SALES-ATTY. SANTIAGO- 2B-by.

BogDabog

GAITE vs. FONACIER

No. L-11827. July 31, 1961.
DOCTRINE:
A contract of sale is normally commutative and onerous; parties assume a
correlative obligation, but each party anticipates performance by the other
from the very start. Al though 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, it is not in the usual
course of business to do so; hence, the contingent character of the
obligation must clearly appear.
If there is doubt whether the parties intended a suspensive condition or a
suspensive period for the payment of the agreed price, the doubt shall be
settled in favor of the greatest reciprocity of interests

FACTS:
Defendant Fonacier was the owner of 11 iron lode mineral claims.
(Dawahan Group) in Camarines Norte.
Fonacier appointed plaintiff Gaite as his attorney-in-fact.

Gaite conveyed exploitation of said mining claims into the Larap

Iron Mines owned belonging to him.
Gaite extracted approximately 24, 000 tons of iron ore.
Fonacier decided to revoke the authority he granted.
Gaite transferred to Fonacier all his rights over the 24, 000 tons
of iron ore, more or less in for P75K, P10K which was paid upon
the signing of the agreement, and P65K will be paid from and
out of the first letter of credit covering the first shipment of iron
ores and of the first amount derived from the local sale of
iron ore made by the Larap Mines & Smel ting Co., Inc.
To secure the payment, Fonacier promised to execute in
favor of Gaite a surety bond.
Gaite refused to sign unless it is a bond by a bonding company.
Fonacier executed a bond where Far Eastern will be an additional
security.
It provided the the liability of the surety company will attach
when there is an actual sale and will expire on Dec 8.
The surety expired on Dec 8. Fonacier failed to pay upon gaites
demand.

ISSUE 1: Whether the obligation is one with a period or term, and not
with a suspensive condition.
the shipment or local sale of the iron ore is not a condition
precedent (or suspensive) to the payment of the balance of
P65, 000. 00, but was only a suspensive period or term
The words of the contract express no contingency in the
buyers obligation to pay: will be paid
A contract of sale is normally commutative and onerous;
While in a sale 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 hopes or expectations,
emptio spei), it is not in the usual course of business to do
so; hence, the contingent character of the obligation must
clearly appear. Nothing is found in the record to evidence
that Gaite desired or assumed to run the risk of losing his
right over the ore without getting paid for it, or that Fonacier
understood that Gaite assumed any such risk.
Assuming that there could be doubt whether supensive
condition or a suspensive period, the rules of interpretation
would incline the scales in favor of the greater reciprocity
of interests

ISSUE 2: Whether or not Fonacier is entitled to take full advantage

of the period granted them for making the payment.
Appellants failure to renew or extend the surety
companys bond upon its expiration plainly impaired the
securities given to the creditor (appellee Gaite), unless
immediately renewed or replaced. The balance of P65,
000. 00 became due and payable thereafter.
ISSUE 3: Whether or not there was a short-delivery.
The subject matter of the sale is, therefore, a
determinate object, the mass, and not the actual number
of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith
to his buyer all of the ore found in the mass-which he
did.

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SALES-ATTY. SANTIAGO- 2B-by. BogDabog

BUENAVENTURA vs. CA
G.R. No. 126376. November 20, 2003
DOCTRINE:
A contract of sale is not a real contract, but a consensual contract. If there
is a meeting of the minds of the parties as to the price, the contract of
sale is valid, despite the manner of payment, or even the breach of
that manner of payment. If the real price is not stated in the contract, then
the contract of sale is valid but subject to reformation. If there is no meeting of
the minds of the parties as to the price, because the price stipulated in the
contract is simulated, then the contract is void.
Failure to pay the consideration results in a right to demand the fulfillment or
cancellation of the obligation under an existing valid contract while lack of
consideration prevents the existence of a valid contract.

FACTS:
Defendant spouses Leonardo Joaquin and Feliciana
Landrito are the parents of both the plaintiffs and
defendants, all surnamed JOAQUIN.
Sought to be declared null and void ab initio are certain
deeds of sale of real property (subd lots) executed by
defendant parents Leonardo Joaquin and Feliciana
Landrito in favor of their co-defendant children
Plaintiffs contend that there was no valid consideration OR
that assuming that there was consideration, the properties
are more than three-fold times more valuable than the
measly sums appearing therein
Lower Court and CA denied the petition since there was
valid consideration AND plaintiffs cant claim an impairment
of legitime while their parents are still alive.
ISSUE 1: Whether Petitioners have a legal interest over the
properties subject of the Deeds of Sale.
Petitioners do not have any legal interest. Petitioners right
to their parents properties is merely inchoate and
vests only upon their parents death. While still living,
the parents of petitioners are free to dispose of their
properties.

ISSUE 2: Whether the Deeds of Sale are void for lack of

consideration.
A contract of sale is not a real contract, but a
consensual contract. As a consensual contract, If there
is a meeting of the minds of the parties as to the
price, the contract of sale is valid, despite the manner
of payment, or even the breach of that manner of
payment. If the real price is not stated in the contract,
then the contract of sale is valid but subject to
reformation. If there is no meeting of the minds of the
parties as to the price, because the price stipulated in
the contract is simulated, then the contract is void.
Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand
the fulfillment or cancellation of the obligation under
an existing valid contract while the latter prevents the
existence of a valid contract.
Petitioners failed to show that the prices in the Deeds
of Sale were absolutely simulated.( just showed deed of
sale)
ISSUE 3: Whether the Deeds of Sale are void for gross
inadequacy of price.
Art. 1470. Gross inadequacy of price does not affect a
contract of sale, except as may indicate a defect in the
consent, or that the parties really intended a donation
or some other act or contract.
Petitioners failed to prove a violation of 1470 of the Civil
Code which would invalidate, or even affect, the Deeds
of Sale.
Indeed, there is no requirement that the price be equal to
the exact value of the subject matter of sale. All the
respondents believed that they received the commutative
value of what they gave.

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SALES-ATTY. SANTIAGO- 2B-by. BogDabog

CELESTINO CO. vs. COLECTOR OF INTERNAL REVENUE

No. L-8506. August 31, 1956
DOCTRINE:
Filing orders according to specifications does not alter character of Establishment

FACTS:
Celestino Co & Company paid 7% taxes(manufactured
products) on the gross receipts of its sash, door and
window factory.
However it began to claim liability only to the
contractor's 3 per cent tax (instead of 7 per cent)
"To support the contention, duplicate copies of letters,
sketches of doors and windows and price quotations
supposedly sent by the manager of the Oriental Sash
Factory to four customers who allegedly made special
orders for doors and windows from the said factory
were presented.
The conclusion that counsel would like us to deduce
from these few exhibits is that the Oriental Sash
Factory does not manufacture ready-made doors, sash
and windows for the public but only upon special order
of its select customers.
for instance, the doors(klin dried lumber) are not in
existence and which never would have existed but for
the order of the party desiring it. Hence, it is a contract
of piece of work
ISSUE 1: Whether or not the company is engaged in contracts for
piece of work.
The important thing to remember is that Celestino Co &
Company habitually makes sash, windows and doors,
as it has represented in its stationery and
advertisements to the public.
The fact that windows and doors are made by it only
when customers place their orders, does not alter the
nature of the establishment.

The Oriental Sash Factory does nothing more than sell

the goods that it mass-produces or habitually makes;
sash, panels, mouldings, frames, cutting them to such
sizes and combining them in such forms as its
customers may desire.
ARTICLE 1467
"A contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business
manufactures or procures for the generaj market, whether the
same is on hand at the time or not, is a contract of sale, but
if the goods are to be manufactured specially for the customer
and upon special order, and not for the general market, i t is
contract for a piece of work."
In our opinion when this Factory accepts a job that
requires the use of extraordinary or additional
equipment, or involves services not generally
performed by itit thereby contracts for a piece of
workfilling special orders within the meaning of
Article 1467. The orders herein exhibited were not
shown to be special. They were merely orders for
worknothing is shown to call them special requiring
extraordinary service of the factory.
The test of special order must be drawn from the nature
of the work to be performed and the products to be
made.

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SALES-ATTY. SANTIAGO- 2B-by. BogDabog

Commissioner of Internal Revenue vs. Engineering Equipment

and Supply Company
No. L-27044. June 30, 1975
DOCTRINE:
The distinction between a contract of sale and one for work, labor and
materials is tested by the inquiry whether the thing transferred is one not in
existence and which never would have existed but for the order of the party
desiring to acquire it, or a thing which would have existed and has been the
subject of sale to some other persons even if the order had not been given.
If the article ordered by the purchaser is exactly such as the plaintiff makes
and keeps on hand for sale to anyone, and no change or modification of it is
made at defendants request, it is a contract of sale, even though it may be
entirely made after, and in consequence of, the defendants order for it.
The true test of a contractor would seem to be that he renders service in the
course of an independent occupation, representing the will of his employer
only as to the result of his work, and not as to the means by which it is
accomplished. He undertakes to do a specific job or piece of work for other
persons, using his own means and methods without submitting himself to
control as to the petty details

FACTS:
Engineering Equipment and Supply Co. engages in the
design and installation of central type air conditioning
system
One Juan de la Cruz,
wrote the Commissioner
denouncing Engineering for tax evasion by misdeclaring its
imported articles
A raid and search was conducted where voluminous
records of the firm were seized and confiscated.
Revenue examiners recommended Commissioner that
Engineering be assessed for P480, 912. 01 as deficiency
advance sales tax on the theory that it misdeclared its
importation of air conditioning units which are subject to
tax under Section 185(m)
The firm, however, contested the tax assessment. Court
of Tax Appeals rendered its decision, as follows:

petitioner, as a contractor, is declared exempt from

the deficiency manufacturers sales tax
GUIDELINES = DOCTRINE SA LEFT
MANUFACTURER: a person who by any such process
alters the quality of any such material or manufactured
or partially manufactured product so as to reduce it to
marketable shape, or prepare it for any of the uses of
industry, or prepare it in such a manner that the finished
product of such process of manufacture can be put to
special use or uses to which such raw material or
manufactured or partially manufactured products in their
original condition could not have been put.
ISSUE 1: Whether or not Engineering is a manufacturer or
contractor of air conditioning.
We find that Engineering did not manufacture air
conditioning units for sale to the general public but had
its services contracted for the installation of a central
system. (IN SHORT CONTRACTOR SILA)
Engineering designed and engineered complete each
particular plant and that no two plants were identical
but each had to be engineered separately.
Engineering does not sell self-contained air conditioning
units(unitary) which can be mass produced. They are
engaged in central system which cannot be mass produced.
S.M. Lawrence Co. vs. McFarland
o The Court held the appellant is a contractor which used the
materials in the performance of its contracts(improvement
of real estate), and that the customers did not purchase
the equipment and have the same installed.
ISSUE 2: Whether there was fraud in the importation of materials.
There was. They sent letter saying No mention of the
words air conditioning equipment should be made on
any shipping documents as well an on the cases in
order to escape payment of taxes.

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SALES-ATTY. SANTIAGO- 2B-by. BogDabog

QUIROGA vs. PARSONS

No. 11491. August 23, 1918.
DOCTRINE:
These are precisely the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply the beds, and,
on that of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the agent receives the
thing to sell it, and does not pay its price, but del ivers to the principal the
price he obtains from the sale of the thing to a third person, and if he does
not succeed in selling it, he returns it.
It must be understood that a contract is what the law defines it to be, and
not what it is called by the contracting parties.

FACTS:
Quiroga entered a contact with Parsons for the exclusive
sale of 'Quiroga' beds in the Visayan islands.
Quiroga shall furnish beds of his manufacture to Parsons
for the latter's establishment in Iloilo, and shall invoice
them at the same price he has fixed for sales, in
Manila, make an allowance of a discount of 25 per cent of
the invoiced. prices, as commission on the sales; and,
Parsons shall order the beds by the dozen, whether of
the same or of different styles.
Parsons binds himself to pay Quiroga for the beds
received, within a period of sixty days from the date of
their shipment.
Quiroga asserts that Parsons violated the following
obligations: a) not to sell the beds at higher prices than
those of the invoices b) to have an open establishment
in Iloilo c) to conduct the agency d) to keep the beds on
public exhibition e) to pay for the advertisement expenses
for the same f) and to order the beds by the dozen and
in no other manner.
None of the obligations imputed to the defendant are
expressly set forth in the contract(except F). But the
plaintiff alleged that the defendant was his agent for

the sale of his beds in Iloilo, and that said obligations

are implied in a contract of commercial agency.
ISSUE 1: Whether the defendant, by reason of the contract
hereinbefore transcribed, was a purchaser or an agent of the
plaintiff f or the sale of his beds.
The plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated,
and that the defendant was to pay the price in the
manner stipulated. The price agreed upon was the one
determined by the plaintiff for the sale of these beds in
Manila, with a discount of from 20 to 25 per cent,
according to their class. Payment was to be made at the
end of sixty days, or before, at the plaintiff s request,
These are precisely the essential features of a contract
of purchase and sale.
There was the obligation on the part of the plaintiff
to supply the beds, and, on the part of the
defendant, to pay their price.
These features exclude the legal conception of an
agency or order to sell whereby the mandatory or
agent received the thing to sell it, and, does not pay
its price, but delivers to the principal the price he obtains
from the sale of the thing to a third person, and if he
does not succeed in selling if, he returns it.
By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term
fixed, without any other consideration and regardless as
to whether he had or had not sold the beds.
Ernesto Vidals Testimony: USELESS. But it must be
understood that a contract is what the law defines it
to be, and not what it is called by the contracting
parties.

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SALES-ATTY. SANTIAGO- 2B-by. BogDabog

PUYAT vs. ARCO

No. 47538. June 20, 1941
DOCTRINE:
What does not appear on the face of the contract should be regarded merely
as "dealer's" or "trader's talk", which cannot bind either party.

FACTS:
Arco was engaged in the business of operating
cinematographs.
Gonzalo Puyat & Sons, Inc. was acting as exclusive agents
in the Philippines for the Starr Piano Company of
Richmond, Indiana, U. S. A.
After some negotiations, it was agreed between the
parties that the latter would, on behalf of the plaintiff,
order sound reproducing equipment from the Star Piano
Company and that the plaintiff would pay the defendant
The defendant did not show the plaintiff the cable of
inquiry nor the reply but merely informed the plaintiff of
the price of $1, 700.
The sale was perfected. Another sale amounting to $1,600
was done.
The officials of the Arco Amusement Company
discovered that the price quoted to them by the
defendant with regard to their two orders above mentioned
was not the net price but rather the list price, and that
the defendant had obtained a discount from the Starr
Piano Company.
Lower Court: Contract of Purchase and Sale
Appelate Court: Agency
ISSUE 1: Whether or not the contract is a contract of purchase
and sale.
The contract was one of purchase and sale.
What does not appear on the face of the contract
should be regarded merely as "dealer's" or "trader's
talk", which can not bind either party.

The letters are clear in their terms and admit of no

other interpretation than that the respondent agreed
to purchase from the petitioner the equipment in
question at the prices indicated which are fixed and
determinate.
Whatever unforeseen events might have taken place
unfavorable to the defendant (petitioner), such as
change in prices, the plaintiff (respondent) might still
legally hold the defendant (petitioner) to the prices
fixed of $1, 700 and $1, 600.
While the letters state that the petitioner was to
receive ten per cent (10%) commission, this does not
necessarily make the petitioner an agent of the
respondent, as this provision is only an additional
price which the respondent bound itself to pay, and
which stipulation is not incompatible with the contract
of purchase and sale.
It follows that the petitioner as vendor is not
bound to reimburse the respondent as vendee for
any difference between the cost price and the sales
price which represents the profit realized by the
vendor out of the transaction.
It is to be observed that the twenty-five per cent
(25%) discount granted by the Starr Piano Company
to the petitioner is available only to the latter as
the former's exclusive agent in the Philippines.

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SALES-ATTY. SANTIAGO- 2B-by. BogDabog

Lo vs. KJS Eco-Formwork System Phil. Inc.

G.R. No. 149420. October 8, 2003
DOCTRINE:

FACTS:
Respondent KJS ECO engaged in the sale of steel
scaffoldings, while petitioner Sonny L. Lo is a building
contractor.
In February, petitioner ordered scaffolding equipments
from respondent worth P540, 425. 80.
He paid a downpayment in the amount of P150, 000. 00.
The balance was made payable in ten monthly
installments.
His business, however, encountered financial difficulties
and he was unable to settle his obligation to
respondent despite oral and written demands made
against him.
Petitioner and respondent executed a
Deed
of
Assignment, whereby petitioner assigned to respondent
his receivables in the amount of P335, 462 from Jomero
Realty Corporation.
However, when respondent tried to collect the said
credit from Jomero Realty Corporation, the latter refused
to honor the Deed of Assignment because it claimed
that petitioner was also indebted to it.
Petitioner refused to pay claiming that his obligation
had been extinguished when they executed the Deed of
Assignment.
ISSUE 1: Whether or not the assignment of credit extinguished Los
obligation to KJS.
An assignment of credit is an agreement by virtue of
which the owner of a credit, known as the assignor,
by a legal cause, such as sale, dacion en pago,
exchange or donation, and without the consent of the
debtor, transfers his credit and accessory rights to

another, known as the assignee, who acquires the

power to enforce it to the same extent as the assignor
could enforce it against the debtor.
In dacion en pago, as a special mode of payment, the
debtor offers another thing to the creditor who accepts it
as equivalent of payment of an outstanding debt.
In order that there be a valid dation in payment, the
following are the requisites: (1) There must be the
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; (2) There must be some difference
between the prestation due and that which is given in
substitution (aliud pro alio); (3) There must be an
agreement between the creditor and debtor that the
obligation is immediately extinguished by reason of the
performance of a prestation different from that due.
The undertaking really partakes in one sense of the
nature of sale, that is, the creditor is really buying the
thing or property of the debtor, payment for which is
to be charged against the debtors debt.
Petitioner, as vendor or assignor, is bound to warrant
the existence and legality of the credit at the time of the
sale or assignment. When Jomero claimed that it was no
longer indebted to petitioner since the latter also had an
unpaid obligation to it, it essentially meant that its
obligation to petitioner has been extinguished by
compensation.
Indeed, by warranting the existence of the credit,
petitioner should be deemed to have ensured the
performance thereof in case the same is later found to be
inexistent. He should be held liable to pay to respondent
the amount of his indebtedness.

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