LEGAL ASPECTS OF SALE 2.

Conditional

CONTRACTS
CAPACITY
A. DEFINITION:
TO BUY AND SELL
A contract is a
MEETING OF MINDS between two persons
whereby one binds himself, with respect to
As a rule, all persons, natural or
juridical, who are authorized by the
the other, to give something or to render Constitution to own land (Art. XII,
some service
Sec. 7) and by the New Civil Code to
obligate (Art. 1469), may buy or sell
(Art. 1305, NCC).
real estate.

Save in cases of hereditary succession,

A. ESSENTIAL REQUISITES OF
no private lands shall be transferred or
CONTRACT
conveyed except to individuals,
(Art. 1318, NCC)
corporations, or associations qualified to
acquire or hold lands of the public
domain. (Art. XII, Sec. 7)
1. Consent of the contracting parties;
A natural-born citizen of the
Philippines who has lost his Philippine
citizenship may be a transferee of private
2. Object certain which is the subject matter
lands, subject to limitations provided by
of the contract;
law. (Sec. 8).
3. Cause or consideration of the obligations
which is established.
CAPACITY TO BUY AND SELL
SALE
OF REAL ESTATE PROPERTIES Only Filipino citizens or corporations
at least 60% of the capital of which is
owned by Filipino citizens can
A. DEFINITION: acquire land.
By the Contract of Sale, one of the
contracting parties obligates himself
to
A Filipina married to a foreigner
retains her Philippine citizenship, and
transfer the
ownership of
thus, also retains right to acquire
land in the Philippines
and

to deliver a
A Filipino who lost Philippine
citizenship, can retain ownership of
determinate land acquired by him prior to change
thing, of citizenship.

and the other

to pay therefore a price certain in
money or its equivalent. (Art. 1458, CAPACITY
NCC). TO BUY AND SELL
5. The husband and the wife cannot sell
KINDS OF SALE (Art. 1458, property to each other, except:
NCC). a. when a separation of property has
been agreed upon in their
1. Absolute or Unconditional marriage settlement; or
 b. when there has been a judicial
separation of the property
under Art. 134 of the Family
Code.
(Art. 1490, NCC)
Reasons: To protect 3rd persons, union of
personality, influence
Note: Spouses also prohibited from giving
donations; applies to common law relationships.
6. Persons who cannot acquire
by purchase because of
fiduciary relationship or peculiar
control exercised. (Art. 1491, NCC)
The following persons cannot acquire by
purchase, even at a public or judicial
auction, either in person or through the
mediation of another:
GUARDIAN the property of
the person or persons who
may be under his
guardianship;
AGENTS the property whose
administration or sale
may have been intrusted to
them, unless the consent of
the principal has been given;
EXECUTORS and
ADMINISTRATORS the
property of the estate under
administration
4. PUBLIC OFFICERS and EMPLOYEES the
property of the State or of any
subdivision thereof, or
government owned or controlled
of any
corporation or institution, the
administration of which has been
intrusted to them; this provision shall
apply to judges and government
experts who, in any manner
whatsoever take part in the sale;
5. JUSTICES, JUDGES, PROSECUTING
ATTORNEYS, CLERKS OF SUPERIOR
AND INFERIOR COURTS, AND OTHER
OFFICERS and EMPLOYEES
CONNECTED with the administration of
justice the property and rights in
litigation or levied upon an execution
before the court within whose
jurisdiction or territory they exercise
their respective functions; and
6. ANY OTHERS disqualified by law.
(Art. 1491, NCC)
The prohibitions in Articles 1490 and 1491
are applicable to sales in legal redemption,
compromises and renunciations.
(Art. 1492, NCC)
APPLICABILITY TO LEASE
The persons disqualified to buy
referred to in articles 1490 and 1491,
are also disqualified to become lessees
of the things mentioned therein.
(Art. 1646, NCC)
transfer the
ownership of
and
to deliver the
thing,
IMPLIED WARRANTIES OF SELLER
(Art. 1547, NCC)
In a contract of sale, unless a contrary intention
appears, there is:
WARRANTY AGAINST EVICTION - An
implied warranty on the part of the seller
that he has a right to sell the thing at the
time when the ownership is to pass, and
that the buyer shall from that time have
and enjoy the legal and peaceful
possession of the thing; and
WARRANTY AGAINST HIDDEN
DEFECTS* - An implied warranty that
the thing shall be free from any hidden
faults or defects, or any charge or
 encumbrance not declared or known to 1. accept the area included in the
the buyer. contract and reject the
excess; or
*Does not apply to second-hand items.

2. accept the whole area, but must

E. OBLIGATIONS OF THE pay for the excess
VENDEE (Art. 1582, NCC) area at the contract rate.
1. The Vendee is bound to
accept delivery of the property sold
at the time and place b) If the area is smaller, choose to:
stipulated in the contract;
and

2. The Vendee is bound to pay

the price of the property sold at 1. have a proportional reduction of the
the time and place stipulated in
the contract. price; or
2. rescind contract, provided:
a. that the lack in area be
RULE IN CASE AREA IS
DIFFERENT FROM THAT
not less
that in the contract; or
than 10% of

b. that he would
STATED IN THE CONTRACT not have bought
(Art. 1539, 1540 and 1542, NCC) the land had
he known of its

1. If the sale is for a lump sum, there

smaller area.

shall be
no increase or decrease of the price, RULE ON WHO HAS BETTER
RIGHT TO OWNERSHIP OF
although there be a greater or lesser
area PROPERTY SOLD TO TWO OR
than that stated in the contract. MORE BUYERS
(Art. 1544, NCC)

P 8,000,000 The buyer who in good faith first

recorded the sale in the Registry of
Property.

P 8,000,000 Should there be no inscription, then

the buyer who in good faith was

first in possession.
2. If the sale be made with a
statement of
certain price
its area at the rate of a
Should there be neither inscription
nor possession, then the buyer who
per square meter, the VENDEE may:
can present the oldest title, provided
a)If the area is bigger, choose to: there is good faith.

If not registered under the Torrens System

 Registration of instruments affecting
unregistered land is without prejudice to a
PACTO DE RETRO
[ Sale with right to repurchase ]
Sale where vendor has reserved right to
third person with a better right (Act. No.
repurchase the property sold
3344)

H. DIFFERENCE BETWEEN
Period to repurchase or redeem

- depends on agreement of parties but not to

CONTRACT TO SELL AND CONTRACT
OF SALE.
1. A CONTRACT TO SELL is merely a mutual
promise to buy and sell a property,
2.CONTRACT TO SELL, no such transfer of
ownership of title takes place.
exceed ten (10) years
- in the absence of stipulation, the period is
deemed to be four (4) years
EQUITABLE MORTGAGE is one which
although lacking in some formality, or form or
words, or other requisites demanded by the
statute, nevertheless reveals the intention of the
parties to charge real property as a security for a
debt, there being no impossibility nor anything
contrary to law in this intent.

1. CONTRACT OF SALE consists of the actual
sale of the property.
When Presumed as Equitable Mortgage
(Art. 1602 & 1603)
2.CONTRACT OF SALE, there is transfer of
The contract shall be presumed to be an
ownership and title
equitable mortgage, in any of the following
cases:
DIFFERENCE BETWEEN
SALE WITH
MORTGAGE AND SALE
When the price of a sale with right to
repurchase is unusually inadequate;
WITH ASSUMPTION OF
MORTGAGE.
A DEED OF SALE WITH MORTGAGE is a
When the vendor remains in possession
as lessee or otherwise;
contract of sale whereby part of the
purchase price is paid upon the
execution of the contract with the
When upon or after the expiration of the
right to repurchase another instrument
balance to be paid within a stipulated extending the period of redemption or
period and the property is mortgaged granting a new period is executed;
by the VENDEE to the VENDOR to
secure the payment of the said
balance.
When the purchaser retains for himself a
part of the purchase price;
DEED OF SALE WITH MORTGAGE

On the other hand, a DEED OF SALE

WITH ASSUMPTION OF MORTGAGE is
a contract of sale whereby the property
being sold is presently mortgaged and
the VENDEE pays a certain amount to
the VENDOR and assumes as well the
existing obligation which is secured by
a mortgage over the property.
DEED OF SALE WITH
ASSUMPTION OF MORTGAGE
When Presumed as Equitable Mortgage
(Art. 1602 & 1603)
When the vendor binds himself to pay the
taxes on the thing sold;
In any other case where it may be fairly
inferred that the real intention of the
parties is that the transaction shall secure
 the payment of a debt or the performance

of any other obligation; and

In case of doubt, a contract purporting to

2. Marital consent is NOT necessary
be a sale with right to repurchase shall be
construed as an equitable mortgage. a. when the property relations
between the spouses is one of
Reasons: Prevent circumvention of pactum absolute separation; or
commissorrium and usury law.

MARITAL CONSENT IN
DEED OF SALE
b. when the property relations
between the spouses is one of
conjugal partnership and the
1. Marital consent is required property involved:

1. was brought into the

a. when the property relations marriage by either of the
spouses (property
between the spouses is one
of ABSOLUTE COMMUNITY or nomenclature: husband's -
capital,
wife's - paraphernal);
b. when the property relations
between the spouses is one 2. was acquired by either
of CONJUGAL of the spouses by
PARTNERSHIP and the inheritance; or
property involved was
acquired by onerous title 3. was acquired with
during the marriage at the exclusive funds of either of
expense of the common the spouses.
fund.

Effect of NO CONSENT
(Art. 96, Art. 124, FC)

If one spouse acts without the written consent of

the other or without court authority, the
disposition or encumbrance shall be
VOID.

However, the transaction shall be construed as

a continuing offer on the part of the
consenting spouse and the third person,
and may be perfected as a binding
contract upon the acceptance by the other
spouse or authorization by the court
before the offer is withdrawn by either or
both offerors.

Period to file questioning transaction by the

wife

Within FIVE (5) years from the date of the

contract