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Note: The presumption is in favour of an emptio rei speratae. • A full owner may sell the usufruct of his land leaving the naked
ownership to himself.
• Vain Hope or Expectancy
If the hope or expectancy itself is vain, the sale is itself VOID. Be • Asian Terminals, Inc. v. Philam Insurance Co., Inc. 702 SCRA 88
it noted that this is NOT an aleatory contract for while in an A letter of credit (L/C) is a financial device developed by
aleatory contract there is an element of chance, here, there is merchants as a convenient and relatively safe mode of dealing
completely NO CHANCE. with sale of goods to satisfy the seemingly irreconcilable interests
of a seller, who refuses to part with his goods before he is paid,
Example: Sale of a losing ticket for a sweepstakes already run. and a buyer, who wants to have control of his goods before
Exception: If the ticket be a collector’s item. paying
Article 1462. Sale of Goods Article 1464. Sale of Share in a Specific MassGoods
The goods which form the subject of a contract of sale may be either In the case of fungible goods, there may be a sale of an undivided share
of specific mass, though the seller purports to sell and the buyer to buy a 1) A’s right is registered
definite number, weight or measure of the goods in the mass, and 2) Or even if not, if C had actual knowledge of the right of
though the number, weight or measure of the goods in the mass in redemption. (It has been held that actual knowledge is
undetermined. By such sale the buyer becomes owner in common of equivalent to registration)
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 Article 1466. Distinctions Between a ‘Contract of Sale’ and an ‘Agency
contains less than the number, weight or measure bought, the buyer to Sell’ (like a Consignment for Sale)
becomes the owners of the whole mass and the seller s bound to make
good the deficiency from goods of the same kind and quality, unless a In construing a contract containing provisions characteristic of both the
contrary intent appears. contract of sale and of the contract of agency to sell, the essential
clauses of the whole instrument shall be considered.
• Example: In a stock of rice, the exact number of cavans of which
is still unknown, Jose buys 100 cavans. If there are really 150, Contract of Sale Agency to Sell
Jose becomes the co-owner of the whole lot, his own share being Price The buyer pays the price The agent delivers the price
2/3 thereof. which in turn he get from his
buyer
• Forest Hills Golf and Country Club v. Vertox Sales and Trading, Ownership The buyer after delivery The agent who is supposed
Inc., 692 SCRA 706 becomes the owner to sell does not become the
The corporation whose shares of stocks are subject of a transfer owner, even if the property
transaction (through sale, assignment, donation or any other has already been delivered to
mode of conveyance) need not be a party to the transaction. him
Warranty The seller warrants The agent who sells assumes
However, to bind the corporation as well as third parties, it is no personal liability as long
necessary that the transfer is recorded in the books of the as he acts within his
corporation. authority and in the name of
the principal.
Article 1465. Sale of Things Subject to a Resolutory Condition
• Example:
Things subject to a resolutory condition may be the object of the contract X acquired a booklet of 10 sweepstakes tickets directly from the
of sale. office of the PCSO. X paid P1,800 for the booklet, less the customary
discount. What was the legal nature of X’s act in acquiring the
Examples: tickets? Did he enter into a contract of purchase and sale? Briefly
a) A property subject to reservatroncal may be sold. explain your answer.
b) A usufruct that may end when the naked owner becomes a lawyer
may be sold ANS.: Yes, X entered into a contract of purchase and sale,
c) A sold B the former’s land a retro. After delivery to B, B becomes an notwithstanding the fact that he may be referred to as “agent” of
absolute owner subject to the right of redemption. This land may be the Sweepstakes Office, and the fact that he may be entitled to an
sold by B to C, a stranger, subject to the right of redemption; i.e., C “agent’s prize” should one of the tickets purchased win a principal
must respect the right of A to redeem the property within the prize. The truth is that he is not required to re sell the tickets, and
stipulated period if: even if he were to do so, still failure on the part of his purchasers to
pay will not allow him to recover what he himself has paid to the HELD: This was an AGENCY TO SELL despite the disclaimer in
office. Moreover, the delivery of the tickets to him transferred their the contract referring to the non-representation. What is important
ownership to him; this is not true in the case of an agency to sell. is that the US Rubber International retained ownership over the
Furthermore, it has been said that in a contract of sale, the buyer goods, and the price subject to its control, despite the delivery.
pays the price; while in agency to sell, the agent delivers the price.
The mere fact that a “discount” or so called commission has been Article 1467. Contract of Sale or a Piece of Work
given is immaterial. (Quiroga v. Parsons Hardware Co., 38 Phil. 501)
A contract for the delivery at a certain price of an article which the
• Quiroga v. Pasons Hardware Co., 38 Phil. 501 vendor in the ordinary course of his business manufactures or procures
FACTS: Plaintiff granted defendant the right to sell as an “agent” for the general market, whether the same is on hand at the time or not,
Quiroga beds in the Visayas. The defendant was obliged under the is a contract of sale, but if the goods are to be manufactures specially for
contract to pay for the beds, at a discount of 25% as commission on the customer and upon his special order, and not for the general market,
the sales. The payment had to be made whether or not the it is a contract for a piece of work.
defendant was able to sell the beds. Is this a contract of sale, or an
agency to sell? • Rules to determine if the contract is one of sale or a piece of work
a) If ordered in the ordinary course of business – SALE
ANS: This is clearly a contract of sale. There was an obligation b) If manufactured specially and not for the market – PIECE OF
to supply the beds, and a reciprocal obligation to pay their price. An WORK CONTRACT
agent does not pay the price, he merely delivers it. If he is not able
to sell, he returns the goods. This not true in the present contract,
for the price was fixed and there was a duty to pay the same • Schools of taught
regardless as to whether or not the defendant had sold the beds. a) Massachusetts Rule: If specially done at the order of another,
The phrase “commission on sales” means nothing more than a mere this is a contract for a piece of work
discount on the invoice price. The word “agent” simply means that → We follow Massachusetts Rule in the Philippines
the defendant was the only one who could sell the plaintiff’s beds in b) New York Rule: If the thing already exists, it is a SALE, if not,
the Visayas. At any rate, a contract is what the law defines it to be, WORK
and not what it is called by the contracting parties. c) English Rule: If material is more valuable, SALE; if skill is more
valuable, WORK
• Ker and Co., Ltd, v. Jose B. Lingad, L-20871, April 30, 1971
FACTS: In a contract between the US Rubber International • QUERY:
Company and Ker and Co., the former consigned to the latter certain If I ask someone to construct a house for me, is this a contract of
goods to be sold by the distributor. Prior to such sale, the Rubber sale or for a piece of work?
Company would remain the owner. The contract, however, stated
expressly that Ker and Co. was not being made an agent, and could ANS: If he will construct on his own land, and I will get both
not bind the company. the land and the house it would seem that this can be very well
treated as a sale.
ISSUE: Between the 2 entities here, was there as contract of
SALE or one of AGENCY TO SELL? Article 1468. Contract of Sale or Barter
• Rules to determine whether contract is one of sale or barter ANS: Yes, for we cannot say that the consideration or cause of
a) First rule – intent the contract is the illegal currency. The real consideration or cause is
b) If the intent does not clearly appear – still be the VALUE or price agreed upon.
1) If the thing is more valuable than money – BARTER
2) If 50-50 – SALE • Reparations Commission v Judge Morfe, GR 35796, Jan. 31, 1983
3) If thing is less valuable than he money – SALE If a contract for the acquisition of reparation goods does not specify
the conversion rate of the dollar value of the goods, the conversion
rate shall be the exchange rate of exchange prevailing in the free
Article 1469. Certainty of the Price market at the time the goods are delivered.
• If no specific amount has been agreed upon, the price is still
In order that the price may be considered certain, it shall be sufficient considered certain:
that it be so with reference to another thing certain, or that the a) if it be certain with reference t another thing certain;
determination thereof be left to the judgment of a specified person or b) if the determination of the price is left to the judgment of a
persons. specified person or persons;
c) in the case provided for under Art. 1472, Civil Code
Should such person or persons be unable or unwilling to fix it, the
contract shall be inefficacious, unless the parties subsequently agree • Robles v. LizarragaHermanos, 50 Phil. 387
upon the price. If the buyer and seller agreed on a sale and on determining the
price by a joint appraisal, the sale is still valid even if the buyer later
If the third person or persons acted in bad faith or by mistake, the courts on refuses to join the appraisal. The bad faith of the buyer holds him
may fix the price. liable for the true value of the object. The true value can be
established by competent evidence.
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 Article 1470. Gross Inadequacy of Price
have such remedies against the party in fault as are allowed the seller or
the buyer, as the case may be. 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
• The price must be certain; otherwise, there is no true consent donation or some other act or contract.
between the parties
→ There can be no sale without a price • Effect of Gross Inadequacy of Price
→If the price is fixed but is later on remitted or condoned, this is a) In ordinary sale, the sale remains valid even if the price is very
perfectly all right, for then the price would not be fictitious low. Of course, if there was vitiated consent, the contract may
be annulled but only due to such vitiated consent.
→ The fact that the bargain was a hard one is not important, • A simulated price is fictitious. There being no price, there is no cause
the sale having been made freely and voluntarily (Askay v or consideration; hence, the contract is void as a sale. However it is
Cosolan, 46 Phil. 79) enough that the price be agreed on at the time of perfection. A
→ The rule holds true even if the price seems too rescission of the price will not invalidate the sale.
inadequate as to shock the conscience of man. (Alarcon v.
Kasilag, 40 OG Sup. No. 16, p.203) • If the sale of conjugal property is FICTITIOUS and therefore non-
b) In execution of judicial sales – While mere inadequacy of price existent, the widow who has an interest in the property subject of
will not set aside a judicial sale of real property, still the price the sale may be allowed to contest the sale, even BEFORE the
is so inadequate as to shock the conscience of the Court, it will liquidation of the conjugal partnership, making the executor a party-
set aside. defendant if he refuses to do so. (Borromeo v. Borromeo, 98 Phil.
→ As a matter of fact, it may be that the extremely low price 432)
was the result not of a sale but of a contract of loan, with
the price paid as the principal and the object, given
merely as security. In case like this, the contract will be Article 1472. Certainty of Priceof Securities
interpreted to be one of loan with an equitable mortgage.
The remedy would then be the reformation of the The price of securities, grain, liquids, and other things shall also be
instrument. considered certain, when the price fixed is that which the thing sold
→ A buyer at a judicial sale is allowed to resell to others would have on a definite day, or in a particular exchange or market, or
what he has acquired. The mere fact that he demands a when an amount is fixed above or below the price on such day or in such
very high price is of no consequence. exchange or market, provided such amount be certain.
• It is possible that a donation, not a sale, was really intended. In • Example: I can sell to you today my Mont Blanc fountain pen at the
such a case, the parties may prove that the low price is sufficiently price equivalent to the stock quotation 2 days from today of 100
explained by the consideration of liberality. (Art. 1470, last shares of PLDT
paragraph)
• If the stock quotation price 2 days later cannot really be ascertained
Article 1471. Simulated Price at that time, the sale is inefficacious. Note the last clause in the
article – “provided said amounts be certain.”
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. Article 1473. Price Cannot be Left to One Party’s Discretion
• The price must not be fictitious. Therefore, if the price is merely The fixing of the price can never be left to the discretion of one of the
simulated, the contract as a sale is void. It may however, be valid as contracting parties. However, if the price fixed by one of the parties is
a donation or some other agreement provided the requirements of accepted by the other, the sale is perfected.
donations or other agreements have been complied with. If these
requirements do not exist, then as a sale, the contract is absolutely • Reason why price fixing cannot be left to the discretion of one of
void, not merely voidable. An action for annulment is therefore them: the other could not have consented to the price for he did not
essential. (De Belen v. Collector of Customs, 46 Phil. 241) know what it was.