6/7/15 5:01 PMIII. Essential Elements (for perfection)

Transfer of title or an agreement to transfer it for a price paid or promised to be paid is the essence of sale. xCommissioner of Internal Revenue v. CA and AdeMU, 271 SCRA 605 (1997).

The Civil Code provisions defining sales is a catch- all provision which effectively brings within it grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. Polytechnic University v. CA, 368 SCRA 691 (2001).

Where under an agreement, a party renounces and transfers whatever rights, interests, or claims she has over a parcel of land in favor of another party in consideration of the latters payment of therein loan, the agreement is essentially a sale, and the rule on delivery effected through a public instrument apply. xCaoibes, Jr. v. Caoibes-Pantoja, 496 SCRA 273 (2006).

1. ConsentBeing a consensual contract, Article 1475 of the Civil Code 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.

Offer must be certainit is certain only when the description of the subject matter has all the three requisites (possible thing, licit, determinate or at least determinable), with a price certain in money or its equivalent, including the terms of payment thereof.Acceptance must be absolutemust be absolute, plain, unequivocal, unconditionalqualified acceptance is not an absolute acceptance. It constitutes merely a counter-offer. It involves any new proposition.

2. Determinate Subject Matter

a) Requisites:

i) Thing must be licitArticle 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

Article 1347. All things which are (1)not outside the commerce of men, including future things may be the object of a contract. (2)All rights which are not intransmissible may also be the object of contracts.

(3)No contract may be entered into upon future inheritance except in cases expressly authorized by law.

*NOTE: Distinguish from waiver of hereditary rights. Sale of future hereditary rights presumes the existence of a contract of sale between the parties.

Waiver of hereditary rights is a mode of extinction of ownership where there is intentional relinquishment of a know right with a knowledge of its existence and intention to relinquish it, in favour of co-heirs. Therefore, a non-hero cannot conclusively claim ownership over part of the estate of the deceased on the sole basis of waiver document.

All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract.

(4) Not illegal or prohibited under special laws

(5) Effect if not licit: contract is voidArticle 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;4. Those whose object is outside the commerce of men;7. Those expressly prohibited or declared void by law.

ii) Thing must be determinateArticle 1460. A thing is determinate when it is particularly designated or physically segregated from all others 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.

Article 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of 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.

1) As to kindArticle 1460. A thing is determinate when it is particularly designated or physically segregated from all others 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.

Article 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties.

a) Meaning of determinate (2 requisites)i. Particularly designated or physically segregated. Article 1460(1) A thing is determinate when it is particularly designated or physically segregated from all others of the same class.

ii. At the time contract entered into, thing has capacity to become determinate without necessity of a new agreement or further agreement (determinable). Article 1460 (2) 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.

b) Applied to generic objectsArticle 1246. When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration.

Article 1460 (2) 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.

2) As to quantityArticle 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties.

a) Not essential provided that it is possible to determine without need of a new contract

3) Effect if not determinate: contract is voidArticle 1409. The following contracts are inexistent and void from the beginning:6. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained.

iii) Thing must be possible/not impossibleArticle 1348. Impossible things or services cannot be the object of contracts.

1) Effect if impossible: contract is voidArticle 1409. The following contracts are inexistent and void from the beginning:3. Those whose cause or object did not exist at the time of the transaction.

SALES: Essential Elements (3rd Meeting)6/7/15 5:01 PM

b) Things which can be subject of sale (not impossible)

i) Things with potential existenceArticle 1461. Things having a potential existence may be the object of the contract of sale.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.

1. Emptio rei speretae (purchase of expected thing) Things having a potential existence may be the object of the contract of sale, however such sale is subject to the condition that the thing will come into existence. Contract covering future things and subject to a condition that a subject matter will come into existence. If the subject matter does not come into existence, the contract is deemed extinguished. Emptio rei speretae covers only contract of sale whose subject matter are determinate or specific.Rationale: generic things are never lost Examples:Pending cropsFruits of the coconut trees on the landSale of a lot by seller who is yet to acquire full ownership

2. Emptio spei (purchase of hope or expectancy) Example:Sale of sweepstakes ticket, for P100 where the buyer purchases the ticket with a hope that upon the draw the ticket would win him a million pesos.The object of sale: chance to winIf the ticket does not win, the sale is still valid. The buyer has no right to recover the amount paid for the ticket. Emptio spei typifies a situation where the communtative nature of a contract of sale seems not to be complied with. NOTE: Emptio spei may be considered an aleatory contract

ii) Future goodsArticle 1462. The goods which form the subject of a contract of sale may either be 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.

iii) Sale of undivided interestArticle 1463. The sole owner of a thing may sell an undivided interest therein.NOTE: And there would result a co-ownership over the subject matter

iv) Sale of undivided share in massArticle 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 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.

v) Things subject to a resolutory conditionArticle 1465. Things subject to a resolutory condition may be the object of the contract of sale. The rule would be the same as applied to all obligations subject to a resolutory condition under Article 1190: When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each what they have received. This default rule will thus preserve the commutative nature of the sale. Once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. In Gaite v Fonacier, it held that the contract of sale being an onerous and commutative contract would incline the scales in favor of the greatest reciprocity of interests. The stipulation is clear, a clause should be interpreted as a term rather than as a condition.6/7/15 5:01 PM

c) Ownership of the thing sold

i) Not essential for perfectionArticle 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

Article 1462. The goods which form the subject of a contract of sale may either be 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.

EXCEPTION: in foreclosure sale Article 2085. The following requisites are essential to the contracts of pledge and mortgage:1. That they be constituted to secure the fulfillment of a principal obligation;2. That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;3. That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.

ii) Required at the time of delivery Article 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

Nemo dat quod non habet The law stems from the principle that can dispose of that which does not belong to him.

iii) Effect if seller is not the owner/no authority or consent of the owner1) At time of deliverya) Liable for warranty against eviction

b) Buyer acquired no better right than the sellerArticle 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer required no better title to the goods than the seller had,

EXCEPT:i. Owner is, by his conduct, precluded from denying sellers authority to sell unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell.

Nothing in this Title, however, shall affect:ii. Law enables apparent owner to dispose of the goods as if he were true owner1) The provisions of any factors acts, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;

iii. Sale is sanctioned by statutory or judicial authority2)The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;

iv. Sale is made at merchants stores, fairs or markets3) Purchases made in a merchants store, or in fairs, or markets, in accordance with the Code of Commerce and special laws.

v. Seller has voidable title which has not been avoided at time of sale.Article 1506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the sellers defect of title.

c) Not affect status of saleArticle 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.Article 1462. The goods which form the subject of a contract of sale may either be 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.

NOTE: Contra view contract is void akin to impossible service underArticle 1409. The following contracts are inexistent and void from the beginning:5. Those which contemplate an impossible service;

2) At time of perfectiona) Not affect status of contract

b) Subsequent acquisition of title by the seller, provided there is previous deliveryArticle 1434. When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.i. validates the saleii. title passes to the buyer by operation of law

6/7/15 5:01 PMc) d)Distinguish subject matter from motive

i) General Rule:Motive does not affect the contractMotive is the particular reason of a contracting party which does not affect the other party.

ii) Exception:Motive predetermines the causeCause is the essential reason which moves the contracting parties to enter into a contract. It is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties.

In Uy v. Ca, a contract of sale of a piece of land, The Court observed that the cause of the vendor in entering into the contract is to obtain the price, while that for the vendee is the acquisition of the land.The motive of the vendor (NHA) is to use the lands for housing.The Court ruled that ordinarily, a partys motive do not affect the contract. However when the motive predetermines the cause, the motive may be regarded as the cause.(See Oblicon Book or notes)