010 Atty. Joanne Cañete-Chan Made through telegram or verbally – such order subsequently confirmed, no need for purchase order. Made through telephone – sale perfected during telephone conversation when object and price of the sale is agreed upon Sec. 31 Statue of Frauds Agreement for the sale of real property or of an interest is covered by SOF The Sale of goods, chattels or things in action at a price not less than P500 – under SOF Unless buyer accepted and received part of the goods and chattels or the evidence of the things in action or paid some part of the purchase price. Under SOF – agreement shall be unenforceable UNLESS the same, or some note or memorandum thereof be in writing, and subscribed by the party charged or by his agent. Failure to object to the presentation of oral evidence to prove agreement or acceptance shall render agreement – ENFORCEABLE (see examples p. 27-28) SOF apply only to executory contracts, not to contracts either totally of partially performed Iñigo v. Estate of Maloto – in accordance to their previous oral contracts the plaintiff paid the purchase price and exercised acts of dominion on the property by improving and constructing a retail store. The court ordered the execution of the DOS of the house and lot. Combinations of all of the acts are sufficient to take the matter away from the SOF: • Possession of the portion of the land • Relinquishment of her claim to the entire land, building or improvement on the land • Tender of payment • Surveying and segregation of the portion which defendant promised to sell *Otherwise it would be fraud upon the plaintiff if the defendant to oppose the performance on his part after he allowed or induced the former to perform reliance upon agreement SOF does not apply where verbal contract of sale is adduced for the purpose of enforcing performance thereof, but as the basis of lawful possession of the applicant entitling him to have the land registered in his name. ii. Sale of Real Property to an agent must be in writing
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (n)

Sec. 32 Sale of Realty by an Agent Written authority to sell a parcel of land for 15 days, any renewal or extension of the authority must be in writing Sec. 33 Secondary Evidence 11

Sales – SY 2010 Atty. Joanne Cañete-Chan Before introduced - It is necessary that due execution and subsequent loss of the original instrument evidencing transaction be proved. Due execution may be proved by • Testimony of the person who has executed it • Person whom its execution was acknowledged • Person who was present and saw it executed and delivered • Who, after its execution and delivery, saw it and recognized the signature • Person to whom the parties to the instrument had previously confessed the execution Sec. 34 Electronic Commerce Act (RA 8792) Electronic documents shall have legal effect, validity, enforceability as any other document or legal writing. As long as maintains the integrity and reliability. Capable of being displayed to the person to whom it is to be presented, containing electronic signature of the person sending it. d. “Deed of Absolute Sale” and “Contract to Sell” compared “Conditional Sale” i. Sample of Contract to Sell and Deed of Absolute Sale ii. Spouses Dijamco v. CA G.R No. 113665 October 7, 2004 to

FACTS: The case is a petition for review of the Jan. 7, 1994 resolution and Mar. 30, 1993 decision of CA affirming the decision of RTC which dismissed the petitioners complaint against Premiere Development Bank (PDB) for the recovery of real property and damages. The facts of the case are as follows:

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Sps. Dijamco were granted four separate loans by defendant bank: 1 st was granted on April 1976for P75,000, 2nd on March 1980 P80,000, 3rd on Feb. 1986 P80,000 and the subject of the complaint, 4th on October 1981 for P210,000 which was secured by a REM over a parcel of land in Pasay City which has an improvement of 5-door apartment. Sps. Failed to remit monthly amortizations regularly on the 4th loan and also on the 2nd and 3rd. Sps. Negotiated for the settlement of the 2nd and 3rd. The 4th loan was about 10months in arrears. Sps. Approached Atty. Araos, president of PDB and a family friend, advised them to 1st settle the two smaller loans and not to worry about the 4th loan (210,000) PDB alleges that the Sps. Scheme to pay off the 2nd and 3rd loan 1st so that they then use the collateral from another which proceeds they would use to pay off the 4th loan. On Mar. 1983, PDB sought assistance to City Sheriff of Pasay re: the petition for extrajudicial forecloseure of mortgage against the Sps. Dijamco for their violations of the mortgage contract that was executed. On Sept. 1983, the Deputy Sheriff issued a Notice of Sheriff’s Sale to be conducted on Oct 1983. But this was postponed due the postponement filed. Sps. Requested for 5 consecutive postponements but on Mar. 1984 the Ex-officio Sheriff of Pasay issued a Certificate of Sale stating the mortgaged land was sold to PDB as the highest bidder. Sps. Failed to redeem the property within the redemption period. In a letter dated June 1986, Remedios Dijamco offered repurchase of the said property to the President of PDB.It stated “ we could pay the interest monthly, just so the principal of P622,095.00 as of May 30, 1986 will no longer be increased..we wish to pay the repurchase of foreclosed properties within a year’s time”, “failure to remit the interest payment when the same is due will render this proposal automatically revoked without need of formal demand and you may immediately enforce your Writ

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Sales – SY 2010 Atty. Joanne Cañete-Chan
of Possession”, “Failure to repurchase within the period, all interest and other payment made by us shall be treated as rentals for the use of property.” • In compliance with the letter-agreement, plaintiffs paid the bank 6 monthly remittances of P13,478.73 or of a total of P80,872.38. The payment was discontinued by the plaintiffs when Atty. Araos was informed that none of the payment will be deducted from the purchase price. • Sps. sued PDB and claimed that the latter employed fraud and undue advantage depriving them of their property and prayed for recovery of said property for P350,000 and damages. RTC dismissed the complaint for utter lack of merit and CA affirmed dismissal. Hence this appeal ISSUE: Whether there was fraud and undue advantage employed in their contract?NO. HELD: • The respondent bank validly acquired the property at the auction sale and that it was only after the title was consolidated and transferred to the banks that Sps. Dijamco signed the June 1986 agreement to purchase the same property. Remedios entered into the June 1986 agreement without fraud and undue advantage from PDB. Such was binding, valid and unenforceable between the parties. • The court held that the said agreement was contract of option to purchase and a contract to sell. It was contract to sell because the agreement contains: 1. that Sps. are granted right to repurchase the property involved at the fixed price of 622,095.00 within a year provided they paid the monthly instalments, 2. No transfer of conveyance ownership was effected by its terms, 3. The interest payment were not part of the purchase price because in case of failure to exercise the right to repurchase they would be considered as rentals, and 5) the interest payments,in a way was a consideration to preserve the right to repurchase. • The stipulation on the interest payments was actually a reconsideration for the contract of option to purchase in compliance of 2nd par. Of article 1479 of CC.”An accepted unilateral promise to buy (by the petitioners) or to sell a determinate thing(the subject real property) for a price certain(for P622,995) is binding upon the promissor if the promise is supported by a consideration distinct from the price(the monthly interest payment of P13,478). “

•

A Judicial action for recission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions.

Contract of Sale Contract to Sell Title passes to the buyer upon the where, by agreement, the ownership is delivery of the thing sold reserved by the seller till full payment of the purchase price. Non-payment of the price is a negative Full payment is a positive suspensive resolutory condition condition Vendor has lost and cannot recover the ownership of the thing sold until and unless the contract of sale is itself resolved and set aside The title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract. If the vendor, because of non compliance with the suspensive condition stipulated, seeks to eject the buyer from the land object agreement, said vendor is 13

Sales – SY 2010 Atty. Joanne Cañete-Chan enforcing the contract is not resolving the same. III. Capacity of the parties a. Sale to Minors, Sales between husbands and wife, agents, public officers, executors, guardians etc.
CHAPTER 2 - CAPACITY TO BUY OR SELL Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles. Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 290. (1457a) Art. 1490. The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 191. (1458a) Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. (6) Any others specially disqualified by law. (1459a) Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n)

i.Notes: (Baviera p.17-22) Sec. 18 Absolute Incapacity The following cannot validly give consent to contracts: • Minors • Insane or demented persons • Deaf-mutes who do not know how to write

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Sales – SY 2010 Atty. Joanne Cañete-Chan Necessaries – those which are indispensable for his support, according to the social position of the family; Things indispensable, or things proper and useful, for the sustenance of human life. • when sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price Sec. 19 Relative Incapacity *H & W cannot sell property to each other EXC when a separation of property was agreed upon in marriage settlements or there has been a judicial separation of property. Why? To protect 3rd persons Persons who cannot also acquire by purchase, public or judicial sale, or by assignment, compromise, renunciation or sale in legal redemption, either in person or through the mediation of another: 1) guardian – property of the person under his guardianship 2) agents - property whose administration and sale is entrusted to them UNLESS the consent of the principal is given 3) executors and administrators – property under their administration 4) public officers and employees – property of the State or any of the subdivision or GOCC, of administration has been entrusted to them 5) justices, judges prosecutor, attorneys, clerk of superior and inferior courts and other officers and employees – connected with administration of justice, property and rights in litigation or levied upon execution before the court 6) lawyer - with respect to the property and rights in litigation in which they may take part of virtue of their profession 7) aliens of private corporation/ or associations- with respect to lands located in the Philippines a. EXC former natural-born Filipinos – allowed to acquire residential lands not exceeding 1,000 sq. Meters urban land or one hectare rural land Persons under 1-6. Occupy fiduciary relationship with the owner of the properties and prevent them from being tempted to take advantage of their position *Contracts prohibited by law are VOID and CANNOT BE RATIFIED. Neither can set up a defense for illegality be waived. Sec.20 Spouse The FC vests the power to administer, alienate, or encumber the community property and conjugal partnership property in both spouses. In case of disagreement – the husband’s decision shall prevail. -wife’s remedy of recourse within 5 years from the execution of the contract -any alienation or encumbrance by one spouse without the consent of the other shall render the contract void. GR. Transfers are void. UNLESS there has been: a) separation of property agreed upon the marriage settlement or b) ordered by the court. Sec.21 Executors, Guardians, Etc. Executors – administer the property pertaining to the estate, do not administer the hereditary rights of any heir. *Right is vested entirely in the heirs who retain and transmit it in whole or in part, independent of the executor. Does not form part of the property delivered to the executor for administration.

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Sales – SY 2010 Atty. Joanne Cañete-Chan Executor can buy the hereditary rights of an heir to the estate under his administration. Guardianship – trust of the highest order *Trustee can not be allowed to have any inducement to neglect his wards interest. *When guardian acquires property through an intermediary, he violates the law, and such transaction and subsequent one shall be ANNULLED *It is essential to prove actual collusion between the guardian and the purchaser to buy the property for the guardian. Sec. 22 Agent Agent – one who accepts another’s representation to perform in his name certain acts of more or less transcendency ( Surpassing others; preeminent or supreme.) Broker - a mere go-between or middleman between the seller and the buyer bringing them togerher to make the contract themselves. Sec. 23 Public Officers, Judges Etc. Prohibition refers to properties that the administration of which have been entrusted to them. Intention: to remove any occasion to fraud but also surround them with the prestige necessary to carry out their functions by freeing them from all suspicion which although unfounded, tends to discredit the institution by putting into question the honor of said functionaries. Justice of SC and CA- incapacity extends to properties or rights in litigation in their territorial jurisdiction Judge of CFI – can buy properties in litigation pending outside his territorial jurisdiction; *Prohibition extends to properties levied upon execution before the court within whose territorial jurisdiction they exercise their respective function. Sec. 24 Lawyers Intention: to curtail any undue influence of the lawyer on his client on account of their confidential association. *When property in litigation was sold by a party in case to the lawyer representing him in such litigation during the pendency of the same, sale was VOID and cannot be cured by ratification. *If judgment became final, assignment to the lawyer by his client of an interest in the property litigated does not violate the prohibition. -Any person may invoke the inexistence of the contract whenever judicial effects founded thereon asserted against him. Sec. 25 Indigenous Cultural Communities(ICC)/ Indiginous Peoples Ancestral domains of ICC belong to all generations and cannot be sold or disposed -EXC to/among of the same, subject to their customary laws and traditions Organic Act of ARMM and CAR: lands of ancestral domain titled or owned by an indigenous cultural community shall not be disposed of to non-members -UNLESS authorized by the Regional Assembly Public Land Act

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Sales – SY 2010 Atty. Joanne Cañete-Chan Conveyances of lands acquired under it by illiterate non-Christian or literate nonChristians where the instrument of conveyance is in a language is not understood by said non Christian shall not be valid. -UNLESS duly approved by the National Commission on Indigenous People. ii. Rubias v. Batiller No. L-35702 May 29, 1973
FACTS: On Aug. 1964, Plaintiff Domingo D. Rubias (Rubias), lawyer, filed a suit to recover the ownership and possession of certain lot in Viejo, Iloilo which he brought from his father in law, Francisco Militante (Militante) in 1956 against it present occupant Isaias Batiller(Batiller), who alleged entered the lot on two occasions (1945 and 1959). Batiller counter-claim that Rubias does not state a cause of action and he and his predecessors in interest have always been in actual, open and continuous possession of the property since time immemorial. The trial court issued a pre-trial order. During the said pre trial the parties agreed that following facts are attendant in this case. It was said that Francisco Militante claimed ownership of the land which he caused to be surveyed in 1934 and was issued a plan PSU 99791 where the land contained 171.3561 hectares. Before the war with Japan, Militante filed with CFI of Iloilo an application for registration of title of the land but was opposed by Director of Lands, Director of Forestry and other oppositors. During the war with Japan, the records of the case was lost and Militante petitioned to reconstitute the records of the case. CFI dismissed the application for registration and he appealed. Pending disposal of the appeal, Militante sold the lot to Rubias and was duly recorder in the Office of Register of Deeds of Iloilo. Militante executed a deed of sale and sold to Rubias, his son in law, for the sum of P2,000 the untitled land. On Sept 1958, CA confirmed the decision of dismissing the application of registration filed by Militante. The land claimed by Isaias Batiller as his own on June 1956 and approced by the Director of Lands on Nov. 1956. On Apr. 1960, plaintiff filed forcible entry and detainer against Batiller in the Justice of Peace Court of Iloilo. The Municipal court ruled in favour of Batiller. Rubias appealed and the court ruled again in favour of Batiller. During the trial, Rubias claims that the land he purchased from Militante was formerly owned by Demontaño. On Sept 1919 the land was sold at public auction by virtue of a civil case. Yap Pongco was the purchaser and the sale was registered and a deed of sale was executed by the Sheriff Canto in favour of Pongco on Feb. 1934.On Sept. 1934, Pongco sold this land to Militante by a notarial deed which was registered in Registry of Deeds on May 1940. Defendant claimed that the land was owned by Felipe Batiller grandfather of the defendant, who was succeeded by Basilio Batiller on the death of the former in 1920 as his sole heir. Isaias Batiller succeeded his father in the ownership and possession of the land in 1930 up to present. The predecessors in interest of the plaintiff has never been in actual possession of the land had never had title thereto. And the land was subject to free patent application of the defendant was approved. The Appelate court related more development in the case, the defendants counsel manifested that the property in dispute which plaintiff allegedly bought from his father in law, Francisco Militante was the subject matter in LRC No. 695 filed in CFI Iloilo which was brought on appeal to this court in which plaintiff was the counsel on record of his father in law, Francisco Militante. Invoking Art. 1409 and 1491 of the civil code,” Art. 1409 The following contracts are inexistent and void from the beginning XXX (7) those expressly prohibited or declared void by law. Art. 1491 The ff. Cannot acquire any purchase, even at a public or judicial auction, either in person or through the mediator of another: XXX (5) Justices, Judges, Prosecuting Attorneys, Clerk of Superior and Inferior Courts and other officers and employees connected with the administration of justice, the property and rights

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Sales – SY 2010 Atty. Joanne Cañete-Chan
in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective function; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights may be the object of any litigation in which they may take part by virtue of their profession.” Defendant claims that the plaintiff could not have acquired any interest in the property as the contract he (plaintiff) had with Militante was inexistent and void. Plaintiff strongly opposed defendant’s motion to dismiss. The lower court ordered dismissing plaintiffs complaint, agreed with defendant’s contention that the contract between the plaintiff and Militante was null and void. Plaintiff filed MR but was denied and hence this appeal. ISSUE: W/N the Contract of Sale between appellant and his father in law, Militante over the property was void because the plaintiff was the counsel of his father in law in a land registration case involving the property in dispute? HELD: When CA dismissed the application of registration of the land, the lack of any rightful claim or title of Militante to the land was conclusively and judicially determined. Hence there was no right or title to the land that could be transferred or sold by Militante’s purported sales in 1956 in favour of the plaintiff. Plaintiffs purchase of the property in litigation from his client was void and could produce no legal effect under Art. 1409 par. 7 Civil Code provides that contracts “expressly prohibited and declared void by law” are “inexistent and void from the beginning” and “that these contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.” Art. 1491 Civil code prohibits certain person, by reason of the relation of trust or their peculiar control either directly or indirectly and “even at a public or judicial auction” as follows 1) guardian 2) agents 3) administrators 4) public officers and employees 5)judicial officers and employees,prosecuting attorneys and lawyers 6) others specially disqualified by law. Criterion of nullity of contracts under 1491 was a matter of public order and policy. This was adopted to Art. 1409 declaring such contracts as “inexistent and void from the beginning.” Such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit compromise and ratification. The permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from 1st three cases of guardians, agents and administrators. It may be “ratified” by means of and “in the form of a new contract, in which case its validity shall be determined only by circumstances at the time of the execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been cleared by the parties. The ratification or 2nd contract would then be valid from its execution; however, it does not retroact to the date of the 1st contract.

IV Price a. Article 1469-1474
Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons. Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. If the third person or persons acted in bad faith or by mistake, the courts may fix the price.

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Sales – SY 2010 Atty. Joanne Cañete-Chan
Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be. (1447a) Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n) Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n) Art. 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain. (1448) Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. (1449a) Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. (n)

i.Notes: (Baviera p.49-53) IV. Price A. In general Sec. 53 Necessity of a Price Contract of sale is null and void and produces no effect – if the same is without cause or consideration or the price which appears to have been paid has in fact never been paid -permanent and incurable The statement of false cause in contracts – VOID if it should not be proven that they were founded upon another cause which is true and lawful Fraud or Badfaith – VOIDABLE it is binding until annulled Sec. 54 Inadequacy of Price Gross Inadequacy of the price – does not affect a contract of sale EXCEPT may indicate a defect in consent Parties really intended a donation or some other act or contract. When contract is entered by a guardian of a ward or a representative of an absentee -the owner suffers lesion (damage) by more than ¼ of the value of the thing sold –RECISSIBLE unless approved by the court -naturally suggests fraud Evidence: sufficient to show when taken in connection with other circumstances such as ignorance or the fact that one of the parties has an advantage over the other. 19

Sales – SY 2010 Atty. Joanne Cañete-Chan Bargain coupled with inadequacy of price when both of the parties are in a position to form an independent judgment concerning the transaction – NOT sufficient ground for the annulment of the contract. When transaction is invalidated on the ground of inadequacy of price or inadequacy shocks the conscience as to justify the courts to interfere. -DOES NOT FOLLOW when the law gives to the owner the right to redeem; when there is right to redeem, inadequacy of price is not material because judgment debtor may reacquire the property or else sell his right to redeem and thus recover the loss he claims to have suffered of price obtain in public auction Where a public auction has been fairly and regularly made and confirmed by trial court. –should not be set aside for inadequacy of price alone, without a proper showing that in the event a resale was made, the property would sell at an increased price - UNLESS inadequacy be so great as to shock the conscience of the court Special grounds must be laid: fraud and collusion, accident, mutual mistake, breach of trust or misconduct on the part of purchaser or other party connected with the sale, which has worked injustice to the party complaining and was unknown to him at the time the sale was confirmed. Sec.55 Definiteness and certainty Fixing of the price can never be left to the discretion of one of the contracting parties. If the price is fixed by one of the parties is accepted by the other, the sale is PERFECTED. Price considered certain – when the price agreed upon is that which the thing sold would have on a definite day or in a particular exchange or market or could be determined with reference to another thing certain. (ie 10% below the inventory price, 10% below the invoice price) Determination of the price may be left to the judgment of specified persons. If unable or unwilling to fix the price – INEFFICACIOUS contract Where 3rd persons are prevented from fixing the price by fault of the seller or the buyer, the party at fault shall be answerable for damages based on fraud. If 3rd persons acted in bad faith or made a mistake – the aggrieved party may impugn such determination and the court may fix the price. If in the opinion of the party, 3rd person incurred a mistake – cannot be impugned because persons are bound to have differences in judgment. Where price can not be determined in any manner – CONTRACT IS INEFFICACIOUS -if thing has been delivered w/o arriving at a price – buyer must pay a reasonable price or the true value of the thing on the principle of unjust enrichment. B. Medium of Payment Sec. 56 In Money or its equivalent Price – payable in money or its equivalent (letters of credit) --otherwise transaction may be barter or an innominate contract

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Sales – SY 2010 Atty. Joanne Cañete-Chan If price consists of a life annuity or obligation to give support – not SALE because the price is a prestation w/c cannot be certain. Dation in payment Sale Presupposes a previous credit and Obligations are created from the extinguishes the obligation perfection of the contract Fixing of the price is more or less arrived at with ample contractual freedom than the value of the thing given in the former
If consideration is partly money and partly in another thing -depends upon the intention of the parties whether they intended it to be sale or barter -does not clearly appear –BARTER – if value given as part of the consideration EXCEEDS the amount of the money or its equivalent -the true cause of the contract for the other party is the thing transferred to him and not the money; OTHERWISE it is a SALE Sec. 57 Earnest Money Absence of express stipulation to the contrary, earnest money or token is given in a contract of sale – considered as part of the price and as proof of the perfection of the contract, & not a penal clause. Parties may stipulate that earnest money be regarded in both senses. Sec. 58 Under Prior laws Partdas: EM given in a contract of purchase and sale is considered as a penal clause or as an ostensible sign of the perfection of the contract. -first case: fulfilment or non-fulfillment of the contract is dependent on the will of the parties, subject to the penalty that the buyer loses the earnest money or the vendor returns double the amount, as the case may be. The sale was not perfected upon the giving of the earnest money; only the penal clause is effective. 2nd case: the parties were bound to comply with the contract of sale which became absolutely perfected and the giving of the EM was an ostensible and material sign of proof and perfection of the contract. Spanish Code: Whenever EM or token has been given in a contract of purchase and sale, the contract may be RESCINDED If the vendee shall agree to forfeit it or the vendor to return double the amount. – RECISSIBLE upon the will of the parties. However the giving of the price can not be presumed to be EM unless such was the intention of the parties. Spanish Code of Commerce: EM given in commercial sales- considered paid on account of the price and as proof of the ratification of the contract UNLESS there was agreement to the contrary. Embodied by NCC.

b. “Earnest Money” as compared to “Option”, Articles 1482, 1479

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. (1454a) Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

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Sales – SY 2010 Atty. Joanne Cañete-Chan
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. (1451a)

i.

Sanchez v. Rigos No. L-25494 June 14, 1972
FACTS: On April 3, 1961, Plaintiff Nicolas Sanchez and defendant Severina Rigos executed Option to Purchase whereby Rigos agreed, promised and committed to sell to Sanchez a parcel of land in San Jose, Nueva Ecija for P1510. In the agreement it is said that the option shall be deemed terminated and elapsed within 2 years and if Sanchez shall fail to exercise his right to buy the property. Several payments were made by Sanchez within the said period, but were rejected by Rigos. On Mar. 12, 1963, Sanchez deposited the amount with CFI and commenced the present action for specific performance and damages The defendant’s special defense was that the contract between the parties “is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the NCC, is null and void. On Feb. 11, 1964, both parties moved for judgment. The lower court rendered judgment for Sanchez, ordering Rigos to judicially consigned by him and to execute, his favor the deed of conveyance. Rigos was sentenced to pay P200 attorney’s fees and the costs and hence this appeal. ISSUE: W/N the contract was an “option to purchase”? HELD:

The case hinges on the proper application of 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 sell a determinate thing is supported by a consideration distinct from the price. “ The court said that although the defendant had “agreed, promised and committed” herself to sell the land to the plaintiff, it is not true that the latter had, in turn, “agreed and committed herself” to buy the property. The promise did not impose upon the plaintiff the obligation to purchase the defendant’s properties. The contract is not a contract to buy and sell, it merely granted plaintiff an “option to buy”. Both parties understood it, as indicated by the caption “Option to Purchase” given by them in the instrument. Also the contract did not mention that the agreement, promise and undertaking in is supported by a consideration “distinct from the price” stipulated for the sale of land. Under Art. 1354, the lower court presumed the existence of said consideration which is the main factor that influenced the decision in plaintiff’s favor. However it should be noted that: 1) Art. 1354 applies to general contracts whereas the 2nd par. Of Art. 1479 refers to “sales” in particular “an accepted unilateral promise to buy or sell” Art. 1479 is controlling in the case at bar. 2) that said unilateral promise “may be binding” upon the promisor, Art. 1479 requires the concurrence of a condition, namely, that the promise be “supported by a consideration distinct from the price.” Accordingly, the promise can not compel the promisor to comply with the promise, unless the former establishes the existence of a distinct consideration. The promisee has the burden of proving such consideration which was not alleged in his complaint. 3) 22

Sales – SY 2010 Atty. Joanne Cañete-Chan the defendant averred that the absence of consideration for her promise to sell and by joining in the petition for a judgment on the pleadings the plaintiff has impliedly admitted the truth of said averment in defendants answer. The court said that there may no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly withdraw from it. Pending notice of its withdrawal, his accepted promise partakes however of an offer to sell which, if accepted results in a perfected contract of sale. In Statutory Construction, provision of the same should be reconciled. In avoiding conflict between Art. 1324 – general principles of contracts – and Art. 1479 – on sales – it is a cardinal in statcon that in construing different provisions of one and the same law, such interpretation should be favoured as will reconcile and harmonize the said provision and avoid conflict between them. The decision of Southwestern Sugar & Molasses Co v. Atlantic Gulf in holding Art. 1324 is modified by Art. 1479 of the Code, considers the latter an exception to the former, and exception are not favoured unless the intention to the contrary is clear. Earnest Money Part of the purchase price (Art. 1479 par.2) Option Money Money given as distinct consideration for the option contract Given only when there is already Applies to a sale not yet perfected a sale Is given, the buyer is bound to When the would-be buyer gives pay the balance option money, he is not required to buy *may become earnest money if parties so agree. V. Subject Matter of Sale a. Article 1459-1465, Article 1181
Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. (n) Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. (n) Art. 1461. Things having a potential existence may be the object of the contract of sale.

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Sales – SY 2010 Atty. Joanne Cañete-Chan
The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. (n) Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n) Art. 1463. The sole owner of a thing may sell an undivided interest therein. (n) Art. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears. (n) Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n) 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. (1114)

i.Notes: (Baviera p.37-42) III. Subject Matter of Sale A. Must Be Licit Sec. 39 In General Object of sale must be licit and within the commerce of men Examples of Prohibited by law: narcotics and dangerous drugs, sale of wild animals or rare plants protected by law, tubli or other poisonous plants or fruits, dynamited fish, explosives and ammunition More examples of outside commerce of men: • Properties belonging to the State or its political subdivisions – intended for public use or service or for development of natural wealth. • Churches • Rivers • Patrimonial Property of the State – when property no longer intended for public use or service B. Must be Determinate Sec. 41 Meaning of Determinate

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Sales – SY 2010 Atty. Joanne Cañete-Chan -when it is particularly designated or physically segregated from all others of the same class or is capable of being made determinate without the necessity of a further agreement between the parties. - to cover generic things, future goods and undivided interest (Civil Code expanded the meaning) Sec. 42 Under the Old Civil Code Determinate is the same meaning on obligation ie. Specific opposed to indeterminate or generic. Thus is sale is by description and goods have not be physically segregated – mere contract to sell and not a perfected sale. Distinction was important to Old Civil Code. If object of sale was specific or fungible, it had already weighed, counted or measured, the risk of loss is imputable to the vendee, even before delivery of the thing. C. Particular Kinds Sec. 43 Future Goods May be the object – goods are still to be manufactured, raised or acquired by the seller AFTER the perfection of the contract of sale Things having potential or possible existence as the natural increment of something already belonging to the seller (i.e grain in ricefield, wool that may grow on sheep) Sale of a mere hope of expectance (ie. “the next catch”of a fisherman) – deemed subject to the condition that thing will come to existence. -different from roman law on the sale of hope of expectancy (venditio sempei) Effect: the sale is effective even if the thing does not come into existence because the object of the contract is the hope or expectancy. Sec. 44 Sale of Undivided Interest or Share Sole owner of a thing may sell an undivided interest Sale of an undivided share in a specific mass of fungible goods results in making the buyer a co-owner of the entire mass in proportion to the amount bought by him, and if the mass contains less than the amount bought, the seller is bound to make good the deficiency from goods of the same kind and quality, unless intent appears. Co-owner cannot sell more than his share Sec. 45 Sale of things in Litigation Recissible – sale of things under litigation entered into by a defendant without the knowledge and approval of the litigants or of the court Recission cannot take place when things are legally in the possession of 3rd persons who did not act in bad faith. If movable property sold by the defendant without the knowledge and approval of the plaintiff or the court, the sale can not be rescinded if the purchaser did not know the thing is involved in litigation. In action affecting the right of possession of real property -the plaintiff may record in the office of the registrar of deeds of the province in which the property may be situated, a notice of pendency of action -from the time of filing of notice, third persons are charged with notice of the litigation, and takes the property subject to the outcome of the litigation Sec. 46 Things subject to Resolutory condition May be subject of a contract of sale 25

Sales – SY 2010 Atty. Joanne Cañete-Chan Things acquired under a legal or conventional right of redemption, or subject or reserva troncal During the period of legal or conventional redemption, the vendee a retro may sell the property to another. Should the vendor a retro redeem the property, he can recover it from the subsequent purchaser without prejudice to the provisions of Land Registration Act, requiring previous registration to the right to redeem. Req. Of registration – to enable redemptioner to recover the property from a subsequent purchaser -not applicable to unregistered lands. Lands acquired under homestead or free patent where the patentee or his heirs invoked their right of legal redemption Property subject to reserva troncal is subject to a resolutory condition that the reservee will outlive the reservor. The latter during his lifetime , sell the property to another. The sale will be extinguished, in case the reserve should outlive the reservor. ii. “Documents of title to goods” (Baviera p.8) Bill of Lading, dock warrant, “quedan” or warehouse receipt or order for the delivery of goods,or * any other document used in the ordinary course of business in the sale of transfer of goods as proof of possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or delivery, the goods represented by such document. The Uniform Sales Act was incorporated with the Civil Code: Sec. 47 of Warehouse Receipt “ the validity of a receipt is not impaired ... such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the receipt was induced by fraud, mistake, or duress to intrust the possession or custody of the receipt to such person, if the person to whom the receipt was subsequently negotiated, paid value therefor, without notice of breach of duty, or fraud, mistake or duress” Art. 1518 of NCC “the validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was breach of duty on the part of the person making the negotiation, or by the fact that the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake duress, or conversion, if the same by the person to whom the document was negotiated or a person to whom the document was subsequently negotiated or a person to whom the document was subsequently negotiated paid value therefor in goodfaith without notice of the breach of duty or loss, theft, fraud, accident, mistake, duress or conversion” b. Article 1539, 1542, Sale of real estate where there is greater or lesser area

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Sales – SY 2010 Atty. Joanne Cañete-Chan
Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules: If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated. The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract. The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold exceeds one-tenth of the price agreed upon. Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area of inferior quality, he may rescind the sale. (1469a) Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less area or number than that stated in the contract. The same rule shall be applied when two or more immovables as sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. (1471)

c. Article 1543, Prescription of Action
Art. 1543. The actions arising from Articles 1539 and 1542 shall prescribe in six months, counted from the day of delivery. (1472a)

VI. Delivery of movable property a. Article 1477-1478, 1480, 1496, 1497 1588 general provisions on transfer of ownership; res perit domino The maxim res perit domino means the thing perishes for the owner. The maxim refers to the contractual principle that risk in the goods pass with ownership.
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. (n) Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. (n)

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Sales – SY 2010 Atty. Joanne Cañete-Chan
Art. 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by Articles 1163 to 1165, and 1262. This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number, or measure. Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay. (1452a) Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n) Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. (1462a) Art. 1588. If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's refusal to accept the goods is without just cause, the title thereto passes to him from the moment they are placed at his disposal. (n)

i.
•

Chrysler Phils. Corp. v. CA G.R. No. L-55684 December 19, 1984

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• •

•

FACTS: Petitioner is a domestic co. engaged in assembling and sale of motor vehicles and automotive products. Respondent Sambok Motors Co., a general partnership, dealer for automotive products with offices at Bacolod (Sambok, Bacolod) and Iloilo (Sambok, Iloilo) These two offices were run by Miguel Ng, Asssistant Manager for Sambok, Bacolod and elder brother Pepito Ng, President. Sept. 1972, Petitioner filed with CFI Rizal a complaint for Damages against Allied Brokerage Co., Negros Co. and Sambok, Bacolod, alleging that on Oct. 1970, Sambok, Bacolod ordered from Chrysler various automotive products worth P30,909.61, payable in 45 days. On Nov 1950, Chrysler delivered the products to its forwarding agent, Allied Brokerage Co. for shipment and loaded the goods on M/S Dona Florentina, owned by Negros Navigation, for delivery to Sambok, Bacolod. When Chrysler tried to collect the payment Sambok, Bacolod refused to pay claiming that it had not received the merchandise; and Chrysler demanded the return of the merchandise or their value from Allied Brokeraga and Negros Navigation, but both denied liability. Sambok, Bacolod, denied having received the products and professed no knowledge of having ordered from Chrysler. Trial Court rendered dismissing the complaint against Negros Nav. For lack of COA, but finding Sambok, Bacolod liable for the claim of petitioner. Also found Sambok, Bacolod, “in refusing to take delivery of shipment for justifiable reason from Negros Nav. Despite having received the Bill of Lading constituted wrongful neglect or refusal to accept and pay for the subject shipment, by reason Sambok motors held liable for damages.” Sambok, Bacolod appealed and set aside the appealed judgment and dismissed petitioner’s complaint, after finding that the latter had not performed its part of the obligation under the contract by not delivering the goods at Sambok, Iloilo, the place designated in the Order Form and must suffer the loss. Appellate Court found that there was misdelivery. Hence this petition.

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Sales – SY 2010 Atty. Joanne Cañete-Chan
ISSUE:W/N there was delivery ? HELD: Matter of misdelivery is not the decisive factor for relieving Sambok, Bacolod of liability. Under the order form it indicated Iloilo as the destination as testified by Ordonez,Sales Rep. And made by Pepito Ng through his marketing consultant. Upon receipt of the Bill of Lading, Sambok, Bacolod initiated but did not pursue the steps to take the delivery as advised by Negros Nav. Because some parts were missing. It was only 4 years later, when a warehouseman of Negros Nav., Aguarte found in their offshore bodega the parts of the shipment in question but was already deteriorated and valueless. Sambok, Bacolod cannot be faulted for not accepting or refusing to accept the shipment from Negros four years after shipment. The evidence is clear the Negros could not produce the merchandise nor ascertain its whereabout at the time Sambok was ready to take delivery. Where the sellers delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them. Negros was negligent in failing to deliver the complete shipment to Sambok but the Trial Court found, Chrysler failed to comply with the condition precedent to the filing of a judicial action. It is the petitioner (Chrysler) failed to comply with the conditions precedent to the filing of judicial action. Petitioner must shoulder the resulting loss. As a GR that before, delivery, the risk of loss is home by the seller who is still the owner under the principle of res perit domino is applicable. Judgment of CA is sustained on non delivery since the merchandise was never placed in the control and possession of Sambok, Bacolod.

ii.

Union Motors Co. v. Sps. Bernal G.R. No. 117187 July 20, 2001

FACTS: Sps. Bernal purchased from petitioner Union Motors Co.(Union) one jeepney for P37,758.60 to be paid in instalments. Sps. Bernal executed a promissory note and a deed of chattel mortgage in favor of Union. Union entered into a contract of assignment of promissory note and chattel mortgage with Jardine-Manila Finance Inc. (Jardine), through Manuel Sosmeña, agent of Union, the parties agreed that Sps. Bernal would pay the amount of promissory note to Jardine, latter being the assignee of the petitioner. To effectuate the sale, Sps. Bernal were required to sign the documents (assignment of PN, deed of assignment, sales invoice, registration certificate, affidavit and disclosure statement), according to Sosmeña, it was a requirement to Union and Jardine for the respondent Sps. to accomplish all said documents in order to have the application approved. Sps paid the downpayment of P10,037.00 and the petitioner’s acceptance of the same approved the sale. Sps. have not yet physically possessed the vehicle but Sosmeña required them to sign the receipt as a condition for the delivery of the vehicle. Sps. Bernal continued paying the agreed instalments even if the Jeep remained undelivered inasmuch as Jardine promised to deliver the vehicle. Sps. have paid a total of P7,507.00 worth of instalments before they discontinued paying on account of non-delivery of the jeep. According to Sps. Bernal, the vehicle was not delivered because Sosmeña allegedly took the subject motor vehicle in his personal capacity. On Sept. 1981 , Jardine filed a complaint for a sum of money against the Sps. Bernal before the CFI of Manila. The case was transferred to RTC of Makati and was amended to include petitioner Union as alternative defendant because Sps. refusal to

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Sales – SY 2010 Atty. Joanne Cañete-Chan
pay Jardine was due to Union’s nondelivery of the unit and pay Jardine what has been advanced to the petitioner. Union and Sps. filed their claims against Jardine. After Jardine’s presentation of evidence, the Sps. Bernal presented as witnesses. Petitioner did not present any witnesses because of repeated failure to appear for hearings. Trial court deemed the presentation of witnesses have been waived. The Trial Court ordered plaintiff to pay Sps. Bernal P7,507.15 plus legal interest and Union to pay them of the downpayment P10,037. Also Union to pay plaintiff 23,268.29 and attorney’s fees. Union shallfurther pay Sps. 20,000 as moral damages and 10,000 attorneys fees. Petitioner appealed to CA and Sps appealed to hold petitioner solidarily liable with Jardine. The appellate court denied and affirmed trial courts decision holding that defendant had failed to adduce evidence in court to support its claim for non-liability. Hence this petition. ISSUE: Whether there has been a delivery, physical or constructive of the jeep? No. HELD: Sps. Bernal did not come into possession of the Jeep that was supposed to be delivered to them by the petitioner. The registration cert., receipt and sales invoice that the Sps. signed was explained in the hearing. According to the evidence, the documents were signed as part of the processing and for the approval of their application to by the Jeep. Without such documents, no sale, much less delivery of the subject jeepney could be made. The documents were not an acknowledgement by respondent spouses of the physical acquisition of the jeep but merely a requirement of petitioner so that the jeep would be delivered to them. The court ruled that the issuance of a sales invoice does not prove transfer of ownership of the thing sold to buyer, an invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. The registration cert. Signed by the Sps. does not conclusively prove that the constructive delivery was made nor that ownership has been transferred to the Sps. this was qualified by the fact that it was a requirement of the petitioner for the sale and financing to be approved. In all forms of delivery, it is necessary that the act of delivery, whether constructive or actual, should be coupled by the intention of delivering the thing. The act without the intention is insufficient. The critical factor in the different modes of effecting delivery which gives legal effect to that act, is the actual intention on the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition. Addison v. Felix and Tioco: in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor; symbolic delivery through the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality the delivery has not been effected. (Italics supplied) The act of signing the registration certificate was not intended to transfer the ownership of the jeep to Sps. Bernal, the petitioner needed the same for the approval

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Sales – SY 2010 Atty. Joanne Cañete-Chan
of financing contract with Jardine. The fact that the registration certificate was kept by Jardine and unhesitating move to give the same to Sosmeña just shows that the Sps. still had no complete control over the subject motor vehicle as they did not even possess the certificate of registration nor consent was sought when Jardine handed over the said document to Sosmeña. There was neither physical of constructive delivery of determinate thing (in the case, subject motor vehicle), the thing sold remained at the seller’s risk. The petitioner should bear the loss of the subject motor vehicle after Sosmeña allegedly stole the same. Reliance on the Chattel Mortgage by the petitioner does not held its assertion of ownership has been transferred to the Sps. since there was neither delivery nor transfer of possession of the subject motor vehicle to the Sps. the CM has no legal effect, Sps. were not absolute owners, ownership of the mortgagor being an essential requirement for valid mortgage contract.

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