Uribe Sales 5

1.

In an option contract there is a consideration or a promise separate and distinct from

the price

2.

Since he has an option, he is not bound to pursue the contract

He is not obliged to enter into a contract

But the usual effect of the failure of the optionee to enter into such a contract is he
would usually forfeit the consideration

Rare is the optioner who would return the option money. But there are some who
return it

In some, a certain period is given within which to decide. If within that period, no
decision is made, one can seek the return of the option money. After that period, he can
still decide not to enter, but he can no longer recover what he gave as option money

3.

Will the action for specific performance prosper?

Yes, it will prosper because from the facts, it is already a perfected sale.

Although the parties would call the 10,000 as option money, in their agreement, that
is actually called an earnest money. This is because it will form part of the purchase price

The nature of earnest money is that it is part of the price

 If the amount that is considered by the party as option money was in fact accepted,
and the seller clears the property of settlers, clearly he gave consent to this contract

So he cannot later on claim that he only give the other party an option to buy this
property

4.

Specific performance as a remedy

An action for specific performance presupposes that there is a perfected contract

If there is no perfected contract, then an action for specific performance can

never be an appropriate remedy

5.

Just because the contract is disadvantageous to one of the contracting parties does
not mean that it will not bind such party. It will still be a binding contract despite the fact
that it is disadvantageous to him

6.

The deposit of the amount of earnest money did not ratify the contract

7.

Will the action for specific performance prosper?

 No

Because there was no perfected sale

Specific performance as a remedy presupposes that there is a perfected contract

The fact that there was an earnest money was only on the part of one of the parties,
but that is not the intention of the other party

When the law says earnest money, the parties must have agreed to that

Here, the seller refused to accept the offer. In fact, it rejected the offer.

The second letter was merely a reiteration of the letter which has already been
rejected

Just because the check was deposited on the account does not mean that the offer
was accepted. Moreover, this decision is still subject to the decision of the board

There being no consent as far as the offer to buy, then there can never be perfected
sale

8.

Earnest money even if paid already by the other party, does not necessarily mean that
there is already a perfected contract of sale

The law provides (1482), that earnest money is a proof of perfection of a

contract

Being a proof does not mean that there will always be a perfected contract.

In other words, it is just a proof of perfection, but there may not have been a
perfected contract

9.

There can be no perfected sale despite the fact that there was earnest money
 10.

Earnest money pertains also to 3 requisites

(1) price
(2) consent
(3) object

11.

It is possible that there is an earnest money, but the contract of sale was not perfected

This happens when parties was not able to agree on the price or to the object. There
was no meeting of the minds as to the price or object

So earnest money is proof of the perfection of the contract but it does not guarantee
that there was a perfected contract

12.

No

There was no perfected contract of sale

Because he calls it earnest money, but that is not how it was appreciated by the other
party.

13.
 If there is no consent as to the offer of earnest money on the part of the other party,
then there is no perfected sale

14.

There can be a perfected contract of sale before we can speak of earnest money. True
or False

False

15.

There is no provision in the law which says that if the form is not complied with, the
contract of sale will be void

16.

Sale of a parcel of land if not in a public instrument is void.

True or False

False

In other words, sale of a parcel of land which is not in a public instrument is not
necessarily void

If it is not in a public instrument, there are only two possibilities: (1) It could be in
writing but is in a private instrument or (2) it could be an oral sale

If it is already in a private instrument, the contract would not be void. In fact, it is a

valid contract
 Between the parties it is enforceable, because it has already complied with the
requirements in the statute of frauds. That is, in the sale involving an immovable, it has to
be in writing

Being in a private instrument is in writing

17.

But if it is just a verbal sale, then it will be unenforceable. Because the law requires it
to be in writing

But in the civil code there is no provision or article requiring the contract of sale to be
in particular form for its validity

The form as stated in Article 1483 is exactly the same as the form in contracts in
general in 1356

18.

General rule in contracts

Contracts are obligatory in whatever form the contract was entered into, provided
that all the essential requisites are present. That is the general rule in contracts

But there are exceptions. That is, unless the law requires a particular form for the
validity, or for the enforceability, or for as to how the contract may be proved

19.

As to how the contract may be proved

This is necessary for greater efficacy or convenience of the parties

Examples of these contracts are in Art 1358. The law requires that those mentioned
must be in a public instrument

This is because as far as the register of deeds, the contract may only be proven if it is
already in a public instrument
 The register of deeds has no business accepting a document for registration if it is
merely a private instrument

So the manner of proving in the register of deeds, is the fact that it is in a public
instrument

That is why 1358 requiring a public instrument as to those contracts and acts is
only for the greater efficacy to bind all the persons in the world through registration

20.

Subject to statute of frauds and applicable laws, the contract of sale may be in writing,
be oral, partly writing, partly oral or it can even be implied from the acts of the parties

21.

Is there a law requiring a particular form of a contract for a contract to be valid?

Yes, the anti cattle rustling act

This is a formal contract because there is a law requiring for a particular form for its
validity

To be valid, the law requires that it must be in a public instrument and registered

22.

Validity, enforceability and greater efficacy are different concepts

23.

Enforceability

The law requires these contracts, under certain circumstances (not all) to be in writing
in order to be enforceable

The statute of frauds is a rule requiring certain contracts to be in writing

 That rule does not require contracts to be in a public instrument. It only requires
that certain contracts be in writing

But there is no problem if it is made in public instrument, because that is still in

writing only a higher kind of level

But even if it is just executed in a private instrument, that already complies with
the requirement of statute of frauds

But the problem is, if it is in a private instrument, it cannot be registered. If one

would go to the RD, RD would have no business registering a private document

24.

If the contract is already in writing, and one would want to have it registered, his
remedy under the law is to compel the other party to have that contract in the form
prescribed by law (in a public instrument), so that it can be registered

In other words, he can make the other party appear before the notary public. If he
refuses, then the court will order him to do that as. The document is deemed notarized if
he refuses

25.

Under what circumstances may a contract of sale be unenforceable because it is not

in writing?

(1) A sold to B a particular pencil for 250. The sale is oral. It was agreed that the
payment and delivery are to be made after 2 years from the sale. At the stipulated
period, A refused to deliver, alleging he cannot be compelled to perform.

Is A correct?

Yes.
 This scenario falls under the first paragraph of statute of frauds.

Any agreement that by its terms is not to be performed within one year has to be in
writing

(2)

26.

All contracts may be covered by statute of frauds

27.

First paragraph of statute of frauds

Any agreement which by its terms is not to be performed within one year has to be in
writing

This provision is not meant to prevent fraud

The purpose real purpose of this provision is to ensure that honest men does not commit
mistake

28.

X came across an advertisement in Manila Bulletin about the rush sale of Toyota cars,
model 1989 for only 200k each. He phone advertiser Y and placed an order for 1 car. Y accepted
the offer and promised to deliver the ordered unit

On the said day, Y did not deliver the unit. X brings an action for Y to deliver the unit

Will such action prosper?

Verbal sale of a car

The action will not prosper

The rule in statute of fraud is that, in the sale of movables, where the value is 500 pesos or
more, it has to be in writing

This is a sale of a car which is movable and the price is obviously more than 500, and it is
merely a verbal sale, and therefore it is unenforceable under the statute of frauds.

Therefore, if there is a proper objection, the action will not prosper

Unenforceable contracts are valid contracts, but they cannot be enforced if there is a proper
objection

29.

Text messages and email

These can be a basis of perfection of contract and enforceability

30.

When is objection proper

Object before the witness who was presented to prove the existence of the contract
testifies

Otherwise, if there is no proper objection, it is deemed ratified. This is called implied

ratication

Unenforceable contracts cannot be enforced unless ratified

 31.

Movables (Sale of a bag)

A bought a bag for 300k. Two days after he sold it to B, and delivery is to be performed
5 days after the sale

Is it possible that this sale will not be covered by statute of frauds?

Yes

It may not be covered by the statute of frauds if A sold it to be at 300 pesos

Even if he bought it at 3k and only sold it at 300 pesos, that is still a valid sale. It is
provided that gross inadequacy of the price does not affect the validity of the contract

In other words, under the statute of frauds, what is relevant is not the value of
the thing, but the price agreed upon by the parties

Even if the value is 300k but the price is 300 pesos only, that is not covered by
the statute of frauds because the object of the contract is movable

32.

As a rule, gross inadequacy of the price does not affect the validity of the contract.

Give the exceptions

(1) If the guardian entered into a contract involving the property of his ward, and
the ward suffered lesion of more than of the value of the property

There is gross inadequacy, and the contract will be rescissible. The contract would
have a defect

This is an exception to the general rule that gross inadequacy of the price does not
affect the validity of the contract
 33.

Immovables

A and B entered into a verbal contract, whereby A agreed to sell to B his only parcel of
land for 200k. B agreed to buy at the aforementioned price. B withdrew the money, but
when he went back to A, A changed his mind

Is the agreement valid?

Will the action of B against A for specific performance prosper?

This is a sale of an immovable, specifically a parcel of land.

Thereby, with respect to validity of sale, for as long as there is consent, object certain
and price, and for as long as there is no law that prohibits this contract, it is not contrary to
morals, etc., the agreement may be valid

This may be valid because consent is given by both parties, and because there was
meeting of the mind as to thin thing which is the object of the contract, and there is
agreement as to the price. Therefore, the contract is valid

But again, just because the agreement is valid does not mean that it is perfected

34.

Just because the agreement is valid does not mean that it is perfected

The perfection is subject to the statute of frauds

So it is valid but it is possible that it is not enforceable

35.

Will the action of A against B prosper?

 No, if there is a proper objection

This is because this is a sale of an immovable property. Under the statute of frauds, a
sale of an immovable has to be in writing to be enforceable.

But this sale is a sale of a parcel of land which is immovable, and since this is not
in writing, this is just a verbal agreement, it is unenforceable under the statute of fraud

36.

Doctrine which will take the contract out of statute of fraud

Doctrine of part performance

Under this doctrine, if there is already a partial performance of the obligation

commencing from the contract, the contract is taken out of the operation of the statute of
frauds

37.

In the problem, it will not take the contract out of the operation of statute of fraud

Because when B went to the bank to withdraw, there was yet no performance of the
obligation. That is only preliminary to the performance

In fact, tender of payment is not performance

In oblicon, performance is equivalent to payment

But a tender is only an offer. If the creditor did not accept, then there is no payment.
In effect, he has just tendered. That is why a tender will not take the contract out of the
operation of the statute of fraud
 But if the seller accepts the offer, even if it is just a partial payment, then that is
not anymore covered by the statute of frauds

38.

There is an oral contract and by its terms it is not to be performed within one year
from execution thereof. One contracting party has already complied within the year. Can
the other party avoid fulfillment of those incumbent upon him by invoking the statute of
frauds?

No.

The premise of the statute of frauds is, since it is only a verbal contract, then it is the
word of one party as against the other party.

So if one party already accepted payment, then there is proof of the existence of the
contract

Performance presupposes that there is already a contract

So this will take it out from the statute of fraud under the doctrine of part
performance

39.

Statute of fraud (1403) states that the requirement that the contract be in writing is
sufficiently complied with if there is a note or memorandum signed by the parties charged

Here, there is such a note or memorandum which is the letter, and it was signed by
the party charged

So he cannot anymore invoke the statute of fraud, because in a way there was a
sufficient compliance of this requirement because of the note or memorandum subscribed
by the parties charged
 40.

Had this only been a telegraph, would that provision apply?

No. Because a telegram has no signature

The law requires that it is subscribed by the party charged

41.

Obligation to transfer ownership

42.

Obligation to take care of the thing

This should be after perfection but before delivery

After delivery, seller has no more obligation

43.

If the goods were damaged while they were still with the seller

Can an action for damages be filed by the buyer, if the seller was able to prove that
he exercised the diligence of a good father of a family in the performance of such
obligation, but despite that, damages was still sustained?

Yes

Because the degree of diligence that he should have observed may be a degree of
diligence higher than the degree of diligence of a good father of a family
 Maybe by stipulation, they agreed that extraordinary diligence should be observed

44.

As to the fruits, when is the buyer entitled to the fruits of the thing sold

45.

Obligation to transfer ownership

May a person sell something that does not belong to him?

Yes, because the law does not require the seller to be the owner of the thing for the
validity of this contract

For as long as he becomes the owner of the thing being sold at the time of delivery

46.

May a contract of sale be valid even if the seller is not the owner?

No.

A sheriff can sell property he does not own

A liquidator can sell property he does not own

 That the seller be the owner of the thing being sold is not required by law

This is not one of the essential requisites for the validity of a contract of sale

47.

In pledge or mortgage, the pledgor or mortgagor must be the absolute owner

48.

If the seller is not the owner of the object of the sale, may the buyer acquire
ownership over the thing?

Yes

Because even if the seller is not the owner, the buyer may acquire ownership if the
seller has the right to sell

The seller would have the right to sell when (1) he was given the authority to sell
which may come from the owner himself agency;
(2) his authority was given to him by law, such as notaries public, executors,
liquidators, conservators statutory power to sell; (3) he was given authority by court such
as sheriff judicial power to sell

Moreover, even if the seller does not have the right to sell, the buyer may have
acquired ownership under certain circumstances:

(1)

49.
 If the seller does not have the right to sell, what will be the effect in relation to the
thing which was sold and in relation to the buyer?

In other words, if the seller is not the owner or does not have authority to sell,
would the buyer acquire any right over the thing sold?

Yes

The general rule is that the buyer acquires no better title than what the seller
have

The law says no better title. It did not say no title

So whatever title seller has is the only title that will be transferred

50.

The seller is considered to have no title if what he sold was only stolen by him

The buyer will not acquire any title over the stolen item

Whatever title seller has is the only title that will be transferred to the buyer

51.

Actual possession is not the same as right to possession

Just because one is in possession, does not mean that he has the right to possession

If one has no right to possession, then the object may be removed from his possession

52.
 Can it happen that the seller has no right to sell, but he has right over the thing?

Yes.

If the seller is the usufructuary of the thing, and it was sold

The buyer would have rights

He may have the right to the fruits, th right to use, the right to posses, subject to the
agreement of the parties

But he acquires no better title than what the seller has

53.

Even if the seller does not have the right to sell, may the buyer acquire rights better
than what the seller had or ownership over the thing sold?

(Exception)

Yes.

In three instances:

(1) Under the principle of estoppels

(2) Because the sale is a sale of an apparent to a buyer in good faith

(3) Because this is a sale in a merchant store, market or fairs, in good faith and for
value

54.

When should the seller have the right to sell in order for the buyer to acquire
ownership?
 It is not at the time of perfection

There is a provision in the code that at the time of delivery he must have the right to
sell

Because it is at the time of delivery that ownership shall pass

If he does not have the right to sell at the time of delivery, then he has nothing
to pass on to the buyer at the time of delivery

But the better rule is in 1547. Because it is possible that even at the time of
physical delivery to the buyer, the seller does not have the right to sell, but thereafter the
buyer can still acquire ownership. The better rule is the seller should have right to sell at
the time the ownership is to pass

Ordinarily, it is upon delivery, but it can be at a later time

55.

Forward sales

Seller sells the thing, because of the promise of the owner that before delivery it will
be sold to him by the owner

This is a valid sale

56.

Who may be estopped?

(1) The owner may be estopped so that the buyer may acquire absolute ownership

(2) the seller itself may be estopped

 The first scenario is covered by 1431, which is estoppels in pais, a kind of equitable
estoppel

If by the conduct or a presentation of the owner, he lead the buyer that the seller
has the authority to sell, the owner will not be allowed to deny the authority of the
seller to the prejudice of the buyer who relied on his representation

The second one is technical estoppels. The estoppels by deed in which it is the
seller who is estopped

At the time of the sale, the seller does not have the right to sell. He is not the
owner, he has no authority to sell, but still he sold it

But after the sale, the seller acquired ownership over the thing by whatever title

If all requisites are present under 1434, that ownership of the seller, automatically,
shall be transferred to his own buyer

In other words, he will not be allowed to claim later on as against buyer that when
he sold it to him, he did not have the right to sell, and that the buyer did not acquire
ownership over the thing

This is under the principle of estoppel which is a technical estoppel, an estoppel by

deed

57.

One parcel of land belonging to A and B was sold by X to Y in the amount of 1500k

The sale was executed verbally. One year later, A and B sold the entire land to X

Is the sale which was executed verbally to X and Y valid and binding?
 Since this is a sale involving a parcel of land, and it was not put in writing, it is
unenforceable under the statute of fraud; unless, other rules will apply such as the doctrine
of part performance, estoppel, etc

58.

The sale is not binding. It is unenforceable under the statute of frauds

59.

If there is already payment, then it falls under the doctrine of part performance

But here, the doctrine of part performance is not applicable

This is because there is no payment mentioned in the problem

60.

No, 1434 will not apply because there was no showing that X delivered the thing to the
buyer

Since the requirements of 1434 are not all complied with, Y cannot be claimed to have
acquired ownership

The sale is not binding. It is unenforceable under the statute of frauds

61.

Sale by an apparent owner

It is sale by the apparent owner to a buyer who is a buyer in good faith and for value
 But there must be a law which enables the seller to dispose the thing as if he is the
true owner. This is the third important requirement

62.

Sale by an apparent owner

A seller would be an apparent owner, in relation to a parcel of land

He is not the owner nor does he have authority to sell.

Being in possession of the property does not make one an apparent owner. Illegal
settlers are in possession but they are not necessarily apparent owners

If the land is registered in the sellers name, then that make him an apparent owner. It
is registered in his name although he is not the owner

63.

Reasons why the property is registered in a name other than that of the owner

(1) by way trust

(2) the seller is a forger

He forged the signature of the real owner in the deed of sale

He was able to register it in his own name. He was able to cancel TCT which is in the
name of the real owner, and made the RD issue a new one in his name

But in order to cancel it in the RD, the original TCT has to be surrendered

The seller is in possession of the owners copy because he is a forger

It could happen that there is breach of trust

 64.

In order for the land to be registered in the name of the forger, aside from surrendering
the original TCT,

65.

RD will never know if the signatures were forged. It does not keep specimen signature

The person accountable is the notary public because these documents are supposed to
be notarized. Therefore the owner was supposed to appear before him. But nonetheless
the notary public notarized it

RD will rely on the notarized document. There is presumption on the regularity of

performance of the obligation of the notary public, that the owner appeared before him,
and this is not a forged document, and that the signatures were not procured by fraud,
violence, and voluntarily executed

So the land can be registered in the name of the forger, and he becomes the apparent
owner

66.

Buyer in good faith and for value

He had no knowledge of the defect of the title

In other words, he is a buyer in good faith and for value

67.

It is good faith at the time of full payment; knowledge of the defect

 To be a buyer in good faith and for value, it is not enough that at the time of the
perfection of the contract he has no knowledge of the defect of the title

In other words, the requirement is not deemed complied with if it is only up to

perfection of contract that he had no knowledge of the defect in the title of the owner

To be considered as buyer in good faith, he must still have no knowledge of the defect
of the title at the time of full payment

So if the buyer would learn the defect of the title before he pays but after perfection, he
should not have paid

If he pays, he will be risking the possibility of being considered as a buyer in bad faith

It is good faith at the time of full payment

68.

There must be a law which enables the seller to dispose the thing as if he is the true
owner

In relation to parcels of land, there is such a law. That is PD 1529

The law is called property registration decree

In this law, it is provided that those dealing with a registered land only have to rely on
the certificate of title. They are not required to inquire beyond the certificate. It is called
the mirror doctrine

For as long as in the certificate, he is the person named as registered owner, then the
buyer can rely on that

So there is a law that enables the forger to sell as if he is the true owner

69.

Mirror doctrine is not applicable to those who are required to exercise the highest
degree of diligence
 In other words, they cannot just rely on the certificate. They have to inquire beyond the
certificate. They have to investigate who are in possession of the land

Banks, public utility companies, and realty firms cannot invoke mirror doctrine

70.

If a third person is in possession, the buyer must inquire why they are in possession.
Though this is going beyond the certificate, and inconsistent with mirror doctrine, this is
good decision by the Supreme Court because it protects the real owner

71.

There are other laws which enable the seller to dispose the thing as if he is the real
owner

(1) Factors act

This is a law in relation to agents

In other words, the agent may not have the authority to sell to a buyer, but based
on the power of attorney, he may be able to transfer the ownership to the buyer

Insofar as third persons are concerned, they only need to rely on the power of
attorney as written. They need not rely on other obligations imposed by the principal to
the agent

The others who would be dealing with the agent only has to rely on the power of
attorney

(2) Recording laws

An example is Land Registration Laws

(3) And any other laws

 1518 of the civil code

The scenario here are goods covered by a negotiable document of title, just like
bills of lading

If the bill of lading is negotiable, and it is a bearer document, whoever is holding

the document has the right to dispose the goods

That is why he may fall under the term apparent owner, as if he is the true owner

The bill of lading may have been stolen by him or entrusted to him

So even if he does not have the right to sell, the buyer may acquire ownership over
the goods

****