Law on Sales

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ATENEO de Manila LAW SCHOOL

LAW ON SALES OUTLINE[1] Dean Cesar L. Villanueva First Semester, SY 2009-2010 and Atty. Alexander C. Dy

I. The Nature of Sale

A. Definition (Art. 1458)

Sale is a contract by which one of the contracting parties obligates himself to transfer the ownership[2] and to deliver possession, of a determinate thing, and the other to pay therefor a price certain in money or its equivalent. xCruz v. Fernando, 477 SCRA 173 (2005).[3]

1. Elements of Sale

Elements of sale: (a) consent or meeting of the minds; (b) determinate subject matter; and (c) price certain in money or its equivalent. xNavarra v. Planters Dev. Bank, 527 SCRA 562 (2007).[4]

Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288 (1999),[5] even when earnest money has been paid. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).

Sale being a consensual contract, its essential elements must be proven xVillanueva v. CA, 267 SCRA 89 (1997); but once proven, a sale’s validity is not affected by a previously executed fictitious deed of sale xPeñalosa v. Santos, 363 SCRA 545 (2001); and the burden is on the other party to prove otherwise. xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001).

2. Stages of Contract of Sale

Policitacion covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected. Perfection takes place upon the concurrence of the essential elements, which are the meeting of the minds of the parties as to the object of the contract and upon the price. Consummation begins when the parties perform their respective undertakings, culminating in the extinguishment thereof. xSan Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).[6]

3. Sale Creates Real Obligations “To Give” (Art. 1165)

4. Essential Characteristics of Sale:

a. Nominate and Principal

A contract of sale is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. xSantos v. Court of Appeals, 337 SCRA 67 (2000).[7]

b. Consensual (Art. 1475)

A contract of sale is not a real, but a consensual contract, and becomes valid and binding upon the meeting of the minds of the parties as to the object and the price[8], that:

• Upon its perfection, the parties may reciprocally demand performance. xHeirs of Venancio Bejenting v. Bañez, 502 SCRA 531 (2006);[9] subject only to the provisions of the law governing the form of contracts. xCruz v. Fernando, 477 SCRA 173 (2005).

• It remains valid even if parties have not affixed their signatures to its written form xGabelo v. CA, 316 SCRA 386 (1999), or the manner of payment is breached. xPilipinas Shell Petroleum Corp v. Gobonseng, 496 SCRA 305 (2006).

The binding effect of sale is based on the principle that the obligations arising therefrom have the force of law between the parties. xVeterans Federation of the Philippines v. Court of Appeals, 345 SCRA 348 (2000).

Perfection Distinguished from Demandability – Not all contracts of sale become automatically and immediately effective. In sales with assumption of mortgage, there is a condition precedent to the seller’s consent and without the approval of the mortgagee, the sale is not perfected. xBiñan Steel Corp. v. Court of Appeals, 391 SCRA 90 (2002).

“No Contract Situation” versus “Void Contract” – Absence of consent (i.e., complete meeting of minds) negates the existence of a perfected sale. xFirme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003). The contract then is null and void ab initio, absolutely wanting in civil effects; hence, it does not create, modify, or extinguish the juridical relation to which it refers. xCabotaje v. Pudunan, 436 SCRA 423...
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