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Parties to a Contract of Sale

Who has the capacity to capacity to buy or to sell?

In general all persons who may enter into a simple contract may also enter into a contract of sale. All persons either natural or juridical is given the legal capacity to buy and sell. However there are those given by law an absolute and relative incapacity to enter into a contract of sale.

Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles.

Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 290. (1457a)

*This provision of the New Civil Code mentioned about necessaries which is defined in Art. 194 of the Family Code as everything indispensable for sustenance, dwelling, clothing, medical, attendance, education, and transportation.

Kinds of Incapacity:

  1. Absolute incapacity
  2. Relative incapacity
  3. Specific incapacity

 

 Who are those with absolute incapacity according to the law?

Those that are considered absolutely incapable of entering into a contract of sale are those that cannot bind themselves because of reasons for example like age, defect intellect and mental capacity.

Article 1327: The following cannot give consent to a contract:

  • Unemancipated minors

*Those which have not yet reached the age of majority which is 18 years old.

  • Insane or demented persons and
  • Deaf-mutes who do not know how to write

Article 1328: Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable.

*Lucid interval is the period wherein the person suffering from mental illness is restored to his normal intellectual capacity, intelligence, judgment and reason.

Article 1390: The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:

  • One of the parties is incapable of giving consent (want of capacity)
  • Consent is vitiated by mistake, violence, intimidation, undue influence or fraud (vitiated consent)

These contracts are binding, unless they are annulled by a proper court action. They are susceptible of ratification.

Who are those with relative incapacity according to the law?

Those that are considered relatively incapable of entering into a contract of sale are in relation only to certain persons and classes of property.

Articles 1490: Husband and wife cannot sell property to each other, except

  1. When separation of property was agreed upon in marriage settlements
  1. When there has been judicial separation of property under Art 191

*This is to prevent commission of fraud or prejudice to third persons, the other taking undue influence over the other and to avoid indirect donations. However the husband and wife cannot sell property to each other except when a separation of property was agreed upon in the marriage settlements and where there has been a judicial separation of property as provided by law.

 Who are those with specific incapacity according to the law?

Those that are considered specifically incapable of entering into a contract of sale are in relation only to their occupation and relation to other persons due to public policy, public order, public morals and so forth.

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:

  • The guardian, the property of the person or persons who may be under his guardianship;

*The relationship of the guardian and ward is so intimate that the influence is so great which might cause highly suspicious and fraudulent contract of sale. This influence is assumed to last while the guardian is still functioning in its capacity, the property is still under his control and accounts have finally been settled.

  • Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given;

*This incapacity rests on the principle that the agent and principal rest on one juridical person. The agent stands on fiduciary relationship with his principal. He is prohibited to buy the property he is supposed to sell unless the principal consented thereto.

  • Executors and administrators, the property of the estate under administration;

*The prohibition applies to properties under the administration of the executor and administrator. Executors do not administer the hereditary rights of any heir and thus not part of the property administered by them.

  • Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled 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;

*This prohibition applies to properties belonging to the State or any subdivision thereof or any government-owned or controlled corporations or institutions and those administered by these public officials.

  • 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; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

*The prohibition applies to properties subject of litigation to the persons disqualified by virtue of this provision. It applies during the pendency of litigation involving the property. Such as when the property is subject to the judicial action of the judge or a lawyer, who by virtue of his profession, takes part on the purchase of the property.

  • Any others specially disqualified by law. (1459a)

*These are for example, aliens who cannot purchase agricultural lands prohibited by the Constitution, an officer managing an execution sale cannot purchase the subject property as prohibited by the Rules of Court or an unpaid seller who prohibited in buying the goods in the resale of the same at a public or private sale as barred by the New Civil Code of the Philippines.

References:

De Leon, H. (2010). Comments and Cases on Sales. Quezon City: Rex Printing Company, Inc.

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

The New Civil Code of the Philippines

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