Law on Sales and Agency - Question AND Answer PDF

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LAW ON SALES AND AGENCYCASE #1: Dux leased his house to Iris for a period of 2 years, at the rate of P25,000 monthly, payable annually in advance. The contract stipulated that it may be renewed for another 2-year period upon mutual agreement of the parties. The contract also granted Iris the right o...

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LAW ON SALES AND AGENCY

CASE #1: Dux leased his house to Iris for a period of 2 years, at the rate of P25,000.00 monthly, payable annually in advance. The contract stipulated that it may be renewed for another 2-year period upon mutual agreement of the parties. The contract also granted Iris the right of first refusal to purchase the property at any time during the lease, if Dux decides to sell the property at the same price that the property is offered for sale to a third party. Twenty-three months after execution of the lease contract, Dux sold breach of her right of first refusal. Dux said there was no breach because the property was sold to his mother who is not a third party. Iris filed an action to rescind the sale and to compel Dux to sell the property to her at the same price. Alternatively, she asked the court to extend the lease for another 2 years on the same terms. (A). Can Iris seek rescission of the sale of the property to Dux's mother? Yes. Iris can seek rescission since there is a meeting of minds between Dux and Iris. Further, there is a stipulation that Iris is granted of the right of refusal to purchase the property at any time during the lease, if it is decided to be sold at the same price offered to a third party. The contract, being consensual, which is perfected by mere consent is binding between the parties. Given that Dux’s mother is not a third party, it cannot be denied that she is a buyer in bad faith knowing that there is agreement between her son and Iris. Thus, Iris can seek rescission as a remedy for the breach of contract. (B). Will the alternative prayer for extension of the lease prosper? No. It should not be denied that according to their agreement, contract may be renewed for another 2-year period upon mutual agreement of the parties. As a general rule, the fixing of the agreement can never be left to the discretion of one of the contracting parties. CASE#2: Sergio is the registered owner of a 500-square meter land. His friend, Marcelo, who has long been interested in the property, succeeded in persuading Sergio to sell it to him. On June 2, 2012, they agreed on the purchase price of P600,000 and that Sergio would give Marcelo up to June30, 2012 within which to raise the amount. Marcelo, in a light tone usual between them, said that they should seal their agreement through a case of Jack Daniels Black and P5,000 "pulutan" money which he immediately handed to Sergio and which the latter accepted. The friends then sat down and drank Sergio learned of another buyer, Roberto, who was offering P800,000 in ready cash for the land. When Roberto confirmed that he could pay in cash as soon as Sergio could get the documentation ready, Sergio decided to withdraw his offer to Marcelo, hoping to just explain matters to his friend. Marcelo, however, objected when the withdrawal was communicated to him, taking the position that they have a firm and binding agreement that Sergio cannot simply

walk away from because he has an option to buy that is duly supported by a duly accepted valuable consideration. (A) Does Marcelo have a cause of action against Sergio? Yes. Marcelo has a cause of action against Sergio. As a general rule, an option contract is an accepted unilateral promise to buy or sell supported by a consideration distinct and separate from the its price. Here, it is said that Marcelo sealed the agreement with Sergio through a case of Jack Daniels Black and P5,000 "pulutan" money, a duly supported by and duly accepted valuable consideration that results to a perfected option contract. Thus, Sergio may not withdraw the offer before the lapse of the period agreed upon, otherwise, he will be liable for damages to Marcelo for breach of contract. (B) Can Sergio claim that whatever they might have agreed upon cannot be enforced because any agreement relating to the sale of real property must be supported by evidence in writing and they never reduced their agreement to writing? No. Sergio cannot claim that what they agreed upon is not enforceable for it is not in writing. The contract which is binding in this case is one of an option contract. As a general rule, a contract shall be obligatory in whatever form they have been entered into, provided that all the essential requisites for its validity are present. However, it does not apply if certain form is required by law for validity, convenience and enforceability. In this case, the Statute of Frauds do not apply since what it requires to be in writing to be enforceable is the sale of property or an interest therein, wherein our subject matter in this case is only an option contract. CASE#3: Eulalia was engaged in the business of buying and selling large cattle. In order to secure the financial capital, she advanced for her employees (biyaheros). She required them to surrender TCT of their properties and to execute the corresponding Deeds of Sale in her favor. Domeng Bandong was not required to post any security but when Eulalia discovered that he incurred shortage in cattle procurement operation, he was required to execute a Deed of Sale over a parcel of land in favor of Eulalia. She sold the property to her grandneice Jocelyn who thereafter instituted an action for ejectment against the Spouses Bandong. To assert their right, Spouses Bandong filed an action for annulment of sale against Eulalia and Jocelyn alleging that there was no sale intended but only equitable mortgage for the purpose of securing the shortage incurred by Domeng in the amount of P 70, 000.00 while employed as "biyahero" by Eulalia. Was the Deed of Sale between Domeng and Eulalia a contract of sale or an equitable mortgage? Explain. The Deed of Sale between Domeng and Eulalia is clearly an equitable mortgage. As a rule, the contract shall be presumed as an equitable mortgage when it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of an obligation. In this case, Domeng’s execution of Deed of Sale over a parcel of land is merely a security when Eulalia learned of shortage incurred by in cattle procurement operation.

CASE#4: The Ifugao Arms is a condominium project in Baguio City. A strong earthquake occurred which left huge cracks in the outer walls of the building. As a result, a number of condominium units were rendered unfit for use. May Edwin, owner of one of the condominium units affected, legally sue for partition by sale of the whole project? Explain.

Yes. Edwin may legally sue for partition by sale of the whole project, him being a coowner of the condominium units. Further, according to Section 8 (b) of Condominium Act of the Philippines, otherwise known as Republic Act No. 4796, where several persons own a condominiums project, an action may be brought by one or more persons for partition by sale of the entire project, as if they are the co-owners of the project, in the same proportion of their interest therein, provided that damage or destruction of the project has rendered one-half or more of the units therein untenantable and that condominium owners holding in aggregate more than thirty percent interest in the common areas are opposed to repair or restoration of the project. CASE#5: X was the owner of an unregistered parcel of land in Cabanatuan City. As she was abroad, she advised her sister Y via overseas call to sell the land and sign a contract of sale on her behalf. Y thus sold the land to B1 on March 31, 2001 and executed a deed of absolute sale on behalf of X. B1 fully paid the purchase price. B2, unaware of the sale of the land to B1, signified to Y his interest to buy it but asked Y for her authority from X. Without informing X that she had sold the land to B1, Y sought X for a written authority to sell. X e-mailed Y an authority to sell the land. Y thereafter sold the land on May 1, 2001 to B2 on monthly installment basis for two years, the first installment to be paid at the end of May 2001. Who between B1 and B2 has a better right over the land? Explain with basis in law. B2 has a better right over the land. As a general rule, a sale of piece of land or interest therein when made through an agent is void unless the agent’s authority is in writing. Thus, the sale of land by Y to B1 is considered inexistent and void, resulting to a better right over the land to be possessed by B2 since she asked for the written authority of Y from X.

CASE#6: Richard sold a large parcel of land in Cebu to Leo for P100 million payable in annual installments over a period of ten years, but title will remain with Richard until the purchase price is fully paid. To enable Leo to pay the price, Richard gave him a power‐of‐attorney authorizing him to subdivide the land, sell the individual lots, and deliver the proceeds to Richard, to be applied to the purchase price. Five years later, Richard revoked the power of attorney and took over the sale of the subdivision lots himself. Is the revocation valid or not? Why?

No, revocation is not valid. As a general rule, principal may revoke an agency at will. However, this rule has an exception, an agency is irrevocable if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted. Here, there is an existence of bilateral contract wherein both parties are bound to fulfill obligations reciprocally towards each other- to buy and sell the parcel of land. The appointment is in effect a condition of contract that should not be revoked without the consent of all the parties. Therefore, Richard cannot revoke the agency at will for a bilateral contract depends upon it....