BUSINESS LAW
CHAPTER 2 – CAPACITY TO BUY OR SELL
PERSON WHO MAY ENTER INTO A CONTRACT OF SALE
As a general rule, all persons, whether natural or juridical, who can bind themselves have also
legal capacity to buy and sell.
KINDS OF INCAPACITY
Absolute incapacity – in the case of persons who cannot bind themselves
Relative incapacity – where it exists only with reference to certain persons or a certain class of
property
SALE BY MINORS
Generally, the contracts entered into by a minor are voidable. (Arts. 1327)
However, where necessaries are sold and delivered to him (without the intervention of the parent
of guardian), he must pay a reasonable price therefor. (Art. 1489, par. 2.)
The contract is, therefore, valid but the minor has the right to recover any excess above a
reasonable value paid by him.
SALES BY AND BETWEEN SPOUSES
General rule: The husband and the wife are prohibited by Art. 1490 from selling property to each
other. A sale between husband and wife in violation of this provision is inexistent and void from
the beginning because such contract is expressly prohibited by law.
Exception:
1. When a separation of property was agreed upon in the marriage settlements; or
2. When there has been a judicial separation of property.
Spouses are also prohibited from making donations to each other during the marriage except
moderate gifts on the occasion of any family rejoicing.
Under Art. 124 of Family Code, sale by husband of a conjugal property without the wife’s consent
is VOID, not merely voidable, since the resulting contract lacks one of the essential elements of
“full consent”.
INCAPACITY BY REASON OF RELATION TO PROPERTY
Persons who, by reason of the relation of trust with the persons under their charge or their peculiar
control over the property, are prohibited from acquiring said property either directly or indirectly
and whether in private or public sale:
1. Guardians;
2. Agents;
3. Executors and administrators;
4. Public officers and employees;
5. Judicial officers, employees and lawyers; and
6. Others especially disqualified by law
1. The incapacity of the guardian is only against buying the property he is required to sell
during the existence of the relationship.
2. The agent’s incapacity to buy his principal’s property rests on the fact that the agent and
the principal form one juridical person.
3. The prohibition with respect to executors and administrators refers only to properties under
the administration of the executor or administrator at the time of the acquisition.
4. The prohibition with respect to public officials and employees refers only to properties: (a)
belonging to the State, or of any subdivision thereof, or of any GOCC or institution, (b) the
administration of which has been entrusted to the public officials or employees.
5. The prohibition with respect to judges, and lawyers, etc., applies only to the sale of
assignment of property which is the subject of litigation to the persons disqualified therein.
For the prohibition to operate, the sale or assignment must take place during the pendency
of the litigation involving the property.
6. Other persons especially disqualified:
a. Aliens who are disqualified to purchase private agricultural lands;
b. An unpaid seller having a right of lien or having stopped the good in transit;
c. The officer conducting the execution sale or his deputies at an execution sale.
