Law on Sales Reviewer

1458 Contract of Sale – contract whereby the seller obligates himself to deliver something to the buyer who binds himself to pay a price

1. One can sell only what he owns 2. Sufficient if right exist at the time of delivery 1460 

Characteristics: 1. Consensual – perfected by mere consent 2. Bilateral – parties are bound to fulfill obligations reciprocally 3. Onerous – price is considered in the thing sold 4. Commutative – thing sold is equivalent to the price paid 5. Nominate – Sale is its special name in the civil code 6. Principal – its existence and validity upon another contract Requisites:

1461 Things having potential existence  

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Natural Elements – elements deemed to exist in absence of any contrary stipulations

1462

2 Kinds of Contract of Sale

Goods which can be the object of the sale 1. Existing goods – possessed by the seller 2. Future goods – to be manufactured, raised or acquired

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1459 Requisites Concerning Objects Determinate Licit (lawful) Not impossible Rights which are not intransmissible or personal

Kinds of Illicit Things 1. Per se – nature 2. Per accidens – declaring it illegal

Subject into condition that the thing contemplated will come into existence This is VALID even if this thing does not come into existence unless the hope of expectancy is VAIN.

Sale of future goods

1. Absolute – no subject to any condition 2. Conditional – sale contemplates contingency/condition

1. 2. 3. 

Even a future thing not existing in the time of contract (potential/possible existence) may be the object of sale i.e. the wine a vine is expected to produce

Sale of hope or expectancy

1. Consent/Meeting of Minds 2. Object/Subject Matter (Determinate thing) 3. Cause/Consideration (Price)

Accidental Elements – elements which may be present depending on the stipulations of the parties

Subject matter must be determinate

provisions

Right of vendor to transfer ownership

of

law

Sale of future goods cannot be the subject of an executed sale but may be the subject of an executory contract (that which is yet to be fully executed or performed; opposite of executed sale)

1463 Sale of undivided interest in a thing  

Makes the buyer a co-owner in the thing sold (i.e. land) Once became a co-owner, the buyer can dispose the thing (undivided portion of the thing) even without the consent of his coowners

1464

Sale of an undivided share of a specific mass 1. Fungible goods – goods of any unit is equivalent to any other unit; a commodity money (i.e. grain, oil, wine, gasoline) 2. Effect: may be a sale of undivided interest if the mass is specific or capable of being determinate 3. Risk of loss: whole mass is at risk of all the parties interested in it, in proportion to their various holdings 4. Subject Matter: incorporeal/intangible right 1465  

Things subject to a resolutory condition may be the object of the contract of sale Resolutory condition – uncertain event upon the happening of which the obligation subject to it is extinguished

1466 Contract of agency – person binds himself to render some service or to do something in representation of another, with the authority of the latter Differences between contract of sale and agency 1. Sale, buyer receives the goods as owner Agency, agent receives goods (but the ownership retains to the principal) 2. Sale, buyer pays the price Agency, only accounts for the proceeds in the principal’s behalf 3. Sale, buyer cannot return the object sold Agency, agent can return the object 4. Sale, seller warrants the thing sold Agency, agent assumes no warranty 5. Sale, buyer can deal with the things sold as he pleases Agency, agent acts according to the instructions of the principal

Differences between contract of sale and for work 1. Sale, things would exist even the order had not been given Work, thing would never have existed but for the order of the party desiring it 2. Sale, risk of loss is borne by the buyer Work, risk of loss is borne by the contractor/worker 3. Sale, within the Statute of Frauds Work, not within the Statute of Frauds 1468 Contract of barter/exchange – one party gives one thing in consideration of the other’s promise to give another thing Exchange partly in money and partly in thing   1469  

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1467 Contract for a piece of work – contract binds himself to execute a piece of work for the employer

Refer to the manifest intention of the parties Determine which has greater value

No sale if price is not certain or ascertainable When price is certain: o Agreed definite amount o Reference to another thing certain o Price is left to the judgment of specified person(s) Price fixed by third parties is binding upon them, EXCEPT: o Third person acts in bad faith r by mistake o Third person disregarding instructions given by parties If third person cannot fix the price, the contract shall be ineffective. If the third person is prevented for fixing the price, the party not in fault may obtain redress against the party at fault which may be a choice between rescission or fulfillment. Court fixes the price if the party chooses fulfillment.

1470 Gross inadequacy of price (voluntary sales)

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Mere inadequacy of price does not affect the contract of sale when both parties are in a position to form an independent judgment in the transaction If low price may indicate defect in the consent, contract may be annulled

Gross inadequacy of price (involuntary sales)   

Judicial or execution sale – the court sells the property of the debtor for the satisfaction of his unpaid indebtedness. If the price is so low as to be shocking to the conscience, of the court, a judicial sale may be set aside The validity of the sale is not affected if the law gives the owner the right to redeem (sale in public auction)

1471 

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 1476  

 If the sale is simulated, the sale is void but the act may be shown to be a donation.

1472 

The price of securities, grain, liquids shall also be considered certain (although it is subject to fluctuations on different days)

1473  

Fixing of price by one of the contracting party is not allowed But if the price fixed by one is accepted by the other, the contract is deemed perfected

1474  

If price cannot be determined, the contract is without effect (executory) When delivery has already been made, the buyer must pay a reasonable price— market price at the time and place fixed by contract or law

1475 

Contracts are perfected by mere consent

Owner has the right to fix his own price, reasonable or unreasonable Failure to pay in cases where price is stipulated, does not make the contract invalid. The seller may demand specific performance or rescission with damages No price stipulated, sale is void and nonexistent

Sales of separate lots by auction are separate sales Sale by auction is perfected when auctioneer announces its perfection by the fall of hammer. Until announcement is made, bidder may retract his bid and auctioneer may withdraw the goods from the sale Seller may in auction sale if: o Such right was reserved o Notice was given the sale is subject for bidding o Right to bid is not prohibited by law or stipulation

1477 

Delivery to the vendee means transfer of ownership

1478 

Parties may stipulate the ownership is not transferred unless price has been paid

1479  

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Policitation – unaccepted unilateral promise to sell or buy a thing which has no juridical effect or legal bond Option – privilege of a person for which he has paid a consideration which gives him the right to buy or sell at any time within the agreed period at a fixed price Kinds of promises o Accepted unilateral promise to sell (buy) in which the promise elects to buy (sell)

Does not bind the promisor and may be withdrawn any time o Bilateral promise to buy or sell reciprocally accepted  Reciprocally demandable, contract perfected 

1480 Risk of loss or deterioration (Rules) 1. Thing lost before perfection – seller bears the loss due to the principle of res perit domino or the thing perishes with the owner 2. Thing lost at the time of perfection – contract is void or inexistent 3. Thing lost after perfection but before delivery, even the buyer takes the ownership – buyer bears the loss (exception to res perit domino) 4. Thing lost after delivery – buyer bears the loss

Earnest money – money given by the buyer to the seller to bind the bargain; partial payment of the purchase price; proof of the perfection of contract; like an advance payment, thus, deducted from total price. Differences between earnest money and option money 1. Earnest money, part of the purchase price Option money, distinct consideration for the option contract 2. Earnest money, there is already a sale Option money, sale not yet perfected 3. Earnest money, when given, buyer is bound to pay the balance Option money, buyer is not required to buy 1483 Form of contract – manner it is executed or manifested 

1481 

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1482

Sale by description – seller sells things not yet seen by the buyer but the seller describes it as being of a particular kind o If the bulk of goods do not correspond with the description, contract may be rescinded Sale by sample – parties are contracted solely with the reference to the sample, with the understanding that the bulk was like it. o The thing to be delivered by the seller must conform with the sample in kind, character and quality Sale by sample and description – goods must satisfy all the warranties appropriate to either kind o It is not sufficient the goods correspond with the sample if they do not conform the description given

Contracts may be entered into any form provided it has the essential requisites

Contracts covered by Statute of Frauds – law requires that it must be in writing 1. Sale of personal property at a price greater equal to P500 2. Sale of real property or an interest therein regardless of the price 3. Sale of property not to be performed from the year of sale regardless of the nature of the property and price Stature of Frauds is applicable only to executory contract 1484 Right of vendor tor recover unpaid balance of the purchase price 1. Specific performance 2. Cancellation – vendee is unable to pay two or more installments 3. Foreclosure (of the chattel mortgage) 1485

Lease of personal property with option to buy is sales of the personal property payable in installments 1486 The parties may stipulate that the installments or rents paid are not to be returned. 1987 The expenses for execution and registration of the sale shall be borne by the vendor

1489

Also prohibited in making donations to each other. 1491 Persons who are incapacitated to purchase a property     

Other persons disqualified by law

All persons may enter into a contract of sale. Exceptions are those with incapacities.

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Kinds of incapacity

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1. Absolute – persons who cannot bind themselves 2. Relative – reference to certain persons or certain classes of property Necessaries -- things needed for sustenance, dwelling, clothing and medical attendance in keeping the financial capacity of the family or incapacitated person 

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Guardians Agents Executors and administrators Public officers and employees Judicial officers and employees and lawyers

Contracts entered by minors and other incapacitated persons (e.g. insane/demented person, deaf-mutes who do not know how to write) are voidable. Contract can be valid only when necessaries are delivered to him, thus, he must pay a reasonable price.

Sale by minors – valid when they pretended to have reached their majority even if they have not 1490 Husband and wife CANNOT sell property to each other except: 1. Separation of property was agreed upon in marriage settlements 2. There has been a judicial separation of the property

Aliens, disqualified to purchase private agricultural lands Unpaid seller Officer conducting execution sale of property

Violation of prohibition  

Voidable (guardians, agents, executors and administrators) only private interest are affected Null and Void (Public officers and employees, judicial officers and employees and lawyers, other persons disqualified by law)

1492 The prohibitions are applicable to sales by legal redemption, compromise and renunciation Compromise – contract whereby parties, by reciprocal concessions, avoid litigation Renunciation/Condonation/Remission – creditor gratuitously abandons his right against his creditors 1493  

Thing entirely lost at the time of perfection, contract is void and inexistent Thing only partially lost – vendee may elect between withdrawing from the contract and demanding the remaining part, paying its proportionate price

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A thing is lost when it perishes or goes out of commerce or disappears in such a way that is existence is unknown or cannot be recovered Perishes means that there has been a material deterioration such that it loses its former utility

1494 In sale of specific goods, ad goods without the knowledge of the seller have perished, the buyer may at his option treat the sale: 1. As avoided 2. Valid in all of the existing goods