LAW 4 (Notes)

• What may be the requisites of the object of a contract of sale?

• 1. The thing must be licit.

• 2. The vendor must have a right to transfer the ownership of
the thing at the time of delivery.
• 3. The thing must be determinate
• It is necessary that the seller be the owner at the time of the
perfection of the contract?

• No, what is required is that at the time of delivery he must be

the owner of what he is selling otherwise he is liable for
breach of warranty against eviction
• Is the buyer bound to deliver the accessions and accessories
of the object of the sale?

• Yes. Under Art. 1166, the obligation to give a determinate

thing includes that of delivering all its accessions and
accessories, even though they may not have been mentioned.
• Illustrative Case:
• X enters the restaurant of Y and asks the waiter to bring him a
dozen of fresh oysters in their shell. After eating, he notices
an almost perfect pearl in one of the shells. He is about to
take it when the restaurant owner claims the pearl. To whom
does the pearl belong? Why?

• X is the owner because the rule states that the owner of the
principal is also the owner of the accessory.
• What is emptio rei speratae and emptio spei?

• Emptio rei speratae – sale of a thing not yet in existence

where it is agreed that on failure of the thing to exist, the
contract becomes ineffective and hence, no obligation to pay
the price.

• Emptio Spei – sale of a thing not yet in existence where it is

agreed that the buyer will pay the price even if the thing does
not eventually exist. The hope of existence must not be in
vain, otherwise it is void, such as the sale of a losing
sweepstake ticket already drawn.
• What goods may form the subject of a contract of sale?

• Existing goods – goods in existence at the time of perfection.

• Future goods – goods to be manufactured, raised, acquired by

the seller after the perfection of the contract.
• Sale distinguished from Agency to Sell

• In sale, title to the goods is transferred to the buyer upon

delivery of the thing sold. In agency to sell, title to the goods
is not transferred to the agent upon delivery.

• In sale, the buyer is required to pay the price. In agency to

sell, the agent is required to turn over to the principal the
price of the goods which he receive from the buyer.
• Sale distinguished from contract for a piece of work

• In sale, 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. In contract for a piece
of work the goods are to be manufactured especially for the
customer and upon his special order, and not for the general
market.
• Sale distinguished from barter

• If the consideration of the contract consist 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.
• Sale distinguished from dacion en pago

1. In sale, there is no pre existing credit, while in dacion en

pago, there is a pre existing credit.
2. A sale creates obligations, while dacion en pago extinguishes
obligations.
3. In sale, the cause or consideration is the price, from the
sellers point of view; and the delivery of the object, from the
buyers point of view. In dacion en pago, the cause or
consideration is the extinguishment of obligation, from the
debtors point of view; and the delivery of the object given in
place of the credit from the creditors point of view.
4. In sale, there is greater freedom in fixing the price, while in
dacion en pago, there is less freedom in fixing the price
because of the pre-existing credit which the parties seek to
extinguish.
• Sale distinguished from payment by cession

1. In sale, there is no pre existing credit, while in cession, there

is a pre existing credit.
2. A sale creates obligations, while cession extinguishes
obligations.
3. In sale, as a rule the delivery of the object transfers
ownership to the buyer; while in cession, ownership is not
transferred but only authorizes the creditors to sell the
property and apply the proceeds to the credit.
• When is the price considered certain?
• 1. When it is stipulated
• 2. When it is with reference to another thing which is certain
• 3. When it is fixed by third person
• 4. When it is fixed by the court
• 5. In case of grains, liquid securities, the price is certain, when
the price fixed is that which the thing sold would have on a
definite day, or 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 is also
certain.
• Example: S offered for sale to B 100 cavans of wag-wag rice. B
asked S the price per cavann. S told B that the price per sack is
P5.00 over the price at X store in Divisoria market. If the price
at X store is P300, the price of S is P305, and the same is
considered certain.
• What is the effect of the gross inadequacy of price?

• The contract of sale remains to be valid, except as it may

indicate a defect in the consent, or that the parties intended a
donation or some other act or contract
• What is the effect if the price is simulated?

• If the price of the sale is simulated or fictitious, the contract of

sale is void. If there is only a relative simulation, the contract is
valid from its inception.

• Example: S and B entered into a contract where they made it

appear that S sold his car to B for P100,000. In reality however, B
did not give S P100,000. The sale here is void by reason of the
absence of an essential requisite which is the price. The parties
may, however, show that S really donated the car to B, in which
case, the contract shall be one of donation not a sale.
• May the fixing of the price be left to the discretion of one of
the parties?

• No, but if the price fixed by one of the parties is accepted by

the other, the sale is perfected.
• Illustrative Case:
• S sold and delivered her diamond ring to B. It was agreed
upon that after 10 days, S will name and fix the price. On the
tenth day, S called up B by telephone and stated the price at
P10,000. B agreed. Is the sale perfected?

• Yes, because the price stated and named by one of the

contracting parties was accepted by the other.
• Effect if the price of the sale cannot be determined in
accordance with the rules set forth by law:

• The contract of sale shall be inefficacious. But if the thing or

any part thereof has been delivered to and appropriated by
the buyer, he must pay a reasonable price thereof.
• Illustrative Case:
• “A” sells his 1976 Colt Lancer Sedan to B, a compadre, and
leaves it to B to determine the price. If B refuses to fix a price
and simply takes the car, is he still obliged to pay the price?
Explain.

• Yes, B is still obliged to pay the price. The law states that the
fixing of the price can never be left to the discretion of one of
the parties in a contract. Therefore, the act of A is illegal but
will not affect the validity of the sale since B accepted the
delivery and appropriated it so he must pay a reasonable
price.
• What are the rules in case of sale by auction
• 1. Where goods are put up for sale by auction in lots, each lot
is the subject of a separate contract of sale.
• 2. A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or in other
customary manner. Until such announcement is made, any
bidder may retract his bid; and the auctioneer may withdraw
the goods from the sale unless the auction has been
announced to be without reserve.
• 3. A right to bid may be reserved expressly by or on behalf of
the seller, unless otherwise provided by law or by stipulation.
• 4. Where notice has not been given that a sale by auction is
subject to a right to bid on behalf or for the auctioneer to
employ or induce any person to bid at such sale on behalf of
the seller or any person employed by him. Any sale
contravening this rule may be treated as fraudulent by the
buyer.(Art.1476)
• S sold to B a specific parcel of land for the price of P100,000. It
was stipulated in the contract that B will pay P40,000 in cash,
and for the difference B will convey a for car valued P60,000.
What is the nature of the contract

• S sold to B a specific piano. It was agreed that S would fix the

price a week later. At the appointed time, S named the price
P6,000. B agreed. Is the sale perfected