Law on Sales Essay Example

Law on Sales Essay Article 1458 of the Civil Code de? nes â€Å"sale† as a contract whereby one of the contracting parties (Seller) obligates himself to transfer the ownership, and to deliver the possession, of a determinate thing; and the other party (Buyer) obligates himself to pay therefor a price certain in money or its equivalent. 1 The Roman Law concept embodied in the old Civil Code2 that treated delivery of tangible property as the sole purpose of sale has been modi? d under the present Article 1458, which applies the common law concept of requiring the obligation to transfer the ownership of the subject matter of the sale as a principal obligation of the seller. 1. Nature of Obligations Created in a Sale The de? nition of the contract of sale under Article 1458 provides that its perfection brings about the creation of two sets of obligations: (a) Two OBLIGATIONS of the SELLER to: (i) Transfer the Ownership,3 and 1 Alfredo v. Borras, 404 SCRA 145 (2003); Cruz v. Fernando, 477 SCRA 173 (2 005); Roberts v. Papio, 515 SCRA 346 (2007). 2 Art. 445 of the old Civil Code. 3 Flancia v. Court of Appeals, 457 SCRA 224, 231 (2005), de? nes â€Å"ownership† as â€Å"the independent and general power of a person over a thing for purposes recognized by law and within the limits established thereby — aside form the jus utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the power of the owner to alienate, encumber, transform and even destroy the thing owned. † 1 2 LAW ON SALES (ii) Deliver the Possession, of the SUBJECT MATTER; (b) An OBLIGATION for the BUYER to: (i) Pay the PRICE . Both sets of obligations, are real obligations or obligations â€Å"to give,† as contrasted from personal obligations â€Å"to do† and â€Å"not to do,† and can be the proper subject of actions for speci? c performance. 5 In contrast, obligations to do or not to do, cannot be enforced through actions for speci? c performance because of the public policy against involuntary servitude;6 although the creditor can have the same executed by another at the cost of the obligor,7 and the obligor’s refusal to comply can be the basis for claims for damages. To illustrate, Article 1480 of the Civil Code, which crossrefers to Article 1165 thereof, provides that when what is to be delivered is a determinate thing, the buyer, in addition to the right to recover damages, may compel the seller to make the delivery. In other words, a defaulting party in a sale cannot insist on just paying damages when the non-defaulting party demands performance. 2. Subject Matter of Sal e Although Article 1458, in de? ning sale, uses the word â€Å"determinate† to describe the subject matter of the sale, the present Law on Sales has expanded the coverage to include generic objects which are at least â€Å"determinable. Article 1460 states that the â€Å"requisite that the thing be determinate is satis? ed if at the time the contract is entered into, the thing is capable of 4 Acap v. Court of Appeals, 251 SCRA 30 (1995); Velarde v. Court of Appeals, 361 SCRA 56 (2001). 5 Art. 1165 of the Civil Code: â€Å"When what is to be delivered is a determinate thing, the creditor . . . may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. 6 Sec. 18(2), Art. III, 1987 Constitution. 7 Art. 1167, Civil Code. 8 Art. 1170, Civil Code. NATURE OF SALE 3 being made determinate without the necessity of a new or further agreement between the parties,† which incl udes â€Å"determinable† albeit generic objects as valid subject matters of sale. Nonetheless, the use of the word â€Å"determinate† in the de? nition of sale under Article 1458 seems accurate since it pertains to the performance of the obligations of the seller to transfer ownership and to deliver possession. We will write a custom essay sample on Law on Sales specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Law on Sales specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Law on Sales specifically for you FOR ONLY $16.38 $13.9/page Hire Writer This would require that even if the subject matter of the sale was generic (determinable), the performance of the seller’s obligation would require necessarily its physical segregation or particular designation, making the subject matter determinate at the point of performance. The use of the word â€Å"determinate† to describe the subject matter emphasizes more speci? cally the fact that the obligation to deliver and transfer ownership can be performed only with the subject matter becoming speci? or determinate, and is not meant to exclude certain generic things from validly becoming the proper subject matter of sale, at the point of perfection. 3. Elements of Contract of Sale Coronel v. Court of Appeals,9 enumerates the essential elements of a valid contract of sale to consist of the following: (a) CONSENT, or meeting of the minds to transfer ownership in exchange for the price; (b) SUBJECT MATTER; and (c) PRICE, certain in money or its equivalent. 10 263 SCRA 15 (199 6). See also Jovan Land, Inc. v. Court of Appeals, 268 SCRA 160 (1997); Quijada v. Court of Appeals, 299 SCRA 695 (1998); Co v. Court of Appeals, 312 SCRA 528 (1999); Heirs of San Andres v. Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Penalosa v. Santos, 363 SCRA 545 (2001); Polytechnic University of the Philippines v. Court of Appeals, 368 SCRA 691 (2001); Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. Court of Appeals, 394 SCRA 133 (2002); Manongsong v. Estimo, 404 SCRA 683 (2003); Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Roberts v. Papio, 515 SCRA 346 (2007); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549 SCRA 527 (2008). 10 9 4 LAW ON SALES When all three elements are present, there being a meeting of the minds, then a perfected contract of sale arises, and its validity is not affected by the fact that previously a ? ctitious deed of sale was executed by the parties,11 or by the fact of nonperformance of the obligations thereafter. Unfortunately, the Supreme Court has considered in a number of decisions that the resulting sale is â€Å"void† when some of the essential requisites are not present. 2 To the author, the more appropriate term to use when an essential element is not present at meeting of the mind is to declare a â€Å"no contract† situation. To illustrate, Dizon v. Court of Appeals,13 holds that all three elements of consent, subject matter and consideration must be present for a valid sale to exist; and that in a situation where any of the elements is no t present, â€Å"[t]there was no perfected contract of sale,†14 and that â€Å"the absence of any of these essential elements negates the existence of a perfected contract of sale,†15 rather than using the technical term â€Å"void. In Manila Container Corp. v. PNB,16 the Court held that absence of the concurrence of all the essential elements, the giving of earnest money cannot establish the existence of a perfected contract of sale. On the other hand, when all three elements are present, but there is defect or illegality constituting any of such elements, the resulting contract is either voidable when the defect constitutes a vitiation of consent, or void as mandated under Article 1409 of the Civil Code. Penalosa v. Santos, 363 SCRA 545 (2001). Mapalo v. Mapalo, 17 SCRA 114 (1966) and Rongavilla v. Court of Appeals, 294 SCRA 289 (1998), both consider the contract â€Å"void† even when they agreed that there was no meeting of the minds on the price stated in the underlying instrument of sale. Bagnas v. Court of Appeals, 176 SCRA 159 (1989), considers a simulated price or a nominal price to give rise to a â€Å"void† contract of sale. Cabotaje v. Pudunan, 436 SCRA 423 (2004), considers the lack of consent by the owner of the property to bring about a â€Å"void† sale. 13 302 SCRA 288 (1999). 14 Ibid, at p. 301. 15 Ibid, at p. 302. Reiterated in Firme v. Bukal Enterprises and Dev. Corp. , 414 SCRA 190 (2003). 16 511 SCRA 444 (2006). 2 11 NATURE OF SALE 5 4. Stages in the Life of Sale Strictly speaking, there are only two stages in the â€Å"life† of a contract of sale, i. e. , perfection and consummation, since it is only at perfection that sale as a contract begins to exist in the legal world. Until sale is perfected, it cannot serve as an independent source of obligation, nor as a binding juridical relation between the parties. 17 Nevertheless, the Supreme Court18 has considered the following to be the stages in the life of a sale: (a) POLICITACION, negotiation, or preparation stage; (b) PERFECTION, conception or â€Å"birth†; and (c) CONSUMMATION or â€Å"death. Policitacion or negotiation covers the period from the time the prospective contracting parties indicate their interests in the contract to the time the contract is perfected; perfection takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and consummation begins when the parties perform their respective undertaking under the contract of sale, culminating in the extinguishment thereof. 19 ESSENTIAL CHARACTERISTICS OF SALE Before dissecting sale as a contract, it would be useful to look at sale from a general point of view, by analyzing its essential characteristics. 17 Jovan Land, Inc. v. Court of Appeals, 268 SCRA 160, 164 (1997); Dizon v. Court of Appeals, 302 SCRA 288 (1999); Platinum Plans Phil. , Inc. v. Cucueco, 488 SCRA 156 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v. Papio, 515 SCRA 346 (2007). 18 Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994); Toyota Shaw, Inc. v. Court of Appeals, 244 SCRA 320 (1995); Limketkai Sons Milling, Inc. . Court of Appeals, 250 SCRA 523 (1995); Jovan Land, Inc. v. Court of Appeals, 268 SCRA 160 (1997); Province of Cebu v. Heirs of Ru? na Morales, 546 SCRA 315 (2008). 19 San Miguel Properties Philippines v. Huang, 336 SCRA 737, 743 (2000). 6 LAW ON SALES 1. Nominate and Principal Sale is a nominate contract since it has been given a particular name by law;20 more importantly, its nature and consequences are governed by a set of rules in the Civil Code, which euphemistically we refer to as the â€Å"Law on Sales. Sale is a principal contract, as contrasted from accessory or preparatory contracts, because it can stand on its own, and does not depend on another contract for its validity or existence; more importantly, that parties enter into sale to achieve within its essence the objectives of the transaction, and simply not in preparation for another contract. The â€Å"nominate and principal† characteristics of sale leads to the doctrine held by the Supreme Court that in determining the real character of the contract, the title given to it by the parties is not as signi? ant as its substance. 21 In one case,22 the Court held that in determining the nature of a contract, the courts look at the intent of the parties and not at the nomenclature used to describe it, and that pivotal to deciding such issue is the true aim and purpose of the contracting parties as shown by the terminology used in the c ovenant, as well as â€Å"by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement. † In another case,23 the Court held that contracts are not de? ed by the parties thereto but by the principles of law; and that in determining the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties. The other doctrinal signi? cance of the â€Å"nominate and principal† characteristics of sale is that all other contracts which have for their objective the transfer of ownership and delivery of possession of a determinate subject matter for a valuable consideration, are governed necessarily by the Law on Sales. 24 Art. 1458, Civil Code. Bowe v. Court of Appeals, 220 SCRA 158 (1993); Romero v. Court of Appeals, 250 SCRA 223 (1995); Santos v. Court of Appeals, 337 SCRA 67 (2000). 22 Lao v. Court of Appeals, 275 SCRA 237, 250 (1997). 23 Cavite Dev. Bank v. Lim, 324 SCRA 346 (2000). 24 In-depth discussions of this doctrinal signi? cance are found in Chapter 3. 21 20 NATURE OF SALE 7 2. Consensual Sale is consensual contract (as contrasted from solemn and real contracts), since it is perfected by mere consent, at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. 25 Buenaventura v. Court of Appeals,26 held that a sale over a subject matter is not a real contract, but a consensual contract, which becomes a valid and binding contract upon the meeting of the minds as to the price. Once there is a meeting of the minds as to the price, the sale is valid, despite the manner of its actual payment, or even when there has been breach thereof. If the real price is not stated in the contract, then the sale is valid but subject to reformation; if there is no meeting of the minds as to the price, because the price stipulated is simulated, then the contract is void. 7 Under Article 1475 of the Civil Code, from the moment of perfection of the sale, the parties may reciprocally demand performance, even when the parties have not af? xed their signatures to the written form of such sale,28 but subject to the provisions of the law governing the form of contracts. 29 Consequently, the actual delivery of the subject matter or payment of the price agreed upon are not necessary compo nents to establish the existence of a valid sale;30 and their non25 Art. 1475, Civil Code. Balatbat v. Court of Appeals, 261 SCRA 128 (1996); Coronel v. Court of Appeals, 263 SCRA 15 (1996); Xentrex Automotive, Inc. . Court of Appeals, 291 SCRA 66 (1998); Laforteza v. Machuca, 333 SCRA 643 (2000); Londres v. Court of Appeals, 394 SCRA 133 (2002); San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005); Cruz v. Fernando, 477 SCRA 173 (2005); Marnelgo v. Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2006); MCC Industries Sales Corp. v. Ssanyong Corp. , 536 SCRA 408 (2007); Castillo v. Reyes, 539 SCRA 193 (2007); Roberts v. Papio, 515 SCRA 346 (2007). 26 416 SCRA 263 (2003). 27 Ibid, at p. 271, citing VILLANUEVA, PHILIPPINE LAW ON SALES, p. 4 (1998). 28 Gabelo v. Court of Appeals, 316 SCRA 386 (1999); Province of Cebu v. Heirs of Ru? na Morales, 546 SCRA 315 (2008). 29 Co v. Court of Appeals, 3 12 SCRA 528 (1999). Also City of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999); San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005). 30 Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. Court of Appeals, 416 SCRA 263 (2003). 8 LAW ON SALES performance do not also invalidate or render â€Å"void† a sale that has began to exist as a valid contract at perfection; non-performance, merely becomes the legal basis for the remedies of either speci? performance or rescission, with damages in either case. 31 The binding effect of a deed of sale on the parties is based on the principle that the obligations arising therefrom have the force of law between them. 32 In Fule v. Court of Appeals,33 the Court summarized the doctrines pertaining to sale being a consensual contract, thus: A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. 4 Being consensual, a contract o f sale has the force of law between the contracting parties and they are expected to abide in good faith by their respective contractual commitments. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience,35 and registration of the instrument only adversely affects third parties. 36 Formal requirements are, therefore, for the bene? t of third parties. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. 7 Since sale is a consensual contract, the party who alleges it must show its existence by competent proof, as well as of the 31 Gabelo v. Court of Appeals, 316 SCRA 386 (1999); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. Court of Appeals, 416 SCRA 263 (2003), citing this particular passage in VILLANUEVA, PHILIPPINE LAW ON SALES, p. 54 (1998). 32 Veterans Federation of the Philippines v. Court of Appeals, 345 SCRA 348 (2000). 33 286 SCRA 698 (1998). 34 Citing Art. 1475, Civil Code; Romero v. Court of Appeals, 250 SCRA 223 (1995). 35 Citing Aspi v. Court of Appeals, 236 SCRA 94 (1994). 36 Citing Olegario v. Court of Appeals, 238 SCRA 96 (1994). 37 286 SCRA 698, 712-713 (1998). Reiterated in Quijada v. Court of Appeals, 299 SCRA 695 (1998); Agasen v. Court of Appeals, 325 SCRA 504 (2000). NATURE OF SALE 9 essential elements thereof. 38 However, when all three elements of a sale are present, there being a meeting of the minds, then a perfected contract of sale arises, and its validity is not affected by the fact that previously a ? titious deed of sale was executed by the parties;39 and at that point the burden is on the other party to prove the contrary. 40 Despite the consensual character of a sale, under Article 1332 of the Civil Code, 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 form er. 41 a. Modalities That Affect the Characteristic of Consensuality The consensual characteristic of sale can be affected by modalities that by stipulation may be added into the contractual relationship, such as a suspensive term or condition. Binan Steel Corp. v. Court of Appeals,42 reminds us that â€Å"even if consensual, not all contracts of sale become automatically and immediately effective. . . In sales with assumption of mortgage, the assumption of mortgage is a condition precedent to the seller’s consent and therefore, without approval of the mortgagee, the sale is not perfected. † On the other hand, National Housing Authority v. Grace Baptist Church,43 demonstrates clearly that even the delivery and taking possession of the subject matter by the buyer with the knowledge or consent of the seller, would not bring about the perfection and binding effect of the sale, when the meeting of the minds is incomplete, there being no agreement yet on the ? nal price. 38 Villanueva v. Court of Appeals, 267 SCRA 89 (1997); Roberts v. Papio, 515 SCRA 346 (2007). 39 Penalosa v. Santos, 363 SCRA 545 (2001). 40 Heirs of Ernesto Biona v. Court of Appeals, 362 SCRA 29 (2001). 41 Vda. de Ape v. Court of Appeals, 456 SCRA 193 (2005). 2 391 SCRA 90 (2002). 43 424 SCRA 147 (2004). 10 LAW ON SALES 3. Bilateral and Reciprocal Sale is a bilateral contract embodying reciprocal obligations, as distinguished from a unilateral contract, because it imposes obligations on both parties to the relationship,44 and whereby the obligation or promise of each party is the cause or consideration for the obligation or promise of the other. 45 Recipr ocal obligations are â€Å"those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous ful? llment of the other. †46 The legal effects and consequences of sale being a bilateral contract composed of reciprocal obligations are as follows: (a) The power to rescind is implied, and such power need not be stipulated in the contract in order for the innocent party to invoke the remedy;47 (b) Neither party incurs delay if the other party does not comply, or is not ready to comply in a proper manner, with what is incumbent upon him;48 and (c) From the moment one of the parties ful? ls his obligation, the default by the other begins,49 without the need of prior demand. 50 Since both parties in a sale are bound by their respective obligations which are reciprocal in nature, then a party cannot Art. 1458, Civil Code; People v. Tan, 338 SCRA 330 (2000). Art. 1191, Civil Code; see also Vda. De Quirino v. Palarca, 29 SCRA 1 (1969). 46 Agro Conglomerates, Inc. v. Court of Appeals, 348 SCRA 450 (2000). See also Ong v. Court of Appeals, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Carrascoso, Jr. v. Court of Appeals, 477 SCRA 666 (2005). See also Vda. De Quirino v. Palarca, 29 SCRA 1 (1969) as it pertains to an option contract. 47 Art. 1191, Civil Code. 48 Art. 1168, last paragraph, Civil Code; Almocera v. Ong, 546 SCRA 164 (2008). 49 Ibid. 50 Art. 1191, Civil Code. 45 44 NATURE OF SALE 11 simply choose not to proceed with the sale by offering also the other party not to be bound by his own obligation; that each party has the remedy of speci? c performance; and that rescission or resolution cannot be enforced by defaulting party upon the other party who is ready and willing to proceed with the ful? lment of his obligation. 51 Polytechnic University of the Philippines v. Court of Appeals,52 summed up the reciprocal and nominate nature of sale, thus: â€Å"It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i. e. , there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. †53 Consequently, Carrascoso, Jr. . Court of Appeals,54 held that since a sale is constituted of reciprocal obligations, then â€Å"[t]he right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them. † 4. Onerous Sale is an onerous contract, as distinguished from a gratuitous contract, because it imposes a valuable consideration as a prestation, which ideally is a price certain in money or its equivalent. 55 In Gaite v. Fonacier,56 the Court ruled that the stipulation in a contract of sale on the payment of the balance of the purchase price must be deemed to cover a suspensive period rather than a condition since â€Å"there can be no question that greater reciprocity obtains if the buyer’s obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, than if such obligation were viewed as non-existing or not binding until 51 52 Almira v. Court of Appeals, 399 SCRA 351 (2003). 368 SCRA 691 (2001). 3 Ibid, at p. 705. 54 477 SCRA 666, 686 (2005). 55 Art. 1458, Civil Code. 56 2 SCRA 831 (1961). 12 LAW ON SALES the ore was sold. †57 The Court held that the rules of interpretation would incline the scales in favor of â€Å"the greater reciprocity of interests,† since sale is essentially an onerous contract. 5. Commutative Sale is a commutative contract, as distinguished from an aleatory contract, because a thing of value is exchanged for equal value, i. e. , ideally the value of the subject matter is equivalent to the price paid. Nevertheless, there is no requirement that the price be equal to the exact value of the subject matter; all that is required is for the seller to believe that what was received was of the commutative value of what he gave. 58 Again Gaite held that a sale is â€Å"normally commutative and onerous: not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold, and the buyer to pay the price), but each party anticipates performance by the other from the very start. 59 Gaite recognized that although in a sale â€Å"the obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hope or expectancy, emptio spei), it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. 60 Gaite therefore acknowledged that obligation s in a sale can be subordinated to a suspensive condition with the party fully aware that â€Å"he assumes the risk of receiving nothing for what he gives,† although such stipulation may seem to be contrary to the commutative nature of a sale. This con? rms the view that although â€Å"commutativeness† is an essential characteristic of a sale, the test for compliance therewith is not objective but rather subjective; i. e. , so long as the party believes in all honesty that he is receiving good value for what he transferred, then it complies 57 58 Ibid, at p. 838. Buenaventura v. Court of Appeals, 416 SCRA 263 (2003). 59 2 SCRA 831, 837 (1961). 60 Ibid. NATURE OF SALE 13 with the commutative character of a sale, and would not be deemed a donation nor an aleatory contract. Take the example of a seller, selling his old car for only 5200,000. 00, when a more objective review of the prevailing market price for the particular model shows that its correct selling value would be 5500,000. 00. Under those circumstances, the contract perfected with the buyer would still be a sale, because by agreeing to receive a price of only 5200,000. 0, the seller believes honestly that he is receiving appropriate value for the car he is selling. Likewise, the consequences of negotiations and bargaining, such as being able to obtain a large discount, do not destroy the commutative nature of the sale, since in the end the test would be that the parties to the sale believe that they have each received the proper and appropriate value for what they eac h in turn gave up. However, the point of discussion pertaining to the subjective test of the commutative nature of sale cannot, and should not, be pushed to absurdity. Take a situation, where the same seller, knowing fully well that the going price for his car is 5200,000. 00, sells it for only 5100. 00 to the buyer. Even if the seller, is satis? ed in receiving only 5100. 00 for the car, the resulting contract, from a strictly legal standpoint, is not a sale, but more of a donation, and the law will presume that the underlying consideration must have been liberality. Therefore, the tax authorities may insist that the gift tax be paid on the transaction. This is all academic discussions, of course, since if no third party complains, the nature of the contract would never be at issue, and in all probability the contracting parties themselves would be bound by their characterization of the contract under the principle of estoppel. The subjective test of the commutative nature of sale is further bolstered by the principle that inadequacy of price does not affect ordinary sale. 61 Inadequacy of price may be a ground for setting aside an execution sale but is not a suf? cient ground for the cancellation of a voluntary contract of sale otherwise free 61 Arts. 355 and 1470, Civil Code; Ereneta v. Bezore, 54 SCRA 13 (1973). 14 LAW ON SALES from invalidating effects. 62 Inadequacy of price may show vice in consent, in which case the sale may be annulled, but such annulment is not for inadequacy of price, but rather for vitiation in consent. 63 Only recently Buenaventura v. Court of Appeals,64 held that: â€Å"Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale; all that sellers believed was that they received the commutative value of what they gave. All the respondents believed that they received the commutative value of what they gave. 65 6. Sale Is Title and Not Mode The perfection of a sale gives rise to the obligation on the part of the seller to transfer ownership and deliver possession of the subject matter; nevertheless, it would be delivery or tradition that is the mode to transfer ownership and possession to the buyer. Although in one case the Court de? ned a â€Å"sale† as a â€Å"contract transferring dominion and other real rights in the thing sold,†66 sale is merely title that creates the obligation on the part of the seller to transfer ownership and deliver possession, but on its own sale is not a mode that transfers ownership. 7 Thus, Alcantara-Daus v. de Leon,68 held that while a sale is perfected by mere consent, ownership of the thing sold is acquired only upon its delivery to the buyer. Upon the perfection of the sale, the seller assumes the obligation to transfer ownership and to deliver the thing sold, but the real right of ownership is transferred only â€Å"by tradition† or delivery thereof to the buyer. In Acap v. Court of Appeals,69 the Court held that an asserted right or claim to ownership, or a real right over a thing arising from Alarcon v. Kasilag, 40 O. G. Supp. 15, p. 203 (1940). Art. 1470, Civil Code. 4 416 SCRA 263 (2003). 65 Ibid, at p. 272. 66 Titong v. Court of Appeals, 287 SCRA 102 (1998). 67 Equatorial Realty Dev. , Inc. v. Mayfair Theater, Inc. , 370 SCRA 56 (2001); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003). 68 404 SCRA 74 (2003). 69 251 SCRA 30, 38 (1995). 63 62 NATURE OF SALE 15 a juridical act, is not per se suf? cient to give rise to ownership over the thing; that right or title must be completed by ful? lling certain conditions imposed by law: â€Å"Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title (such as sale) is the juridical justi? ation, mode (like delivery) is the actual process of acquisition or transfer of ownership over a thing. † Acap held that the â€Å"Declaration of Heirship and Waiver of Rights† executed by the heirs waiving their inheritance rights in favor of a non-heir cannot be deemed a proper mode to affect title to the land involved because waiver of inheritance right can only be done in favor of another heir; whereas, it could not also be considered a sale contract because the document did not provide for the element of price, which is required for a valid sale under Article 1458 of the Civil Code. Manongsong v. Estimo,70 emphasized that once a sale has been duly perfected, its validity â€Å"cannot be challenged on the ground of the non-transfer of ownership of the property sold at that time of the perfection of the contract, since it is consummated upon delivery of the property to the vendee. It is through tradition or delivery that the buyer acquires ownership of the property sold. † Consequently, the proper remedy was not annulment, but rescission. Mode is the legal means by which dominion or ownership is created, transferred or destroyed (e. . , succession, donation, discovery, intellectual creation, etc. );71 title only constitutes the legal basis by which to affect dominion or ownership. Therefore, sale by itself does not transfer or affect ownership;72 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. 73 404 SCRA 683 (2003). Cited in San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99, 113 (2005). 72 Quoted or used verbatim in San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99, 113 (2005) without acknowledgment given to the author. 73 Equatorial Realty Dev. , Inc. v. Mayfair Theater, Inc. , 370 SCRA 56 (2001). The passage was quoted or used verbatim in San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99, 114 (2005) without acknowledgment given to the author. 71 70 16 LAW ON SALES The Roman Law concept of sale encompassing only the obligation of the seller to deliver the property is actually consistent with the treatment of sale as merely a title, and by its perfection does not affect the ownership nor effect the transfer thereof to the buyer. Since it is tradition or delivery as the mode by which ownership over the subject matter is transferred to the buyer, the Roman Law concept of mandating delivery of possession of the subject matter as the essence of the sale contract would be logical. This is in stark contrast to the common law concept that the perfection of a sale over a determinate subject matter which is ready for delivery would legally transfer ownership to the buyer, even when there has been no actual or constructive delivery thereof by the seller. SALE DISTINGUISHED FROM OTHER SIMILAR CONTRACTS The other manner by which to â€Å"recognize† a sale is to know how to differentiate it from other contracts which may happen to have some characteristics similar to sale. The other contracts by which clear distinctions had to be made by the Supreme Court involved basically obligations to transfer ownership and deliver possession of a subject matter. In determining the nature or essential characteristic of a contract purported to be a sale, the Court has held that the title given to it by the parties is not as