(Art. 1458)Sale is a contract whereby one party [the seller] obligates himself to transfer the ownership2 and to deliver the possession, of a determinate thing, and the other party [the buyer] obligates himself to pay therefor a price certain in money or its equivalent. xCruz v. Fernando, 477 SCRA 173 (2005).

1. Elements of Sale

(a) consent or meeting of the minds;(b) determinate subject matter; and (c) price certain in money or its equivalent.

xNavarra v. Planters Dev. Bank, 527 SCRA 562 (2007).Sale being a consensual contract, its essential elements must be proven. xVillanueva v. CA, 267 SCRA 89 (1997). Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288 (1999),5 even when earnest money has been paid. xManila Metal Container Corp. v. PNB, 511 SCRA 444 (2006). But once all elements are proven, a sale’s validity is not affected by a previously executed fictitious deed of sale. xPeñalosa v. Santos, 363 SCRA 545 (2001); and the burden is on the other party to prove otherwise. xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001).

2. Stages of Contract of SalePolicitacion covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected.

Perfection takes place upon the concurrence of the essential elements, which are the meeting of the minds of the parties as to the object of the contract and upon the price.

Consummation begins when the parties perform their respective undertakings, culminating in the extinguishment thereof. xSan Miguel Properties Philippines, Inc. v. Huang, 336SCRA 737 (2000).

3. Sale Creates Real Obligations ―To Give‖ ( Art. 1165 ) 4. Essential Characteristics of Sale:

a. Nominate and Principal

A contract of sale is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. xSantos v. CA, 337 SCRA 67 (2000).7

b. Consensual (Art. 1475)A contract of sale is not a real, but a consensual contract, and becomes valid and binding upon the meeting of the minds of the parties as to the object and the price,8 and consequently: Upon its perfection, the parties may reciprocally demand performance. xHeirs of Venancio Bejenting v. Bañez, 502 SCRA 531 (2006);9 subject only to the provisions of the law governing the form of contracts. xCruz v. Fernando, 477 SCRA 173 (2005). It remains valid even if parties have not affixed their signatures to its written form, xGabelo v. CA, 316 SCRA 386 (1999), or the manner of payment is breached. xPilipinas Shell Petroleum Corp v. Gobonseng, 496 SCRA 305 (2006). In an Extrajudicial Settlement of Estate with Absolute Sale, it would be immaterial that the buyer’s signature does not appear thereon since the contract of sale is consensual and perfected by mere consent. xBaladad v. Rublico, 595 SCRA 125 (2009). Failure of the subdivision developer to obtain a license to sell does not render the sales void especially that the parties have impliedly admitted that there was already a meeting of the minds as to the subject of the sale and price. Cantemprate v. CRS Realty Dev. Corp. 587 SCRA 492 (2009).The binding effect of sale is based on the principle that the obligations arising therefrom have the force of law between the parties. xVeterans Federation of the Philippines v. CA, 345 SCRA 348(2000).

Perfection Distinguished from Demandability – Not all contracts of sale become automatically and immediately effective. In sales with assumption of mortgage, there is a condition precedent to the seller’s consent and without the approval of the mortgagee, the sale is not perfected. xBiñan Steel Corp. v. CA, 391 SCRA 90 (2002).

“No Contract Situation” versus “Void Contract” – Absence of consent (i.e., complete meeting of minds) negates the existence of a perfected sale. xFirme v. Bukal Enterprises and Dev.Corp., 414 SCRA 190 (2003). The contract then is null and void ab initio, absolutely wanting in civil effects; hence, it does not create, modify, or extinguish the juridical relation to which it refers. xCabotaje v. Pudunan, 436 SCRA 423 (2004).When there is no meeting of the minds on price, the contract ―is not perfected‖ and does not serve as a binding juridical relation between the parties. xManila Metal Container Corp. v. PNB, 511 SCRA 444 (2006),10 and should be more accurately denominated as inexistent, as it did not pass the stage of generation to the point of perfection. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004).

c. Bilateral and Reciprocal (Arts. 1169 and 1191)A contract of sale gives rise to ―reciprocal obligations‖, which arise from the same cause with each party being a debtor and creditor of the other, such that the obligation of one is dependent upon the obligation of the other; and they are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Cortes v. CA, 494 SCRA 570 (2006).

A perfected contract of sale is bilateral because it carries the correlative duty of the seller to deliver the property and the obligation of the buyer to pay the agreed price. Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008). The power to rescind is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him, and without need of prior demand. Almocera v. Ong, 546 SCRA 164 (2008).12

d. Onerous and Commutative (√Gaite v. Fonacier, 2 SCRA 830 [1961]; BUT SEE: Arts. 1355 and 1470)In a contract of sale, there is no requirement that the price be equal to the exact value of thesubject matter of sale; all that is required is that the parties believed that they will receive good value in exchange for what they will give. √Buenaventura v. CA, 416 SCRA 263 (2003).

e. Sale Is Title and Not ModeSale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership. Sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership. xSan Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005),13 citing VILLANUEVA, PHILIPPINE LAW ON SALES, 1995 ed., at p. 5. Seller’s ownership of the thing sold is not an element of perfection; what the law requires is that seller has the right to transfer ownership at the time of delivery. xQuijada v. CA, 299 SCRA 695 (1998).14BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which defined a ―sale‖ as ―a contract transferring dominion and other real rights in the thing sold.‖

B. SALE DISTINGUISHED FROM SIMILAR CONTRACTSA contract is what the law defines it to be, taking into consideration its essential elements, and the title given to it by the parties is not as much significant as its substance. The transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale. xSantos v. CA, 337 SCRA 67 (2000).In determining the real character of sale, courts look at the intent of the parties, their true aim and purpose in entering into the contract, as well as ―by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement,‖ and not at the nomenclature used to describe it. xLao v.CA, 275 SCRA 237 (1997).

1. Donation (Arts. 725 and 1471)Unlike a donation, sale is a disposition for valuable consideration with no diminution of the estate but merely substitution of values, with the property sold replaced by the equivalent monetary consideration;unlike donation, a valid sale cannot have the legal effect of depriving the compulsory heirs of their legitimes. xManongsong v. Estimo, 404 SCRA 683 (2003). The rules on double sales under Art. 1544 find no relevance to donations. xHemedes v. CA, 316 SCRA 347 (1999).

2. Barter (Arts. 1468, 1638 to 1641)

3. Contract for Piece-of-Work (Arts. 1467, 1713 to 1715)

Crux: ―Ineluctably, whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party necessarily walks away with an object.‖ xCommissioner of Internal Revenue v. CA, 271 SCRA 605 (1997), citing VILLANUEVA, LAW ON SALES, pp. 7-9 (1995). In both, the provisions on warranty of title against hidden defects applies. xDiño v. CA, 359 SCRA 91 (2001). When a person stipulates for the future sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor xInchausti & Co. v. Cromwell, 20 Phil. 345 (1911); even when he executes production thereof only after an order is placed by customers. √Celestino & Co. v. Collector, 99 Phil. 841 (1956).If the thing is specially done only upon the specific order of another, this is a contract for a piece of work; if the thing is manufactured or procured for the general market in the ordinary course of business, it is a contract of sale. √Commissioner of Internal Revenue v. Engineering Equipment & Supply Co., 64 SCRA 590 (1975).To Tolentino, the distinction depends on the intention of parties: if parties intended that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale; but if one of the parties accepts the undertaking on the basis of some plan, taking into account the work he will employ personally or through another, the contract is for a piece of work. xEngineering & Machinery Corp. v. CA, 252 SCRA 156 (1996).

4. Agency to Sell (Art. 1466)Assumption by ―agent‖ of the risk pertaining to the cost or price of the subject matter makes the relationship that of buyer-seller, for the agent does not assume risk with respect to the price or the property subject of the relationship. xKer & Co., Ltd. v. Lingad, 38 SCRA 524 (1971).Consequently:

(a) the contractual relationship is not inherently revocable. √Quiroga v. Parsons, 38 Phil. 501 (1918);

(b) the purported agent does not have to account for the profit margin earned from acquiring the property for the purported principal. √Puyat v. Arco Amusement Co., 72 Phil. 402 (1941).One factor that most clearly distinguishes agency from other legal concepts, including sale, is control; one person – the agent – agrees to act under the control or direction of another – the principal. xVictorias Milling Co., Inc. v. CA, 333 SCRA 663 (2000).Commercial broker, commission merchant or indentor is a middleman acting in his own name, and acts as agent for both seller and buyer to effect a sale between them. Although he is neither seller nor buyer to the contract effected he may voluntarily assume warranties of seller. xSchmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).

5. Dacion En Pago (Arts. 1245 and 1934)Governed by the law on sales, dation in payment is a transaction that takes place when property is alienated to the creditor in full satisfaction of a debt in money – it involves the delivery and transmission of ownership of a thing as an accepted equivalent of the performance of the obligation. Yuson v. Vitan, 496 SCRA 540 (2007).In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. xAquintey v. Tibong 511 SCRA 414 (2006).

Elements of dation in payment:(a) performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; (b) some difference between the prestation due and that which is given in substitution (aliud pro alio); and (c) agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a presentation different from that due. √Lo v. KJS Eco- Formwork System Phil., Inc., 413 SCRA 182 (2003).18There is no dation in payment where there is no transfer of ownership in the creditor’s favor, as when the possession of the thing is merely given to

the creditor by way of security. Fort Bonifacio Dev. Corp. v. Yllas Lending Corp., 567 SCRA 454 (2008); as when the possession is only by way of security. xPNB v. Pineda, 197 SCRA 1 (1991); there must be actual delivery of the property to the creditor by way of extinguishment of the pre-existing debt. Philippine Lawin Bus Co. v. CA, 374 SCRA 332 (2002). BUT SEE OBITER: SSS v. CA, 553 SCRA 677 (2008).In a true dacion en pago, the assignment of the property extinguishes the monetary debt. Ong v. Roban Lending Corp., 557 SCRA 516 (2008).A creditor, especially a bank, which enters into dacion en pago, should know and must accept the legal consequence thereof, that the pre-existing obligation is totally extinguished. xEstanislao v. East West Banking Corp., 544 SCRA 369 (2008). A property subject to a real estate mortgage, which has not been foreclosed, may validly be the subject of dacion en pago, for a mortgage does not take away the property rights of the mortgagor; however, the creditor who becomes the buyer of the property is subject to the real estate mortgage lien. xTypingco v. Lim, 604 SCRA 396 (2009).A dacion en pago is governed by the law of sales, and contracts of sale come with warranties, either express (if explicitly stipulated by the parties) or implied (under Article 1547 et seq. of the Civil Code). The implied warranty in case of eviction is waivable and cannot be invoked if the buyer knew of the risks or danger of eviction and assumed its consequences. Luzon Dev. Bank v. Enriquez, 639 SCRA 332 (2011).

6. Lease (Arts. 1484 and 1485)When rentals in a ―lease‖ are clearly meant to be installment payments to a sale contract, despite the nomenclature given by the parties, it is a sale by installments and governed by the Recto Law.xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).

II. PARTIES TO A CONTRACT OF SALES1. General Rule: Every person having legal capacity to obligate himself, may validly enter into a contract of sale, whether as seller or as buyer. (Art. 1489)2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399)A minor cannot be deemed to have given her consent to a contract of sale; consent is among the essential requisites of a contract, including one of sale, absent of which there can be no valid contract.

xLabagala v. Santiago, 371 SCRA 360 (2001).a. NECESSARIES (Arts. 1489 and 290)b. Protection of the Senile and Elderly (Art. 24) and Illiterates (Art. 1332)Under Art. 1332, when one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former; otherwise, sale is void. xVda. De Ape v. CA, 456 SCRA 193 (2005).While a person is not incompetent to contract merely because of advanced years or by reason of physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently or firmly protecting his property rights, then he is undeniably incapacitated, and the sale he entered into is void. √Paragas v. Heirs of Dominador Balacano,

468 SCRA 717 (2005).3. Sales By and Between Spouses:

a. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code)Under Art. 124 of Family Code, sale by husband of a conjugal property without the wife’s consent is void and not merely voidable, since the resulting contract lacks one of the essential elements of ―full consent‖. xGuiang v. CA, 291 SCRA 372 (1998). A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her consent. xPelayo v. Perez, 459 SCRA 475 (2005).As an exception, husband may dispose of conjugal property without wife’s consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162. xAbalos v. Macatangay, Jr., 439 SCRA 64 (2004).

b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)Sales between spouses who are not governed by a complete separation of property regime are void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960).Since the spouses cannot validly sell property to one another under Art. 1490, then policy consideration and the dictates of morality require that the prohibition should apply also to common-law relationships. cf. Matabuena v. Cervantes, 38 SCRA 284 (1971).

Sale by husband of conjugal land to his concubine is null and void for being contrary to morals and public policy and ―subversive of the stability of the family, a basic social institution which public policy cherishes and protects.‖√Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984).22Nevertheless, when property resold to a third-party buyer in good faith and for value, reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997). The in pari delicto doctrine would not apply to the spouses-parties under Art. 1490, since only the heirs and the creditors can question the sale’s nullity. xModina v. CA, 317 SCRA 696 (1999).

4. Others Relatively Disqualified (Arts. 1491 and 1492)Contracts entered into in violation of Arts. 1491 and 1492 are not merely voidable, but are null and void. √Rubias v. Batiller, 51 SCRA 120 (1973).23a. Guardians, Agents and AdministratorsHereditary rights are not included in the prohibition insofar as administrator or executor of the estate of the deceased. xNaval v. Enriquez, 3 Phil. 669 (1904).No more need to comply with xRodriquez v. Mactal, 60 Phil. 13 (1934) which required showing that a third party bought as conduit/nominee of the buyer disqualified under Art. 1491; rather, the presumption now is that such disqualified party obtained the property in violation of said article. √Philippine Trust Co. v. Roldan, 99 Phil. 392 (1956). Prohibition against agents does not apply if the principal consents to the sale of the property in the hands of the agent. xDistajo v. CA, 339 SCRA 52 (2000).b. Attorneys

(1) Prohibition against attorneys purchasing the properties of their clients in litigation applies:Only while litigation is pending. xDirector of Lands v. Ababa, 88 SCRA 513 (1979); Even though litigation is not adversarial in nature Rubias v. Batiller, 51 SCRA 120 (1973); or when it is a certiorari proceeding that may has no merit xValencia v. Cabanting, 196 SCRA 302 (1991). Only to a lawyer of record, and does not cover assignment of the property given in judgment made by a client to an attorney, who has not taken part in the case. Municipal Council of Iloilo v. Evangelista, 55 Phil. 290 (1930); Not applicable to a lawyer who acquired property prior to the time he

intervened as counsel in the suit involving such property. Del Rosario v. Millado, 26 SCRA 700 (1969).

(2) Prohibition does not apply to:(a) Sale of the land acquired by a client to satisfy a judgment to his attorney as long as the property was not the subject of the litigation. xDaroy v. Abecia, 298 SCRA 172 (1998);(b) Contingency fee arrangement granting the lawyer proprietary rights to the property in litigation since the payment of said fee is not made during the pendency of litigation but only after judgment has been rendered. [?] √Fabillo v. IAC, 195 SCRA 28 (1991).c. JudgesA judge should restrain himself from participating in the sale of properties—it is incumbent uponhim to advise the parties to discontinue the transaction if it is contrary to law. Britanico v. Espinosa, 486 SCRA 523 (2006).A judge who buys property in litigation before his court after the judgment becomes final does not violate Art. 1491, but he can be administratively disciplined for violation of the Code of Judicial Ethics. xMacariola v. Asuncion, 114 SCRA 77 (1982). Even when the main cause is a collection of a sum of money, the properties levied are still subject to the prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1916).

III. SUBJECT MATTER OF SALE―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 latter’s 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. Subject Must at Perfection Be Existing, Future or Contingent (Arts. 1347, 1348, and 1462)a. Emptio Rei Speratae (Arts. 1461 and 1347)Pending crops which have potential existence may be valid object of sale. xSibal v. Valdez, Phil. 512 (1927); and such transaction cannot be considered to effectively be sale of the land or any part thereof. xPichel v. Alonzo, 111 SCRA 341 (1981).b. Emptio Spei (Art. 1461)c. Subject to Resolutory Condition (Art. 1465)

2. Must Be Licit (Arts. 1347, 1459 and 1575)Under Art. 1347, a sale involving future inheritance is void and cannot be the source of any right nor create any obligation. xTañedo v. CA, 252 SCRA 80 (1996). Article 1347 does not cover waiver of hereditary rights which is not equivalent to sale, since waiver is a mode of extinction of ownership in favor of the other persons who are co-heirs. xAcap v. CA, 251 SCRA 30 (1995). Mortgagor can legally sell the mortgaged property--mortgage is merely an encumbrance that does not affect his principal attribute as owner thereof. Law even considers void a stipulation forbidding owner from alienating mortgaged immovable. xPineda v. CA, 409 SCRA 438 (2003).

3. Must Be Determinate or At Least ―Determinable‖ (Art. 1460)When deed of sale erroneously describes the lot adjacent to the land seen and eventually delivered to the buyer, such vetted land is the one upon which the minds have met, and not thaterroneously described in the deed. Prudent people buy land on the basis of what they see, andnot on what is technically described in the Torrens title. √Atilano v. Atilano, 28 SCRA 231 (1969).

a. Non-Specific Things (Generic) May Be the Object of Sale (Arts. 1246 and 1409[6])Subject matter is determinable when from the formula or description adopted at perfection there is a way by which the courts can delineate it independent of the will of the parties. √Melliza v. City of Iloilo, 23 SCRA 477 (1968).

Where the lot sold is said to adjoin the ―previously paid lot‖ on three sides thereof, the subject lot is capable of being determined without the need of any new contract, even when the exactarea of the adjoining residential lot is subject to the result of a survey. xSan Andres v. Rodriguez,332 SCRA 769 (2000).As the above-quoted portion of the kasunduan shows [giving reference to the area, the locality located, and vicinity with reference of old trees], there is no doubt that the object of the sale is determinate. xCarabeo v. Dingco, 647 SCRA 200 (2011).Determinable subject matter of sale are not subject to risk of loss until they are physically segregated or particularly designated. √Yu Tek & Co. v. Gonzales, 29 Phil. 384 (1915).

b. Undivided Interest (Art. 1463) or Undivided Share in a Mass of Fungible Goods (Art. 1464) – May result it co-ownership.

4. Quantity of Goods as Subject Matter Not Essential for Perfection [?] (Art. 1349)Sale of grains is perfected even when the exact quantity or quality is not known, so long as the source of the subject is certain. √NGA v. IAC, 171 SCRA 131 (1989).Where seller quoted to buyer the items offered for sale, by item number, part number, description and unit price, and the buyer had sent in reply a purchase order without indicating the quantity being order, there was already a perfected contract of sale, even when required letter ofcredit had not been opened by the buyer. √Johannes Schuback & Sons Phil. Trading Corp. v.CA, 227 SCRA 719 (1993).5. Seller’s Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)a. Seller’s Ownership Need Not Exist at Perfection:Sale of copra for future delivery does not make seller liable for estafa for failing to deliver because the contract is still valid and the obligation was civil and not criminal. xEsguerra v.People, 108 Phil. 1078 (1960).

A perfected sale cannot be challenged on the ground of the seller’s non-ownership of thething sold at the time of the perfection; it is at delivery that the law requires the seller to have theownership of the thing sold. xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003). It is essential that seller is owner of the property he is selling. The principal obligation of a seller is ―to transfer the ownership of‖ the property sold (Art. 1458). This law stems from the principle that nobody can dispose of that which does not belong to him. NEMO DAT QUOD NONHABET. Noel v. CA, 240 SCRA 78 (1995).That the sellers are no longer owners of the goods at perfection does not appear to be one of the void contracts enumerated in Art. 1409 of Civil Code; and Art. 1402 thereof recognizes a sale where the goods are to be ―acquired . . . by the seller after the perfection of the contract of sale,‖clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on; nevertheless such contract may be deemed to be inoperative and may thus fall, by analogy, under Art. 1409(5): ―Those which contemplate animpossible service.‖ Nool v. CA, 276 SCRA 149 (1997).

b. Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434) – Title passes to the seller by operation of law.c. Acquisition by the Buyer May Even Depend on Contingency (Art. 1462)

Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590, Sec. 7); rare wild plants (Act 3983); poisonous plants or fruits (R.A. 1288); dynamited fish (R.A 428); gunpowder and explosives (Act 2255); firearms and ammunitions (P.D. 9); sale of realty by non-Christians (Sec.145, Revised Adm. Code, R.A. 4252)b. Following Sales of Land Void: By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised Administrative Code. xTac-an v. CA, 129 SCRA 319 (1984). Friar land without consent of Secretary of Agriculture required under Act No. 1120. xAlonso v. Cebu Country Club, Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SCRA 430 (2000). Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands they tilled.xSiacor v. Gigantana, 380 SCRA 306 (2002).

Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold, public orprivate. Fisheries Dev. Authority v. CA, 534 SCRA 490 (2007).

IV. PRICE AND OTHER CONSIDERATION (Arts. 1469-1474)―Price‖ signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price put to the debit of the buyer and agreed to by him. Inchausti & Co. v. Cromwell, 20 Phil. 345 (1911).Seller cannot unilaterally increase the price previously agreed upon with the buyer, even when due to increased construction costs. GSIS v. CA, 228 SCRA 183 (1993).Buyer who opted to purchase the land on installment basis with imposed interest, cannot unilaterally disavow the obligation created by the stipulation in the contract which sets the interest at 24% p.a. ―Therationale behind having to pay a higher sum on the installment is to compensate the vendor for waiting a number of years before receiving the total amount due. The amount of the stated contract price paid infull today is worth much more than a series of small payments totaling the same amount. x x x To assert that mere prompt payment of the monthly installments should obviate imposition of the stipulated interest is to ignore an economic fact and negate one of the most important principles on which commerce operates.‖ Bortikey v. AFP RSBS, 477 SCRA 511 (2005).

1. Price Must Be Real (Art. 1471)a. When Price ―Simulated‖(1) √Mapalo v. Mapalo, 17 SCRA 114 (1966), versus: When two aged ladies, not versed in English, sign a Deed of Sale on representation by buyer that it was merely to evidence their lending of money, the situation constitutes more than just fraud and vitiation of consent to give rise to a voidable contract, since there was in fact no intention to enter into a sale, there was no consent at all, and more importantly, there was no consideration or price agreed upon, which makes the contract void ab initio. √Rongavilla v. CA, 294 SCRA 289 (1998).

(2) √Mate v. CA, 290 SCRA 463 (1998), versus: When Deed of Sale was executed to facilitate transfer of property to buyer to enable him to construct a commercial building and to sell the property to the children, such arrangement being merely a subterfuge on the part of buyer, the agreement cannot also be taken as a consideration and sale is void. √Yu Bun Guan v. Ong, 367 SCRA 559 (2001).

(3) Effects When Price Simulated – The principle of in pari delicto nonoritur action, which denies all recovery to the guilty parties inter se, where the price is simulated; the doctrine applies only where the nullity arises from the illegality of the consideration or the purpose of the contract.Modina v. CA, 317 SCRA 696 (1999).28

b. When Price is ―False‖ (Arts. 1353 and 1354)When the parties intended to be bound but the deed did not reflect the actual price agreed upon, there is only a relative simulation of the contract which remains valid and enforceable, but subject to reformation. xMacapgal v. Remorin, 458 SCRA 652 (2005).When price indicated in deed of absolute sale is undervalued consideration pursuant to intention to avoid payment of higher capital gains taxes, the price stated is false, but the sale is still valid and binding on the real terms. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004).c. Non-Payment of PriceSale being consensual, failure of buyer to pay the price does not make the contract void for lack of consideration or simulation, but results in buyer’s default, for which the seller may exercise his legal remedies. xBalatbat v. CA, 261 SCRA 128 (1996).29 ―In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder. [?] The remedy of an unpaid seller in a contract of sale is to seek either specific performance or rescission.‖ xHeirs of Pedro Escanlar v. CA, 281 SCRA 176 (1997).Badge That Price Is Simulated, Not Just Unpaid: It is a badge of simulated price, which render the sale void, when the price, which is stipulated thereon to have been paid, has in fact never been paid by the purchaser to the seller. xVda. de Catindig. v. Heirs of Catalina Roque, 74 SCRA 83 (1976).31

2. Must Be in Money or Its Equivalent (Arts. 1458 and 1468)Price must be ―valuable consideration‖ as mandated by Civil Law, instead of ―any price‖mandated in common law. √Ong v. Ong, 139 SCRA 133 (1985); √Bagnas v. CA, 176 SCRA 159(1989); √Republic v. Phil. Resources Dev., 102 Phil. 960 (1958).Consideration for sale can take different forms, such as the prestation or promise of a thing or service by another, thus: When deed provides that the consideration was the expected profits from the subdivision project.xTorres v. CA, 320 SCRA 428 (1999). Cancellation of liabilities on the property in favor of the seller. xPolytechnic University v. CA, 368 SCRA691 (2001). Assumption of mortgage constituted on the property sold. xDoles v. Angeles, 492 SCRA 607 (2006).

3. Must Be Certain or Ascertainable at Perfection (Art. 1469)a. How Price Determined to Be Ascertainable(i) Set by Third Person Appointed at Perfection (Art. 1469)(ii) Set by the Courts (Art. 1469)(iii) By Reference to a Definite Day, Particular Exchange or Market (Art. 1472)(iv) By Reference to Another Thing Certain, such as to invoices then in existence and clearly identified by the agreement xMcCullough v. Aenlle, 3 Phil. 285 (1904); or known factors or stipulated formula. xMitsui v. Manila, 39 Phil. 624 (1919). Price is ascertainable if the terms of the contract furnishes the courts a basis or measure for determining the amount agreed upon, without having to refer back to either or both parties.xVillanueva v. CA, 267 SCRA 89 (1997).33

Where the sale involves an asset under a privatization scheme which attaches a peculiar meaning or signification to the term ―indicative price‖ as merely constituting a ball-park figure, then the price is not certain. xMoreno, Jr. v. Private Management Office, 507 SCRA 63(2006). Consideration is generally agreed upon as whole even if it consists of several parts, and even if it is contained in one or more instruments; otherwise there would be no price certain, and thecontract of sale not perfected. xArimas v. Arimas, 55 O.G. 8682.b. Price Never Set By One or Both Parties (Arts. 1473, 1182), unless the price is separately accepted by the other party.

c. Effects of Un-Ascertainability Price: Sale Is Inefficacious.BUT: If Buyer Appropriates the Object, He Must Pay Reasonable Price (Art. 1474) There can be no concept of “appropriation” when it comes to land? – Where a church organization has been allowed possession and introduce improvements on the land as part of its application to purchase with the NHA, and thereafter it refused the formal resolution of the NHABoard setting the price and insisted on paying the lower price allegedly given by the NHA Field Office, there can be no binding contract of sale upon which an action for specific performance can prosper, not even on fixing the price equal to the fair market value of the property. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004). Even when there was no meeting on the minds of the price, this Court rules that to denypetitioner’s claim would unjustly enrich respondent who had benefited from the repairs of their four elevators. xHyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex Assn., 636 SCRA 401 (2010).

4. Manner of Payment of Price ESSENTIAL (Art. 1179)A definite agreement on the manner of payment of price is an essential element in the formation of a binding and enforceable contract sale; without it the sale is void and an action for specific performancemust fail. √Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007).34When the manner of payment of the price is discussed after ―acceptance,‖ then such ―acceptance‖did not produce a binding and enforceable contract of sale. xNavarro v. Sugar Producer's Corp., 1SCRA 1180 (1961).Where there is no other basis for the payment of the subsequent amortizations in a Deed of Conditional Sale, the reasonable conclusion one can reach is that the subsequent payments shall bemade in the same amount as the first payment. [?] xDBP v. CA, 344 SCRA 492 (2000).

5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470)Mere inadequacy of the price does not affect the validity of the sale when both parties are in a position to form an independent judgment concerning the transaction, unless fraud, mistake, or undue influence indicative of a defect in consent is present. The contract may be annulled for vitiated consent and not due to the inadequacy of price. xBautista v. CA, 436 SCRA

141 (2004).35 Absent any evidence of the fair market value of a land as of the time of sale, it cannot be concludedthat the price was inadequate. xAcabal v. Acabal, 454 SCRA 897 (2005).36

a. Gross Inadequacy of Price May Avoid Judicial Sale:(i) Only when it is shocking to the conscience of man. xPascua v. Simeon, 161 SCRA 1 (1988); And (ii) There is showing that, in the event of a resale, a better price can be obtained. xCu Bie v. CA, 15 SCRA 307 (1965).UNLESS: There is right of redemption, in which case the proper remedy is to redeem. xDe Leon v. Salvador, 36 SCRA 567 (1970).38BUT: By way of extraordinary circumstances perceived, when in a judicial sale the right of redemption has been lost, where the inadequacy of the price is purely shocking to the conscience, such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be likely to consent to it, the same will be se aside. xCometa v. CA, 351 SCRA 294 (2001). Gross inadequacy of price by itself will not result in a void contract; it does not even affect the validity of a contract of sale; unless it signifies a defect in the consent (i.e., there has been fraud, mistake or undue influence) or that the parties actually intended a donation or some other contract. Bacungan v. CA, 574 SCRA 642 (2008).There is ―gross inadequacy in price‖ if it is such that a reasonable man will not agree to dispose of his property. xDorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008). When judicial sale is voided without fault of purchaser, the latter is entitled return of price with simple interest, together with all sums paid out by him in improvements introduced on the property,taxes, and other expenses. xSeven Brothers Shipping Corp. v. CA, 246 SCRA 33 (1995).

b. Lesion of more than 1/4 of value of thing makes sale rescissible unless approved by court (Art. 1386)c. Gross inadequacy of price may raise the presumption of equitable mortgage (Art. 1602)

V. FORMATION OF CONTRACT OF SALE

A. POLICITACION STAGE (Art. 1479)Policitation stage covers the doctrine of ―freedom to contract‖ which signifies the right to choose with whom to contract. A property owner is free to offer his property for sale to any interested person, and is not duty bound to sell the same to the occupant thereof, absent any prior greement vesting the occupants the right of first priority to buy. Gabelo v. CA, 316 SCRA 386 (1999). A negotiation is formally initiated by an offer, which, however, must be certain. At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective mmediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. √Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006). An unaccepted unilateral promise (offer to buy or to sell) prior to acceptance, does not give rise to any obligation or right. xRaroque v. Marquez, 37 O.G. 1911. Where the offer is given with a stated time for its acceptance, the offer is terminated at the expiration of that time. xVillegas v. CA, 499 SCRA 276 (2006). The Letter of Intent to Buy and Sell is just that—a manifestation of offeror’s intention to sell the property and offeree’s intention to acquire the same—which is neither a contract to sell nor a conditional contract of sale. xMuslim and Christian Urban Poor Assn, Inc. v. BRYC-V Dev’t Corp., 594 SCRA 724 (2009). When the offeree negotiates for a much lower price, it constitutes a counter-offer and is therefor not an acceptance of the offer of offeror. xTuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).

1. OPTION CONTRACTAn option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given the option, not to enter into the principal contract with anyother person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate

agreement distinct from the contract of sale which the parties may enter into upon the consummation of the option. √Carceller v. CA, 302 SCRA 718 (1999).40 An option imposes no binding obligation on the person holding the option aside from the consideration for the offer. Until accepted, it is not treated as a sale. √Tayag v. Lacson, 426 SCRA 282 (2004).Tenants, not being the registered owners, cannot grant an option on the land, much less any ―exclusive right‖ to buy the property under the Latin saying ―nem dat quod non habet.‖ xTayag v. Lacson, 426 SCRA 282 (2004).

a. Meaning of ―Separate Consideration‖ (Arts. 1479 and 1324)A unilateral promise to sell, in order to be binding upon the promissor, must be for a price certain and supported by a consideration separate from such price. xSalame v. CA, 239 SCRA 356 (1995). The ―separate consideration‖ in an option may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. √Villamor v. CA, 202 SCRA 607 (1991),43 such when the option is attached to a real estate mortgage xSoriano v. Bautista, 6 SCRA 946 (1962). Although no consideration is expressly mentioned in an option contract, it is presumed that it exists and may be proved, and once proven, the option is binding. xMontinola v. Cojuangco, 78 Phil. 481 (1947).

b. No Separate Consideration: Void as Option, Valid as a Certain Offer√Sanchez v. Rigos, 45 SCRA 368 (1972).44BUT LATELY: xYao Ka Sin Trading v. CA, 209 SCRA 763 (1991); xMontilla v. CA, 161 SCRA 855 (1988); xNatino v. IAC, 197 SCRA 323 (1991); and xDiamante v. CA, 206 SCRA 52 (1992). If the option is without any consideration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at any time before acceptance. If it is foundedupon a consideration, the offeror cannot withdraw his offer before the lapse of the period agreed upon. Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).

c. There Must Be Acceptance of Option Offer. √Vazquez v. CA, 199 SCRA 102 (1991).

d. Proper Exercise of Option Contract. √Nietes v. CA, 46 SCRA 654 (1972).An option attached to a lease when not exercised within the option period is extinguished andcannot be deemed to have been included in the implied renewal (tacita reconduccion) of the lease. xDizon v. CA, 302 SCRA 288 (1999). Proper exercise of an option gives rise to the reciprocal obligations of sale xHeirs of Luis Bacus v. CA, 371 SCRA 295 (2001),45 which must be enforced with ten (10) years as provided under Art. 1144. xDizon v. CA, 302 SCRA 288 (1999). There must be ―virtual‖ exercise of option with the option period. √Carceller v. Court of Appeals, 302 SCRA 718 (1999).

2. RIGHT OF FIRST REFUSAL A right of first refusal cannot be the subject of specific performance, but breach would allow a recovery of damages. xGuerrero v. Yñigo, 96 Phil. 37 (1954). Rights of first refusal only constitute ―innovative juridical relations‖, but do not rise to the level of contractual commitment since with the absence of agreement on price certain, they are not subject tocontractual enforcement. √Ang Yu Asuncion v. CA, 238 SCRA 602 (1994).Right of first refusal contained in a lease, when breached by promissor allows enforcement by the promisee by way of rescission of the sale entered into with the third party, pursuant to Arts. 1381(3) and 1385 of Civil Code. xGuzman, Bocaling & Co. v. Bonnevie, 206 SCRA 668 (1992); √Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc., 264 SCRA 483 (1996);46 √Paranaque Kings Enterprises, Inc. v. CA, 268 SCRA 727, 741 (1997).In a right of first refusal, while the object might be made determinate, the exercise of the right would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up. . . the ―offer‖ may be withdrawn anytime by communicating the withdrawal to the other party. √Vasquez v. Ayala Corp., 443 SCRA 231 (2004).A right of first refusal clause simply means that should the lessor decide to sell the leased property during the term of the lease, such sale should first be offered to the lessee; and the series of negotiations that transpire between the lessor and the lessee on the basis of such preference is

deemed a compliance of such clause even when no final purchase agreement is perfected between the parties. The lessor was then at liberty to offer the sale to a third party who paid a higher price, andthere is no violation of the right of the lessee. √Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002). When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until after the lessor made an offer to sell the property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to exercise his right of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee, or under terms and conditions more favorable to the lessor. Polytechnic University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010). A right of first refusal is a contractual grant, not of the sale of a property, but of the first priority to buy the property in the event the owner sells the same. As distinguished from an option contract, in a right of first refusal, whole the object might be made determinate, the exercise of the right of first refusal would be dependent not only on the owner’s eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up. Polytechnic University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010). A right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee. xSadhwani v. CA, 281 SCRA 75 (1997).

4. MUTUAL PROMISES TO BUY AND SELL (Art. 1479): ―TRUE CONTRACT TO SELL‖Mutual promises to buy and sell a certain thing for a certain price gives each of the contracting parties a right to demand from the other the fulfillment of the obligation. xBorromeo v. Franco, 5 Phil. 49 (1905). Even in this case the certainty of the price must also exist, otherwise, there is no valid and enforceable contract to sell. xTan Tiah v. Yu Jose, 67 Phil. 739 (1939). An accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as a perfected contract of sale because there is already a meeting of minds upon the thing which is the object of the contract and upon the price.48 But a contract of sale is consummated only upon delivery and payment, whereas in a bilateral promise to buy and sell gives the contracting parties rights in personam, such that each has the

right to demand from the other the fulfillment of their respective undertakings. √Macion v. Guiani, 225 SCRA 102 (1993).49The cause of action under a mutual promise to buy and sell is 10 years. xVillamor v. CA, 202 SCRA 607 (1991).

B. PERFECTION STAGE (Arts. 1475, 1319, 1325 and 1326)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. From that moment, the parties may reciprocally demand performance subject to the law governing the form of contracts. xMarnelego v. Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2006).50 Mutual consent being a state of mind, its existence may only be inferred from the confluence of twoacts of the parties: an offer certain as to the object of the contract and its consideration, and an acceptance of the offer which is absolute in that it refers to the exact object and consideration embodied in said offer. xVillanueva v. PNB, 510 SCRA 275 (2006). If a material element of a contemplated contract is left for future negotiations, the same is too indefinite to be enforceable. For a contract to be enforceable, its terms must be certain and explicit, not vague or indefinite. xBoston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006). So long as there is any uncertainty or indefiniteness, or future negotiations or consideration yet to be had between the parties, there is no contract at all. xMoreno, Jr. v. Private Management Office, 507 SCRA 63 (2006). The essence of consent is the conformity of the parties on the terms of the contract, that is, the acceptance by one of the offer made by the other. However, the acceptance must be absolute; otherwise, the same constitutes a counter-offer and has the effect of rejecting the offer. XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).

1. Absolute Acceptance of a Certain Offer (Art. 1475)Under Article 1319, the acceptance of an offer must therefore be unqualified and absolute. In other words, it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. This was not the case herein considering that petitioner’s acceptance of the offer was qualified, which amounts to a rejection of the original offer. Limketkai Sons Milling, Inc. v. CA, 255 SCRA 626 (1996). A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. The acceptance must be identical in all

respects with that of the offer so as to produce consent or meeting of minds. √Manila Metal Container Corp. v. PNB, 511 SCRA 444(2006).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 contract of sale. xDBP v. Ong, 460 SCRA 170 (2005).If sale subject to suspensive condition: No perfected sale of a lot where the award thereof was expressly made subject to approval by the higher authorities and there eventually was no acceptance manifested by the supposed awardee. xPeople's Homesite & Housing Corp. v. CA, 133 SCRA 777 (1984). 2. When ―Deviation‖ Allowed: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 isformed. The vendor’s change in a phrase of the offer to purchase, which change does not essentiall change the terms of the offer, does not amount to a rejection of the offer and the tender or a counter-offer. √Villonco v. Bormaheco, 65 SCRA 352 (1975).53 3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326) The terms and conditions provided by the owner of property to be sold at auction are binding upon all bidders, whether they knew of such conditions or not. xLeoquinco v. Postal Savings Bank,47 Phil. 772 (1925). An auction sale is perfected by the fall of the hammer or in other customary manner and it does not matter that another was allowed to match the bid of the highest bidder. xProvince of Cebu v.Heirs of Rufina Morales, 546 SCRA 315 (2008).

4. Earnest Money (Art. 1482)Earnest money given by the buyer shall be considered as part of the price and as proof of the perfection of the contract. It constitutes an advance payment to be deducted from the total price. xEscueta v. Lim, 512 SCRA 411 (2007). Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale. √Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006). 54 Article 1482 does not apply when earnest money given in a contract to sell xSerrano v. Caguiat,

517 SCRA 57 (2007), especially where by stipulation the buyer has the right to walk away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. xChua v. CA, 401 SCRA 54 (2003).55 Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. But when there is no contract of sale because the parties never went pass the negotiation stage, or more accurately, have not reached the perfection stage with the present of the three essential elements of the contract of sale, the concept of earnest money is certainly inapplicable. The earnest money forms part of the consideration only if the sale isconsummated upon full payment of the purchase price. Hence, there must first be a perfected contract of sale before we can speak of earnest money. xGSIS v. Lopez, 592 SCRA 456 (2009).56 When there is no provision for forfeiture of earnest money in the event the sale fails to materialize,then with the rescission it becomes incumbent upon seller to return the earnest money as legal consequence of mutual restitution. xGoldenrod, Inc. v. CA, 299 SCRA 141 (1998).

5. Difference Between Earnest Money and Option Money. √Oesmer v. Paraiso Dev. Corp., 514 SCRA 228 (2007).

6. Sale Deemed Perfected Where Offer Was Made. (Art. 1319)C. FORMAL REQUIREMENTS OF SALES (Arts. 1357, 1358, 1406 and 1483)

1. Form Not Important for Validity of SaleSale of land under private instrument is valid. Gallar v. Husain, 20 SCRA 186 (1967).57 Articles 1357 and 1358, in relation to Art. 1403(2), require that the sale of real property must be in writing for it to be enforceable, it need not be notarized for there is nothing in those provisions whichrequire that it must be executed in a public document to be valid. xMartinez v. CA, 358 SCRA 38 (2001);58 but both its due execution and its authenticity must be proven, pursuant to Sec. 20, Rule 132 of the Rules of Court. xTigno v. Aquino, 444 SCRA 61 (2003).

Although the conveyance of land is not made in a public document, it does not affect thevalidity of such conveyance. Article 1358 of Civil Code does not require the accomplishment of the

acts or contracts in a public instrument in order to validate the act or contract but only to insure itsefficacy. The Estate of Pedro C. Gonzales v. Their Hiers of Marcos Perez, 605 SCRA 47 (2009).a. Other Rulings on Deeds of Sale:Seller may agree to a deed of absolute sale before full payment of the purchase price. xPan PacificIndustrial Sales Co., Inc. v. CA, 482 SCRA 164 (2006).Assuming that the buyers failed to pay the full price stated in the Deed of Sale, such partial failure wouldnot render the sale void. Bravo-Guerrero v. Bravo, 465 SCRA 244 (2005).That marital consent was executed prior to the Deed of Absolute Sale does not indicate that it is aphoney. Pan Pacific Industrial Sales Co., Inc. v. CA, 482 SCRA 164 (2006).A Deed of Sale when acknowledged before a notary public, enjoys the presumption of regularity and dueexecution. To overthrow that presumption, sufficient, clear and convincing evidence is required, otherwisethe document should be upheld. xBravo-Guerrero v. Bravo, 465 SCRA 244 (2005).59

Notarization of Deeds of Sale by one who was not a notary public does not affect the validity thereof; saiddocuments were merely converted into private documents. xR.F. Navarro & Co. Inc. v. Vailoces, 361SCRA 139 (2001).Notarization of a deed of sale does not guarantee its validity nor is it conclusive of the true agreement ofthe parties thereto, because it is not the function of the notary public to validate an instrument that wasnever intended by the parties to have any binding legal effect. xSalonga v. Concepcion, 470 SCRA 291(2005).60

Buyer’s immediate taking of possession of subject property corroborates the truthfulness and authenticityof the deed of sale. xAlcos v. IAC, 162 SCRA 823 (1988). Conversely, the seller’s continued possessionof the property makes dubious the contract of sale between them. xSantos v. Santos, 366 SCRA 395(2001).61

Any substantial difference between the terms of the Contract to Sell and the concomitant Deed ofAbsolute Sale (such as difference in subject matter, and difference in price and/or the terms thereof), does

not make the transaction between the seller and the buyer void, for it is truism that the execution of theDeed of Absolute Sale effectively rendered the previous Contract to Sell ineffective and cancelled[through the process of novation]. xLumbres v. Talbrad, Jr., 516 SCRA 575 (2007).b. Value of Business Forms to Prove SaleBusiness forms, e.g., order slip, delivery charge invoice and the like, which are issued by the seller in the ordinary course of the business are not always fully accomplished to contain all the necessary information describing in detail the whole business transaction—more often than not they are accomplished perfunctorily without proper regard to any legal repercussion for such neglect such that despite their being often incomplete, said business forms are commonly recognized in ordinary commercial transactions as valid between the parties and at the very least they serve as an acknowledgment that a business transaction has in fact transpired. xDonato C. Cruz Trading Corp. v. CA, 347 SCRA 13 (2000).Such documents are not mere scraps of paper bereft of probative value but vital pieces of evidence of commercial transactions. They are written memorials of the details of the consummation of contracts. xLagon v. Hooven Comalco Industries, Inc., 349 SCRA 363 (2001).2. WHEN FORM IMPORTANT IN SALEa. To Bind Third PartiesArticle 1358 which requires the embodiment of certain contracts in a public instrument is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third parties; and non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. √Fule v. CA, 286 SCRA 698 (1998);62 √Dalion v. CA, 182 SCRA 872 (1990).63 Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, in only for convenience; and registration of the instrument only adversely affects third parties, and non-compliance therewith does not adversely affect the validity of the contract or the contractual rights and obligations of the parties thereunder. xEstreller v. Ysmael, 581 SCRA 247 (2009).64

While sale of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons, if it is not embodied in a public instrument and recorded in theRegistry of Deeds. √Secuya v. Vda. De Selma, 326 SCRA 244 (2000).65 b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405) The term ―Statute of Frauds‖ is descriptive of the statutes which require certain classes ofcontracts, such as agreements for the sale of real property, to be in writing, the purpose being to prevent fraud and perjury in the enforcement of obligations depending for their evidence on theunassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. Shoemaker v. La Tondeña, 68 Phil. 24 (1939).

Presupposes Valid Contract of Sale – ―The application of the Statute of Frauds presupposes the existence of a perfected contract.‖ When the records show that there was no perfected contract of sale, there is no basis for the application of the Statute of Frauds. xFirme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).66

(1) Coverage:(i) Sale of Real Property – A sale of realty cannot be proven by means of witnesses, but must necessarily be evidenced by a written instrument, duly subscribed by the party charged, or by secondary evidence of the contents of such document. No other evidence can be received except thedocumentary evidence referred to. xGorospe v. Ilayat, 29 Phil. 21 (1914).67

(ii) Agency to Sell or to Buy – As contrasted from sale, an agency to sell does not belong to any of the three categories of contracts covered by Arts. 1357 and 1358 and not one enumerated under the Statutes of Frauds in Art. 1403. xLim v. CA, 254 SCRA 170 (1996).68 (iii) Rights of First Refusal – A ―right of first refusal‖ is not covered by the statute of frauds. Furthermore,Art. 1403(2)(e) of Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale; a right of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001).(iv) Equitable Mortgage – Statute does not stand in the way of treating an absolute deed as a mortgage, when such was the parties’ intention, although the agreement for redemption or defeasance is proved by parol evidence. xCuyugan v. Santos, 34 Phil. 100 (1916).69 (v) Right to Repurchase – The deed and the verbal agreement allowing the right of repurchase shouldbe considered as an integral whole; the deed of sale is itself the note or memorandum evidencing the

contract. xMactan Cebu Int’ll Airport Authority v. CA, 263 SCRA 736 (1996).(2) Memorandum (√Yuviengco v. Dacuycuy, 104 SCRA 668 [1981]; Under Art. 1403, an exception to the unenforceability of contracts pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the contract. Thememorandum may be found in several writings, not necessarily in one document, and constitutes the written evidence that such a contract was entered into. The existence of a written contract of the sale is not necessary so long as the agreement to sell real property is evidenced by a written note or memorandum, embodying the essentials of the contract and signed by the party charged or his agent. √Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523(1995). BUT: The memoranda must be signed by the party sought to be charged, and must clearly provide a deed of sale categorically conveying the subject property. √Limketkai Sons Milling,Inc. v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996).For the memorandum to take the sale out of the coverage of the Statute of Frauds, it must contain ―all the essential terms of the contract‖ of sale. xTorcuator v. Bernabe, 459 SCRA 439 (2005),70

even when scattered into various correspondences which can be brought together xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999).71

EXCEPTION: Electronic Documents under the E-COMMERCE ACT (R.A. 8792)(3) Partial Execution (Art. 1405) √Ortega v. Leonardo, 103 Phil. 870 (1958); √Claudel v. CA,199 SCRA 113 (1991).Delivery of the deed to buyer’s agent, with no intention to part with the title until the purchase price is paid, does not take the case out of the Statute of Frauds. xBaretto v. Manila Railroad Co., 46 Phil. 964 (1924). The Statute of Frauds does not apply to contracts either partially or totally performed. In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefitsunder the contract, such as the acceptance of the purchase price and using the proceeds to pay outstanding loans. √Alfredo v. Borras, 404 SCRA 145 (2003).

(4) Waiver – (Art. 1405) Cross-examination on the contract is deemed a waiver of the defense ofthe Statute. xAbrenica v. Gonda, 34 Phil. 739 (1916); Talosig v. Vda. De Nieba, 43 SCRA 472(1972).When the purported buyer’s exhibits failed to establish the perfection of the contract ofsale, oral testimony cannot take their place without violating the parol evidence rule. It was therefore irregular for the trial court to have admitted in evidence testimony to prove theexistence of a contract of sale of a real property between the parties, despite the persistent objection made by the purported seller’s counsel as early as the first scheduled hearing, evenwhen cross-examination was made on the basis of the witnesses’ affidavit-form testimony. √Limketkai Sons Milling, Inc. v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996).

(5) Rulings on Receipts and Other Documentary Evidence of SaleSince a contract of sale is perfected by mere consent, then when the dealer of motor vehicles accepts a deposit of P50,0000 and pulls out a unit from the assembler for that purpose, it was in breach of contract when it sold the car subsequently to another buyer. xXentrex Automotive, Inc. v. CA, 291 SCRA 66 (1998). A sales invoice is a commercial document-commercial documents or papers are those used by merchants or businessmen to promote or facilitate trade or credit transactions—they are not mere scraps of paper bereft of probative value, but vital pieces of evidence ofcommercial transactions, written memorials of the details of the consummation of contracts. Seaiol Petroleum Corp. v. Autocorp Group, 569 SCRA 387 (2008). Sales invoices are not evidence of payment of the price, but evidence of the receipt of thegoods; since the best evidence to prove payment is the official receipt. El Oro Engravers Corp. v. CA, 546 SCRA 42 (2008).

A receipt which is merely an acknowledgment of the sum received, without any indication therein of the total purchase price of the land or of the monthly installments to be paid, cannot be the basis of valid sale. xLeabres v. CA, 146 SCRA 158 (1986). In itself, the absence of receipts, or any proof of consideration, would not be conclusive ofthe inexistence of a sale since consideration is always presumed. xTigno v. Aquino, 444 SCRA

61 (2003).Receipts proves payment which takes the sale out of the Statute of Frauds. √Toyota Shaw, Inc. v. CA, 244 SCRA 320 (1995).

c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)When sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void,75 even when: Agent is the son of the owner. xDelos Reyes v. CA, 313 SCRA 632 (1999)There is partial payment of the price received by the supposed agent. xDizon v. CA, 396 SCRA 154(2003).76

In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA, 325 SCRA 385 (2000).77

When Contract to Sell was signed by the co-owners themselves as witnesses, the written authority for their agent mandated under Article 1874 of the Civil Code is no longer required. xOesmerv. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).

d. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code) XD. SIMULATED SALESCharacteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the parties’ juridical situation, or that the parties have no intention to bebound by the contract. The requisites are: (a) an outward declaration of will different from the will of theparties;(b) false appearance must have been intended by mutual agreement; and (c) purpose is todeceive third persons. xManila Banking Corp. v. Silverio, 466 SCRA 438 (2005).78

1. Badges and Non-badges of Simulation:

Non-payment of the stipulated consideration, absence of any attempt by the buyers to assert their allegedrights over the subject property. xVillaflor v. CA, 280 SCRA 297 (1997).79

Failure of alleged buyers to collect rentals from alleged seller. xSantiago v. CA, 278 SCRA 98 (1997); but notwhen there appears a legitimate lessor-lessee relationship between the vendee and the vendor. xUnion Bankv. Ong, 491 SCRA 581 (2006).Although the agreement did not provide for the absolute transfer ownership of the land to buyer, that did notamount to simulation, since delivery of certificate of ownership and execution of deed of absolute sale wereexpressly stipulated as suspensive conditions, which gave rise to the corresponding obligation on part ofbuyer to pay the last installments. xVillaflor v. CA, 280 SCRA 297 (1997).When signature on a deed of sale is a forgery. Fidel v. CA, 559 SCRA 186 (2008).80 But bare assertions thatthe signature appearing on the Deeds of Sale is not that of her husband is not enough to allege simulation,since forgery is not presumed; it must be proven by clear, positive and convincing evidence. xR.F. Navarro &Co. v. Vailoces, 361 SCRA 139 (2001).Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects – theconcept of a simulated sale is incompatible with inadequacy of price. When the parties to an alleged contractdo not really intend to be bound by it, the contract is simulated and void. Gross inadequacy of price by itselfwill not result in a void contract, and it does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some othercontract. xBravo-Guerrero v. Bravo, 465 SCRA 244 (2005).

2. When Motive Nullifies the Sale

In sale, consideration is, as a rule, different from the motive of parties, and when the primary motive is illegal, such as when the sale was executed over a land to illegally frustrate a person's rightto inheritance and to avoid payment of estate tax, the sale is void because illegal motive predetermined purpose of the contract. xOlegario v. CA, 238 SCRA 96 (1994).81 Where the parties to a contract of sale agreed to a consideration, but the amount reflected in the final Deed of Sale was lower, their motivation being to pay lower taxes on the transaction, the contract of sale remains valid and enforceable upon the terms of the real consideration. Although illegal, the motives neither determine nor take the place of the consideration. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004).An action or defense for the declaration of the inexistence of a contract is imprescriptible. On the other hand, an action to rescind is founded upon and presupposes the existence of a contract. Acontract which is null and void is no contract at all and hence could not be the subject of rescission. xCampos v. Pastrana, 608 SCRA 55 (2009).

3. Remedies Allowed When Sale SimulatedWhen a contract of sale is void, the right to set up its nullity or non-existence is available to third persons whose interests are directly affected thereby. Likewise, the remedy of accion pauliana isavailable when the subject matter is a conveyance, otherwise valid, undertaken in fraud of creditors. xManila Banking Corp. v. Silverio, 466 SCRA 438 (2005). The rescissory action to set aside contracts in fraud of creditors is accion pauliana, essentially a subsidiary remedy accorded under Article 1383 which the party suffering damage can avail of only when he has no other legal means to obtain reparation for the same. In such action, it must be shownthat both contracting parties have acted maliciously so as to prejudice the creditors who were prevented from collecting their claims. Rescission if generally unavailing should a third person, acting in good faith, is in lawful possession of the property since he is protect by law against a suit for rescission by the registration of the transfer to him in the registry. xUnion Bank v. Ong, 491 SCRA 581(2006).

4. Effect When Sale Declared Void:

The action for the declaration of the contract’s nullity is imprescriptible—an action for reconveyance ofproperty on a void contract of sale does not prescribe. Fil-Estate Golf and Dev., Inc. v. Navarro, 526 SCRA51 (2007).Possessor is entitled to keep the fruits during the period for which the buyer held the property in good faith.xDBP v. CA, 316 SCRA 650 (1999).Then restoration of what has been given is in order, since the relationship between parties in any contracteven if subsequently voided must always be characterized and punctuated by good faith and fair dealing.xDe los Reyes v. CA, 313 SCRA 632 (1999); xHeirs of Ignacia Aguilar-Reyes v. Mijares, 410 SCRA 97(2003).

Alien who purchases land in the name of his Filipina lover, has no standing to seek legal remediesto either recover the property or the purchase price paid, since the transaction is void ab initio for beingin violation of the constitutional prohibition. xFrenzel v. Catito, 406 SCRA 55 (2003).