Capacity to Buy or Sell in the Philippine Civil Law (Contract of Sale)

The capacity to buy or sell is a fundamental concept under the Contract of Sale, governed by the provisions of the Civil Code of the Philippines. The law meticulously defines the qualifications and restrictions concerning parties' ability to enter into contracts of sale, ensuring that transactions are lawful and free from defects due to incapacity.

1. General Rule on Capacity

Under Article 1327 of the Civil Code, all persons who can bind themselves in a contract have the capacity to buy or sell. This includes:

Persons who are of legal age (18 years or older).
Persons who are not otherwise disqualified by law.
Persons who have the full use of their reason and judgment.

2. Special Rules on Capacity

A. Minors and Incapacitated Persons

Minors, insane or demented persons, and deaf-mutes who do not know how to write are generally considered incapacitated to buy or sell under the general principles of contracts.

However, exceptions exist:

Necessaries: Under Article 1489, minors and incapacitated persons may validly purchase necessaries (e.g., food, clothing, medicine, education) for themselves or their families. The contract remains valid but subject to fair and reasonable terms.
Ratification upon Reaching Majority: A sale entered into by a minor may be ratified upon reaching the age of majority, making it enforceable.
Contracts by Guardians: Guardians may sell the property of minors or incapacitated persons with court approval to protect their interests.

B. Spouses

Under Article 1490, the law imposes restrictions on spouses' capacity to buy or sell:

No Sale Between Spouses: Spouses are prohibited from selling property to each other, except when:
1. A judicial separation of property exists.
2. One spouse is selling property as a legal guardian or administrator to the other spouse (e.g., under a guardianship order or judicial authority).

This prohibition is aimed at preventing fraudulent transfers that could prejudice creditors or circumvent inheritance laws.

C. Persons Prohibited by Law

Certain individuals are explicitly prohibited from purchasing under Article 1491 of the Civil Code:

Public Officers and Employees: Public officers or employees are prohibited from purchasing property that is under their administration, custody, or disposal during their tenure.
Executors, Administrators, and Guardians: These persons cannot purchase property entrusted to their care or administration unless explicitly allowed by law.
Judges, Lawyers, and Others: Judges, clerks of court, and lawyers cannot purchase property involved in litigation in which they are involved by virtue of their profession or office.
Others Specifically Disqualified:
- Officers of corporations or partnerships cannot purchase corporate property when acting on behalf of the corporation.

These provisions are grounded in public policy to avoid conflicts of interest, abuse of position, and undue influence.

3. Effects of Incapacity

Voidable Contracts: Contracts entered into by incapacitated persons are generally voidable unless they involve necessaries or are ratified.
Void Contracts: A sale made in violation of Article 1491 (e.g., sale by a public officer of government property under their custody) is null and void.
Restitution: If a contract is voided due to incapacity, the incapacitated party is generally required to restore what they received, if possible, except in cases where they have consumed necessaries.

4. Capacity to Buy or Sell in Special Circumstances

A. Aliens

Aliens are generally allowed to purchase and sell property in the Philippines, except when restricted by law or the Constitution. For instance, under the 1987 Constitution, aliens are prohibited from owning land, but they may own condominium units or buildings.

B. Corporations

Corporations may buy and sell property provided it is within their corporate powers as defined in their Articles of Incorporation. However, certain corporations, like educational institutions, may face restrictions under the Constitution and laws concerning land ownership.

5. Judicial Remedies

If a person believes a contract of sale was executed in violation of capacity rules, the following remedies are available:

Action for Annulment: File a case to annul the contract based on incapacity.
Action for Restitution: Seek restitution of property or funds exchanged.
Action for Damages: Claim damages resulting from the unlawful transaction.

6. Case Law on Capacity to Buy or Sell

Philippine jurisprudence has consistently upheld the provisions of the Civil Code on capacity to buy or sell:

Heirs of Guido v. Court of Appeals (G.R. No. 118151, February 8, 1999): Clarified the prohibition on sales between spouses as protecting the sanctity of family relations and inheritance rights.
Agpalo v. Rosales (G.R. No. 152860, June 25, 2008): Reinforced the void nature of contracts entered into by incapacitated persons without proper ratification.
Republic v. Sandiganbayan (G.R. Nos. 104768-69, July 21, 2003): Highlighted the prohibition on public officers purchasing government property under their care.

Conclusion

The capacity to buy or sell under the Civil Code ensures fairness, protects vulnerable parties, and prevents abuse in contractual transactions. These rules must be carefully observed to uphold the validity and enforceability of contracts of sale in the Philippines.