Perfection of Sale 2003 Format

OFFER AND ACCEPTANCEOFFER AND ACCEPTANCE

from the moment there is a

meeting of minds (consensual) upon the thing which is the object

of the contract (subject matter) and upon the price and the

manner of its payment (consideration)

-Santos v. Heirs of Jose P. Mariano

Birth of a Contract of Sale

“Sale is at once perfected when a

person (the seller) obligates himself for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees.”

-Valdez v. Court of Appeals

Court held:

mistake violence intimidation undue influence Fraud

(These do not make the contract void ab initio but only voidable)

-Katipunan v. Katipunan

Vitiation of consent

Until a sale is perfected, it cannot be an

independent source of obligation, nor serve as a binding juridical relation. In sales particularly, the contract is perfected when the seller obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to the buyer, over which the latter agrees and obligates himself to pay the price.

-Ang Yu Asuncion v. Court of Appeals

Court held:

Even when there is a duly executed

written document purporting to be a sale, the same cannot be considered valid when the evidence presented shows that there had been no meeting of the minds between the supposed seller and the corresponding buyer.

Santos v. Heirs of Jose P. Mariano

In another case, the Court held:

Article 1475- provides that the 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.

Article 1319 defines “consent” or“meeting of minds” as “manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.”

Consent that Perfects a Sale

Must be certain and absolute respectively. it must be plain, unequivocal,

unconditional and without variance of any sort from the proposal

-Manila Metal Container Corp. v. PNB

Offer and Acceptance

the subject matter that has all three requisites

of “possible thing,” licit, and determinate or at least determinable; and with

price that has the requisites of being real, money or its equivalent(i.e., constitute valuable consideration), and must be certain or at least ascertainable, including on the terms of payment thereof.

Offer Must Be “Certain”

The absence of even just one of

the essential requisites pertaining to either subject matter or price in the terms of the offer, makes such offer “not certain,” and cannot give rise to a valid sale, even when such offer is absolutely accepted by the offeree.

Offer Must Be “Certain”

Zayco v. Serra held that in order for

an acceptance to have the effect of converting an offer to sell into a perfected contract, it must be plain and unconditional, and it will not be so, if it involves any new proposition, for in that case, it will not be in conformity with the offer, which is what gives rise to the birth of the contract.

Acceptance Must Be “Absolute”

Beaumont v. Prieto, held that

promises are binding when and so long as they are accepted in the exact terms in which they are made, and that it would not be legally proper to modify the conditions imposed by the offeror without his consent.


In order that the acceptance of a

proposition or offer may be efficacious, perfect and binding upon the parties thereto, it is necessary that such acceptance should be unequivocal and unconditional and the acceptance and proposition shall be without any variation whatsoever. Any modification or deviation from the terms of the offer annuls the latter and frees the offeror.


Yuvienco v. Dacuycuy, the use of the

term “to negotiate” in the acceptance letter given by the buyer was held to indicate that there was as yet no absolute acceptance of the offer made, since the term is practically the opposite of the idea that an agreement has been reached.


DBP v. Ong, the Court held that placing the word

“Noted” and signing such note at the bottom of the written offer cannot be considered an acceptance that would give rise to a valid sale: “By no stretch of imagination, however, can the mere ‘NOTING’ of such an offer be taken to mean an approval of the supposed sale. Quite the contrary, the very circumstance that the offer to purchase was merely ‘NOTED’ by the branch manager and not ‘approved,’ is a clear indication that there is no perfected contract of sale to speak of.


Limketkai Sons Milling, Inc. v. Court of

Appeals, The Court held that there was a perfected contract between BPI and the buyer there having been mutual consent between the parties, the subject matter was definite; and the consideration was determined.


“It is true that an acceptance may contain a

request for certain changes in the terms of the offer and yet be a binding acceptance. ‘So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not, a contract is formed.’’

(Citing Villonco doctrine)


Toyota Shaw, Inc. v. Court of Appeals, the

Court held that a document cannot constitute a sale even when it provides for a down payment “since the provision on the down payment made no specific reference to a sale of a vehicle. Definiteness as to the price is an essential element of a binding agreement to sell personal property.”


In Villonco v. Bormaheco, The Court held

that there was a perfected sale that arose from the exchange of correspondences, even if literally, there was a correction or modification contained in the acceptance, the changes were not substantial, but merely clarificatory. Such is corroborated also by the fact, that upon receipt of the check covering the earnest money, Bormaheco had encashed the same.

a. When “Deviation” Allowed

Acceptance may be evidenced by some

act, or conduct, communicated to the offeror, either in a formal or an informal manner, that clearly manifest the intention or determination to accept the offer to buy or sell.

b. Acceptance May Be Express or Implied

Acceptance was manifested through:

payment of the purchase price declaration of the property for taxation purposes,payment of real estate taxes thereon, andsimilar acts showing buyer’s assent to the contract.

Gomez vs. Court of Appeals

Acceptance of the terms of the

sale of co-ownership rights through an agent was expressed by the co-owners signing as witnesses to the covering deed of sale.

Oesmer v. Paraiso Dev. Corp.

Acceptance made by letter or telegram does

not bind the offeror except from the time it came to his knowledge. Therefore, even if an acceptance has been mailed or sent to the offeror, the offeror may still withdraw his offer anytime before he has knowledge of the acceptance.

c. Acceptance by Letter or Telegram

Even when there is a meeting of minds as to

the subject matter and the price, there is deemed to be no perfected sale, if the sale is subject to suspensive condition.

- Gan, Sr. v. Reforma

d. Acceptance Subject to Suspensive Condition

People’s Homesite & Housing Corp. v.

Court of Appeals, held that there can be no perfected sale of a subdivision lot where the award thereof was expressly made subject to approval by higher authorities and there eventually was no acceptance manifested by the supposed awardee.

d. Acceptance Subject to Suspensive Condition

A sale by auction is perfected when the

auctioneer announces its perfection by the fall of the hammer, or in other customary manner.138 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.

Province of Cebu v. Heirs of Rufina Morales,

e. Acceptance in Auction Sales

The owner of the property sold at

auction may provide the terms under which the auction will proceed and the same are binding upon all bidders, whether they knew of such conditions or not.

Leoquinco v. Postal Savings Bank

e. Acceptance in Auction Sales

a. Function of Earnest Money

Article 1482 of the Civil Code, whenever earnest money is given in a sale, it shall be considered as part of the price and as proof of the perfection of the contract. 143 The rule is “no more than a disputable presumption” and prevails only “in the absence of contrary or rebuttal evidence.”The presumption is founded upon the fact that there must first be a valid sale.

4. Earnest Money

it was held that it is not the giving

of earnest money, but the proof of the concurrence of all the essential elements of the sale which establishes the existence of a perfected sale.

San Miguel Properties Philippines v. Huang

it was held that the presumption

under Article 1482 does not apply when earnest money is given in a contract to sell.

Serrano v. Caguiat

held that even when the sale is subject

to a condition, the acceptance of the earnest money would prove that the sale is conditionally consummated or partly executed subject to the fulfilment of the condition, the nonfulfillment of which would be a negative resolutory condition.

Villonco v. Bormaheco

receipt of “earnest money” could not lead to the

conclusion that there was a valid and binding sale because of documentary evidence showing that the parties entered into a contract to sell, which is akin to a conditional sale where the effi cacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.

Philippine National Bank v. Court of

Appeals

in Spouses Doromal, Sr. v. Court of Appeals, the

amount given as earnest money by the buyer, was acknowledged by the sellers to have been received under the concept of the old Civil Code, as a guarantee that the buyer would not back out, and that if they should do so they would forfeit the amount paid. Spouses Doromal took into consideration that even with the payment of the earnest money, that would not by itself give rise to a valid and binding sale, considering that it is not clear that there was already a definite agreement as to the price.

b. Varying Treatments of Earnest Money

EARNEST MONEY OPTION MONEY

1. part of the purchase Price

1. is the money given as a distinct consideration for an option contract

2. given only where there is already a sale

2. Applies to a sale not yet perfected

3. the buyer is bound to pay the balance

3. he is not required to buy, but may even forfeit it depending on the terms of the option.

c. Distinguishing Earnest Money and Option Money

In the absence of a specific stipulation,

the seller of real estate cannot keep the earnest money received to answer for the damages sustained in the event the sale fails due to the fault of the prospective buyer.

d. Effect of Rescission on Earnest Money Received

whenever earnest money is given in a sale, it

shall be considered as part of the purchase price and as proof of the perfection of the contract; consequently, amounts received as part of the down payment and to be credited to the payment of the total purchase price could not be forfeited when the buyer should fail to pay the balance of the price, especially in the absence of a clear and express agreement thereon.


When the seller seeks to rescind the sale,

under Article 1385 of the Civil Code, such rescission creates the obligation to return the things which were the object of the contract together with their fruits and interest.


Generally, the sale’s place of perfection

is where there is a meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.158 In case of acceptance through letter or telegram, it is presumed that the contract was entered into in the place where the offer was made.

5. Place of Perfection

In general, the expenses for the execution and

registration of the sale shall be borne by the seller, unless there is a stipulation to the contrary.160 In the case of goods, unless otherwise agreed, the expenses of, and incidental to, putting the goods into a deliverable state must be borne by the seller.

The duty to withhold taxes due on the sale is imposed on the seller.

6. Expenses of Execution and Registration

Since sale is a consensual contract,

then the ability of the parties to perform the contract (after perfection) does not affect the perfection of the contract, which occurs when the minds of the parties have met as to the subject matter, price and terms of payment.

7. Performance Should Not Affect Perfection

where the seller quoted to the buyer

the description and unit price and total price, and the buyer had sent in reply a purchase order, there was already a perfected sale, even when the required letter of credit had not been opened by the buyer.

Johannes Schuback & Sons Phil. Trading Corp. v. Court of Appeals

the Court reiterated the rule that the non-payment

of the price does not render void nor reverse the effects of the perfection of the contract of sale.

However, the Court on other occasions has taken the position that when the seller is no longer the owner of the land sold at the time of sale, the contract is void,167 in spite of the fact that Articles 1402 and 1459 of the Civil Code recognize that a sale is valid even the subject matter is not owned by the seller at the time of perfection, provided the seller has a right to transfer ownership at the time of delivery.

Balatbat v. Court of Appeals

the Court, held that although Articles 1402

and 1459 of the Civil Code recognize that the seller need not be the owner of the subject matter at the time of perfection, it nevertheless considered a situation where the seller is not the owner both at the time of perfection and delivery of the subject matter as to be similar to item number 5 of Article 1409 of the Civil Code as to “contemplate an impossible service,”

Nool v. Court of Appeals

which prevents the seller from complying with his obligation under Art. 1459 to transfer ownership, and therefore would render the contract “inoperative — and by the same analogy, void.”

Nool v. Court of Appeals

Perfection of Sale 2003 Format

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