230390594 Law on Sales PDF

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I. INTRODUCTIONA. Definition of saleArt. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.A contract of sale may be absolute or conditi...

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Law on Sales 5. Onerous – as opposed to gratuitous, because the thing is sold in consideration of a price and vice versa

I. INTRODUCTION A. Definition of sale Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

6. Principal – it can stand on its own; unlike an accessory contract C. Kinds of a contract of sale

A contract of sale may be absolute or conditional. (1445a)

1. Absolute – where the sale is not subject to any condition whatsoever and where title passes to the buyer upon the delivery of the thing sold.

The definition in Art 1458 brings about the creation of two sets of obligations: for the seller, (1) to transfer ownership and (2) deliver possession of the subject matter; for the buyer: to pay the price. Obligations, as referred to in the Article, are obligations to give; thus it may be the subject of actions for specific performance. (Villanueva)

2. Conditional – where the sale contemplates a contingency and in general, where the contract is subject to certain conditions (usually the full payment of the purchase price). Conditions are attached to the contract; the title will only pass once the conditions have been fulfilled.

B. Characteristics of a contract of sale

D. Sale as distinguished from other contracts

1. Nominate – it has a peculiar name and form as prescribed in the law

1. sale vs. contract for a piece of work2

2. Consensual – it is founded upon and completed by mere consent of the contracting parties1 (See Article 1475) Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. (1450a) 3. Commutative – it is a contract in which each of the contracting parties gives a thing of value and receives an equivalent 4. Bilateral – it is a contract in which both the contracting parties are bound to fulfill the obligations reciprocally towards each other (i.e. the vendor becomes bound to deliver the thing sold and the vendee to pay the price for it)

Art. 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 general 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 his special order, and not for the general market, it is a contract for a piece of work. (n) Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. (1588a) Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on 2

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QUIJADA V. CA: Sale being a consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of the minds as to the offer and acceptance thereof on 3 elements: price, subject matter and terms of payment. Ownership by the seller on the thing sold at the time of perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered.

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CELESTINO V. COLLECTOR: A factory which habitually makes sash, windows and doors, and sells the goods to the public is a manufacturer. The fact that the windows and doors are made by it only when customers place their orders and according to such form or combination as suit the fancy of the purchasers does not alter the nature of the establishment; COMMISSIONER V. ENGINEERING: The test of a contractor is 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.

warranty of title and against hidden defects and the payment of price in a contract of sale. (n)

exceeds the amount of the money or equivalent; otherwise, it is a sale. (1446a)

Art. 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contract fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost. (n)

Art. 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the other's promise to give another thing. (1538a)

a) In a contract for work, labor or materials or for a piece of work, 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; while in a contract of sale, the thing transferred is one which would have existed and been the subject of sale to some other person, even if the order had not been given. (De Leon) b) This follows the Massachusetts Rule: 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 general 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 his special order and not for the general market, it is a contract for a piece of work. (Baviera)

its

Art. 1639. If one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages. (1539a) Art. 1640. One who loses by eviction the thing received in barter may recover that which he gave in exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only make use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third person. (1540a) Art. 1641. As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. (1541a) 4. sale vs. dacion en pago

2. sale vs. agency to buy and sell3 Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. (n) 3. sale vs. barter or exchange Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n) Dacion En Pago Presupposes a preexisting debt & extinguishes the debt Price is the value of the thing given

Sale Obligations are created from the perfection of the contract Fixing of the price is more freely agreed upon (Manresa)

5. sale vs. donation 3

QUIROGA V. PARSONS: In the contract in the instant case, what was essential, constituting its cause and subject matter, was that the plaintiff was to furnish the defendant with the beds which the latter might order, at the stipulated price, and that the defendant was to pay this price in the manner agreed upon. 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 older to sell whereby the mandatory or agent receives 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 it, he returns it,

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Art. 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. Under Art 1471, when the price of the contract of sale is simulated, the sale may be void but the act may be shown to have been in reality a donation x x x On the other hand, a purported donation may have other considerations placed on the donee, thus it becomes critical to

determine what rule applies (law on sales or law on donations) (Villanueva) 6. summation: tests to determine the nature of the contract 4 Tests

Sale = object: transfer of ownership

1. Nature of business 2. Existence of thing 3. Market

Ordinary

4. Statute of frauds

Covered

Does not General

4 Tests (but the ultimate test is: intention of the parties) 1. Risk of Loss

2. Payment

Sale

Borne by seller Buyer

3. Exclusive Dealership 4. Return of unsold goods

None

Sale 1. Intention of parties 2. Value of thing vs. Value of money

2 Tests 1. Debt 2. Stage of contract

Money > thing

Sale None Perfection

Piece of Work = object: service (mental, physical labor) Extraordinary Depends on order Specific Clientele Not covered

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) Art. 1490. The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 191. (1458a) 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: (1) The guardian, the property of the person or persons who may be under his guardianship;

Agency to Sell

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration;

Borne by principal, not agent Principal, not agent Remittance test

(4) 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;

Mandatory

(5) 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.

Barter

Thing > Money

Dacion En Pago Pre-existing Extinguishment

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

II. PARTIES TO A CONTRACT OF SALE A. Capacity of parties 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.

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Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n) 1. absolute incapacity

Those who have the legal capacity to give consent to contracts may validly enter into a contract of sale, unless specifically prohibited by law. However, when necessaries are sold and delivered to a minor or other incapacitated person, the latter must pay a reasonable price therefore. Necessaries are those indispensable for sustenance, clothing, dwelling, education, and medical treatment. 2. relative incapacity a) married persons (as regards contracts with third parties) Art. 73. Either spouse may exercise any legitimate profession, occupation, business or activity without the consent of the other. The latter may object only on valid, serious, and moral grounds. In case of disagreement, the court shall decide whether or not: (1) The objection is proper; and (2) Benefit has occurred to the family prior to the objection or thereafter. If the benefit accrued prior to the objection, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent. The foregoing provisions shall not prejudice the rights of creditors who acted in good faith. (117a)

of within five years from the date of the contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (165a) b) married persons between spouses)

(as

regards

contracts

Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. (133a)

Art. 96. The administration and enjoyment of the community property shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

Art. 1490. The husband and the wife cannot sell property to each other, except:

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (206a)

There is a potential circumvention of the policy of the law if sales between spouses are allowed if there was a judicial separation of property, since undue influence is not completely erased by the separation of property. This prohibition also applies to common-law unions4. (Villanueva)

Art. 124. The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed

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(1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 191. (1458a)

c) special disqualifications (see Articles 1491 and 1492 in the previous page) 1) It is immaterial that no damage is suffered by the owner. The contract is 4 CALIMLIM-CANULLAS V. FORTUN: …if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union."

void as the law seeks to prevent said persons from being tempted to take advantage of their position. They occupy a position of trust and confidence in relation to the property under their administration or jurisdiction. 2) Agents can not buy the property of their principalj without the consent of the latter. BROKERS, however, do not come within the prohibition, as their authority consists merely in looking for a buyer or seller, and to bring the latter and his principal together to consummate the transaction. Of course, after the agency is terminated, the agent can buy the property of the principal, which was formerly under his administration. 3) Although executors and administrators can not buy the property under their administration, an executor may buy the hereditary rights of an heir to the estate under his administration, because the buyer, in such case, can not get the share of the heir in the estate until after the administration is ended. 4) With regard to the lawyers, the prohibition does not apply to other properties of the client, nor to assignments of the property formerly in litigation when such assignment will take effect only after final judgment (compensation of lawyers payable on a contingent basis, unless unconscionable).5 5) Examples of other persons especially disqualified by law are: (1) aliens purchasing private agricultural lands (Art XII, Secs 3 & 7, Consti); (2) an unpaid seller having a right of lien…(Art 133 par 5) (Baviera)

manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n) Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) Emption rei speratai – If the parties make the contract depend upon the existence of a thing, s...