Form of Contracts

Article 1483. Subject to the provisions of the Statute of

Frauds and of any other applicable statute, a contract of sale

may be made in writing, or by word of mouth, or partly in

writing and partly by word of mouth, or may be inferred

from the conduct of the parties. 

Ker v. Lingad

Facts: Ker & Co. Ltd. signed a contract with United

States Rubber International, which, among others, states

that Ker is a distributor of the American goods: “All

goods on consignment shall remain the property of the

Company until sold by the Distributor to the purchaser

or purchasers, but all sales made by the Distributor shall

be in his name, in which the sale price of all goods sold

less the discount given to the Distributor by the

Company in accordance with the provision of paragraph

13 of this agreement, whether or not such sale price shall

have been collected by the Distributor from the

purchaser or purchasers, shall immediately be paid and

remitted by the Distributor to the Company. It is further

agreed that this agreement does not constitute

Distributor the agent or legal representative 4 of the

Company for any purpose whatsoever. Distributor is not

granted any right or authority to assume or to create any

obligation or responsibility, express or implied, in behalf

of or in the name of the Company, or to bind the

Company in any manner or thing whatsoever.” Issue

with CTA is if the relationship between the parties is that

of broker/principal or vendor/vendee.

Held: Relationship is that of agency. Since the company

retained ownership of the goods, even as it delivered

possession unto the dealer for resale to customers, the

price and terms of which were subject to the company’s

control, the relationship between the company and the

dealer is one of agency.

1. Petitioner can dispose of the products of the Company

only to certain persons or entities and within stipulated

limits, unless excepted by the contract or by the Rubber

Company;

2. It merely receives, accepts and/or holds upon

consignment the products, which remain properties of

the latter company

3. Every effort shall be made by petitioner to promote in

every way the sale of the products (Par. 3); that sales

made by petitioner are subject to approval by the

company

4. On dates determined by the rubber company,

petitioner shall render a detailed report showing sales

during the month

5. The rubber company shall invoice the sales as of the

dates of inventory and sales report (Par. 14); that the

rubber company agrees to keep the consigned goods

fully insured under insurance policies payable to it in

case of loss

6. Upon request of the rubber company at any time,

petitioner shall render an inventory of the existing stock

which may be checked by an authorized representative

of the former

7. Upon termination or cancellation of the Agreement,

all goods held on consignment shall be held by

petitioner for the account of the rubber company until

their disposition is provided for by the latter.

The stipulations of the contracting parties had the

insistence on a relationship opposed to that apparent

from the language employed might even yield the

impression that such a mode of construction was

resorted to in order that the applicability of a taxing

statute might be rendered nugatory. Certainly, such a

result is to be avoided.

Swedish Match A.B. v. CA

Facts: Swedish Match, AB (SMAB, a corporation

organized under Swedish laws, had 3 subsidiary

corporations in the Philippines organized under

Philippine laws: Phimco, Provident Tree Farms, Inc, and

OTT/Louie (Phils,), Inc.

In 1988, STORA, SMAB’s parent company, decided to

sell SMAB and the latter’s worldwide match, lighter and

shaving products operation to Swedish Match NV

(SMNV). Enriquez, VP of SMSA (management

company of SMAB), was held under special instructions

that the sale of Phimco shares should be executed on or

before June 30, 1990. Respondent GM Antonio Litonjua

of ALS Management and Development Corp. was one of

the interested parties to acquire Phimco shares, offering

US$36 million. After an exchange of information

between CEO Rossi of SMAB and Litonjua, the latter

informed that they may not be able to submit their final

bid on the given deadline considering that the

acquisition audit of Phimco and the review of the draft

agreements have not been completed.

In a letter dated July 3, 1990, Rossi informed Litonjua

that on July 2, SMAB signed a conditional contract with

a local group for the disposal of Phimco and that the

latter’s bid would no longer be considered unless the

local group would fail to consummate the transaction on

or before September 15, 1990. Irked by SMAB’s

decision to junk his bid, Litonjua asserted that the

US$36 million bid was final, thus finalizing the terms of

the sale.

After 2 months from receipt of Litonjua’s letter,

Enriquez informed the former that the proposed sale

with the local buyers did not materialize and invited to

resume negotiations for the sale of Phimco shares based

on a new set of conditions, as to reducing the period of

sale from 30-day to 15, to which Litonjua expressed

objections and emphasized that the new offer constituted

an attempt to reopen the already perfected contract of

sale. Issue is if there was a perfected contract of sale

between petitioner and private respondent, with respect

to the Phimco shares.

Held: No perfected contract of sale since Litonjua’s

letter of proposing acquisition of the Phimco shares for

US$36 million was merely an offer. Consent in a

contract of sale should be manifested by the meeting of

the offer and acceptance upon the thing and the cause

which are to constitute the contract. The lack of a

definite offer on the part of the respondents could not

possibly serve as the basis of their claim that the sale of

the Phimco shares in their favor was perfected, for one

essential element of a contract of sale needed to be

certain --- the price in money or its equivalent.

Obviously, there can be no sale without a price.

Respondents’ attempt to prove the alleged verbal

acceptance of their US$36 million bid becomes futile

since there was in the first place no meeting of the minds

with respect to the price, and such was merely a

preliminary offer. Respondents’ failure to submit their

final bid on the deadline set by the petitioners prevented

the perfection of the contract of sale.

UP v. Philab

Facts: In 1979, Ferdinand E. Marcos Foundation

(FEMF) decided to construct, for a donation, the

Research Complex of UPLB’s National Institute of

Nanotechnology and Research. FEMF and Philab

entered into a contract of sale for the lab furniture of

said institute. FEMF remitted P600k, and later P800k,

for said lab furniture. In 1982, UP, FEMF, and Philab

entered a MOA in which FEMB agreed to donate, for a

sum not exceeding P29M, the construction of buildings,

labs and other capitalizations for the project, for which

Philab was to provide lab equipment and furniture.

However following the EDSA revolution, Philab wrote

Pres. Aquino to secure help in the payment of FEMF’s

obligation. (In short, walang nagbayad.) Philab went

after UP for unjust enrichment. UP answered that it is

not liable to Philab, because it was merely a donee-

beneficiary, and not privy to the implied contract of sale

between FEMF and Philab.

Held: Based on the records, an implied-in-fact contract

of sale was entered into between the Philab and FEMF,

not UP. UP is thus not liable.

Unjust enrichment is a term used to depict result or

effect of failure to make remuneration of or for property

or benefits received under circumstances that give rise to

legal or equitable obligation to account for them; to be

entitled to remuneration, one must confer benefit by

mistake, fraud, coercion, or request. Unjust enrichment

is not itself a theory of reconveyance. Rather, it is a

prerequisite for the enforcement of the doctrine of

restitution. However the essential requisites for the

application of Article 22 of the New Civil Code do not

obtain in this case. Philab had a remedy against the

FEMF via an action based on an implied-in-fact contract

with the FEMF for the payment of its claim. UP legally

acquired the laboratory furniture under the MOA with

FEMF; hence, it is entitled to keep the laboratory

furniture.

Cause—Money or Equivalent

Vda. De Portugal v. IAC

Facts: Petitioner Cornelia and her late husband Pascual

were able to accumulate several real properties, two of

which two of their sons, Hugo and Emiliano, acquired

the titles thereto on the pretext Hugo had to use them to

secure a loan he was negotiating. When Pascual died,

the other heirs, for the purpose of negotiating an extra-

judicial partition of the deceased estate, Cornelia asked

Hugo for the return of the two titles. Hugo manifested

that the titles no longer exist. He showed petitioners two

TCTs which cancelled the previous ones he was loaned.

This falsification was triggered by a deed of sale by

which the spouses De Portugal purportedly sold the two

parcels of land covered by aforementioned titles.

Emiliano denied any participation in the fraud, and

caused the reconveyance of the lot previously under one

of the two titles and which was conveyed to him under

the void deed of sale. Hugo on the other hand refused to

make restitution. This compelled Cornelia and his other

siblings to institute an action for annulment on the

controversial parcel of land covered by the other TCT.

Issue: If the sale is valid. No.

Held: Fraud and mistake are not the only vices present

in the assailed contract of sale. There was a lack of

consideration in said contract; Cornelia and the others

only learned of the alleged sale after the deed was

shown to them, and thus consideration or price was

totally non-existent. Applying the provisions of Articles

1350, 1352, and 1409 of the new Civil Code in relation

to the indispensable requisite of a valid cause or

consideration in any contract, and what constitutes a

void or inexistent contract, we rule that the disputed

deed of sale is void ab initio or inexistent, not merely

voidable. And it is provided in Article 1410 of the Civil

Code, that '(T)he action or defense for the declaration of

the inexistence of a contract does not prescribe.