LAW ON SALES, DE LEON PDF

Preview

Summary

LAW ON SALES, AGENCY, AND CREDIT TRANSACTIONS☺CHAPTER 1NATURE AND FORM OF THE CONTRACT(ARTS. 1458-1637)ARTICLE 1458CONCEPT OF CONTRACT OF SALE-contract of sale is a contract whereby one of the contracting parties (SELLER) obligates himself to transfer the ownership and to deliver a determinate thing...

Description

LAW ON SALES, AGENCY, AND CREDIT TRANSACTIONS ☺ CHAPTER 1 NATURE AND FORM OF THE CONTRACT (ARTS. 1458-1637) ARTICLE 1458 CONCEPT OF CONTRACT OF SALE -contract of sale is a contract whereby one of the contracting parties (SELLER) obligates himself to transfer the ownership and to deliver a determinate thing, and the other party (BUYER) obligates himself to pay a sum of money or its equivalent (PRICE) CHARACTERISTICS OF A CONTRACT OF SALE 1. CONSENSUAL- it is perfected by mere consent of the parties. 2. BILATERAL- the parties are bound by reciprocal obligations SELLER- to deliver and transfer ownership of the thing sold BUYER- to pay the price 3. ONEROUS- the thing sold is conveyed in consideration of the price. 4. COMMUTATIVE- the thing sold is considered the equivalent of the price paid (the contract may be ALEATORY- depending on an uncertain event or contingency) 5. NOMINATE- it has a special name given to it by law namely “SALE” 6. PRINCIPAL- it can exist by itself without being dependent upon another contract. ELEMENTS OF A CONTRACT OF SALE 1. ESSENTIAL ELEMENTS/ REQUISITES A. CONSENT OR MEETING OF THE MINDS -It refers to the consent on the part of the SELLER to transfer and deliver and on the part of the buyer to pay the price. -The parties must have legal capacity to give consent and to obligate themselves. -when there is an offer of one party, without the acceptance of the other, THERE IS NO CONSENT B. OBJECT OR SUBJECT MATTER - It refers to the determinate thing which is the object of the contract. - If the seller and the buyer differ in regard to the thing sold,

there is no meeting of the minds therefore, there is no sale

C. CAUSE OR CONSIDERATION -It refers to the “price certain in money or its equivalent” 2. NATURAL ELEMENTS- those inherent in a contract of sale, which in the absence of stipulation excluding them, are deemed to exist. Such as: warranty against eviction, warranty against hidden defects and encumbrances 3. ACCIDENTAL ELEMENTS- it refers to the stipulation of the parties such as terms, place and time of payment, and other conditions agreed upon TWO KINDS OF CONTRACT OF SALE 1. ABSOLUTE- the sale is not subject to any conditions and where title or ownership passes to the buyer upon the delivery of the thing sold. 2. CONDITIONAL-where the contract is subject to certain conditions usually the full payment of the purchase price. The delivery of the thing sold does not transfer ownership until the CONDITION is fulfilled ARTICLE 1459 REQUISITES CONCERNING OBJECT 1. THINGS a. determinate thing b. licit or lawful (legal) – it should not be contrary to law, morals, good customs, public order, or public policy. (if the subject matter is illicit, the contract is void and cannot, therefore be ratified) c. not be impossible 2.RIGHTS- all rights which are not intransmissible or personal may be the object of sale. Like: the right of usufruct, the right of conventional redemption. (services may be the object of contract but cannot be the object of contract of sale) KINDS OF ILLICIT THINGS -illicit per se (of its nature) ex: decayed food unfit for consumption -illicit per accidens ( because of some provisions of law declaring it illegal) Ex: prohibited lottery tickets and prohibited drugs RIGHT OF VENDOR TO TRANSFER OWNERSHIP 1. ONE CAN SELL ONLY WHAT HE OWNS -it is essential in order for a sale to be valid, he must be the OWNER or at least must be authorized by the owner of the thing sold. It is a well known principle of law that nobody can dispose of that which he does not have. 2.SUFFICIENT IF RIGHT EXISTS AT TIME OF DELIVERY -It is sufficient if he has the right to sell the thing at the time when the ownership is to pass.

ARTICLE 1460 SUBJECT MATTER MUST BE DETERMINATE 1. WHEN THING DETERMINATE -A thing is determinate or specific when it is particularly designated or physically segregated from all others of the same class. In accordance with the general rule that the object of every contract must be determinate as to its kind. -it is identified by its individuality Ex: the watch I am wearing, my car 2. SUFFICIENT IF SUBJECT MATTER CAPABLE OF BEING MADE DETERMINATE -it is sufficient that the thing is determinable or capable of being made determinate without the necessity of a new or further agreement between the parties to ascertain its identity, quantity, or quality. It cannot be known what may have been sold; the contract shall be null and void. ARTICLE 1461 SALE OF THINGS HAVING POTENTIAL EXISTENCE -future thing not existing at the time the contract is entered into, may be the object of sale provided it has a potential or possible existence. It is reasonably certain to come into existence as the natural increment or usual incident of something in existence already belonging to the seller, and the title will vest in the buyer the moment the thing comes into existence. The thing sold, however must be specific and identified and it must be also owned by the vendor at the time. SALE OF HOPE OR EXPECTANCY The sale refers to an “expected thing” which is not yet in existence, and not to the hope or expectancy which is already exists, in view of the condition that the thing will come into existence, But the SALE OF HOPE OR EXPECTANCY itself is valid even if the thing hoped or expected does not come into existence, unless the hope or expectancy is VAIN, in which case the sale is void. ARTICLE 1462 GOODS WHICH MAY BE THE OBJECT OF SALE Goods which form the subject of a contract of sale may be either: a. EXISTING GOODS OWNED OR POSSESSED BY THE SELLER ex: the sale of bathroom fixtures currently stored in the seller’s warehouse is a sale of existing goods b. FUTURE GOODS OR GOODS TO BE MANUFACTURED, RAISED OR ACQUIRED BY THE SELLER EXAMPLES: MANUFACTURED- like the sale of milk bottles to be manufactured with the name of the buyer pressed in the glass RAISED- sale of chickens that may be raised in a poultry farm and sale of the future harvest of palays from a ricefield ACQUIRED- sale of definite parcel of land the seller expects to buy

SALE OF FUTURE GOODS Even though the contract is in the form of present sale, is valid only as an EXECUTORY CONTRACT to be fulfilled by the acquisition and delivery of the goods specified ARTICLE 1463 SALE OF UNDIVIDED INTEREST IN A THING 1. BY SOLE OWNER -the sole owner of a thing may sell the entire thing; or only a specific portion thereof; or an undivided interest therein and such interest may be designated as an aliquot part of the whole. Such sale shall produce the effect of making the seller and buyer co-owners of the thing sold. 2. BY CO-OWNER -being the owner of his undivided interest therein, can dispose his share even without the consent of the other co-owner/s ARTICLE 1464 SALE OF AN UNDIVIDED SHARE OF A SPECIFIC MASS FUNGIBLE GOODS -refer to interchangeable goods such as grain, oil, etc. that allow one to be replaced by another without loss of value. EFFECT OF SALE The owner of a mass of goods may sell only an undivided share thereof, provided the mass is specific or capable of being made determinate. a. if the quantity i.e., number, weight or measure, of the mass is MORE THAN the quantity sold the parties shall become co-owners of the mass. b. if the quantity of the mass is LESS THAN the quantity sold, the buyer becomes the owner of the whole mass, with the seller being bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears. RISK OF LOSS If the buyer becomes co-owner, with the seller, or other owners of the remainder of the mass, it follows that the whole mass is at risk of all the parties interested in it. SUBJECT MATTER The subject matter is an incorporeal or intangible right. ARTICLE 1465 SALE OF THING SUBJECT TO A RESOLUTORY CONDITION -A resolutory condition is an uncertain event upon the happening of which the obligation (or right) subject to it is extinguished.

-If the resolutory condition attaching to the object of the contract, which object may include things as well as rights should happen, then the vendor cannot transfer the ownership of what he sold since there is no object.

ARTICLE 1466 SALE DISTINGUISHED FROM AGENCY TO SELL -a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

IN SALE: *the *the *the *the *the

buyer receives the goods as owner buyer has to pay the price buyer, as a general rule, cannot return the object sold seller, warrants the thing sold buyer can deal with the thing sold as he pleases, being the owner

IN AGENCY TO SELL: *the agent receives the goods as the goods of the principal who retains his ownership over them. *the agent simply to account for the proceeds of the sale he may make on the principal behalf; *the agent can return the object in case he is unable to sell the same to a third person; and *the agent makes no warranty for which he assumes personal liability as long as he acts within his authority and in the name of the seller; *the agent in dealing with the thing received, must act and is bound according to the instructions of his principal ARTICLE 1467 SALE DISTINGUISHED FROM CONTRACT FOR A PIECE OF WORK -a 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 CONTRACT OF SALE -which the vendor in the ordinary course of business manufactures or procures for the general market, whether the same is on hand or not. (within the statute of frauds) CONTRACT FOR A PIECE OF WORK -if the goods are manufactured specially for the customer and upon his special order, and not for the general market. (are not within the statute of frauds) RISK OF LOSS Before the delivery is borne by the worker or contractor, not by the employer (the person who ordered) ARTICLE 1468

SALE DISTINGUISHED FROM BARTER -the contract of barter or exchange, one of the parties binds himself to give one thing in consideration other’s promise to give another thing

-in contract of sale the vendor gives a thing in consideration for a price of in money. However, where the consideration is partly in money and partly in another thing, the ff. rules shall be observed to determine whether the contract is sale or barter: *the contract shall be one of sale or barter depending upon the manifest intention of the parties IF THE INTENTION DOES NOT CLEARLY: Contract is one of barter- if the value of the thing given as part of the consideration exceeds the monetary consideration Consideration is one of sale- if the monetary consideration is more than or equal to the value of the thing given as part of the consideration ARTICLE 1469 WHEN PRICE CONSIDERED CERTAIN 1. NO SALE IF PRICE NOT CERTAIN OR ASCERTAINABLE -the price in a contract of sale ought to be settled for there can be NO SALE WITHOUT A PRICE. It must be certain or capable of being ascertained in money or its equivalent; and money is to be understood as currency and its equivalent means promissory notes, checks and other mercantile instruments as representing money. 2. CASES WHEN PRICE CONSIDERED CERTAIN a. the parties have fixed or agreed upon a definite amount b. it be certain with reference to another thing certain c. the determination of the price is left to the judgment of a specified person or persons. The last two cases are applicable only when no specific amount has been stipulated by the parties EFFECT WHEN PRICE FIXED BY THE 3RD PERSON DESIGNATED EXCEPTIONS SUCH AS: 1. WHEN THE 3RD PERSON ACTS IN BAD FAITH OR BY MISTAKE 2. WHEN THE 3RD PERSON DISREGARDING SPECIFIC INSTRUCTIONS OR THE PROCEDURE LAID DOWN BY THE PARTIES EFFECT WHERE PRICE NOT FIXED BY THIRD PERSON DESIGNATED 1. IF THE 3RD PERSON DESIGNATED BY THE PARTIES TO FIX THE PRICES REFUSES OR CANNOT FIX The contract shall become ineffective, as if no price had been agreed upon unless of course, the parties subsequently agree upon the price. 2. IF SUCH 3RD PERSON IS PREVENTED FROM FIXING THE PRICE BY THE FAULT OF SELLER OR THE BUYER. Which consist of a choice between rescission or fulfillment, with damages in either case. If the innocent party chooses fulfillment, the court shall fix the

price

ARTICLE 1470 EFFECT OF GROSS INADEQUACY OF PRICE IN VOLUNTARY SALES -gross adequacy does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. EFFECT OF GROSS INADEQUACY OF PRICE IN VOLUNTARY OR EXECUTION SALES 1. GENERAL RULE Judicial or execution sale is one made by a court with respect to the property of a debtor for the satisfaction of his unpaid indebtedness. 2.WHERE PRICE IS SO LOW AS TO BE “SHOCKING TO THE CONSCIENCE” A judicial sale, say of real property will be set aside by the court. 3.WHERE SELLER GIVEN THE RIGHT TO REPURCHASE -the validity of the sale is not necessarily affected where the law gives to the owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price, the easier it is for the owner to buy back the property. ARTICLE 1471 EFFECT WHERE THE PRICE SIMULATED 1. IF THE PRICE IS SIMULATED OR FALSE Then the sale is void but the contract shall be valid as a donation 2. IF THE CONTRACT IS NOT SHOWN TO BE DONATION OR ANY OTHER ACT OR CONTRACT TRANSFERRING OWNERSHIP -because the parties do not bound at all the ownership of the thing is not transferred. The contract is void and inexistent

ARTICLE 1472 PRICE ON A GIVEN DAY AT PARTICULAR MARKET -It follows the principle in ARTICLE 1469 that price is considered if it could be determined with reference to another thing certain -“provided said amount be certain” when an amount is fixed ABOVE or BELOW the price on a given day or in a particular exchange or market, the said amount must be certain, otherwise THE SALE IS INEFFICACIOUS because the price cannot be determined. -this article is applicable to fungible things, the prices of which are subject to fluctuations of the market. ARTICLE 1473 FIXING OF PRICE BY ONE OF THE CONTRACTING PARTIES NOT ALLOWED 1. If the consent is essential to a contract of sale, the determination of the price cannot be left to the discretion of one of the contracting party. The validity or compliance of the contract cannot be made to depend upon the will of one party

2. The price must be determined by both parties or left to the judgment of a specified person or persons however, where the price fixed by one party is

accepted by the other, the contract is deemed perfected because in this case, there exists a true meeting of minds upon the price. ARTICLE 1474 EFFECT OF FAILURE TO DETERMINE PRICE 1. WHERE CONTRACT EXECUTORY -if the price cannot be determined in accordance with articles 1469 and 1472 the contract is without effect. Consequently, there is no obligation on the part of the vendor to deliver the thing and on the part of the buyer to pay. 2. WHERE DELIVERY HAS BEEN MADE -if the thing has already been delivered and appropriated by the buyer, the latter must pay a reasonable price. The reasonable price or value of goods is generally the market price at the time and place fixed by the contract or by law for the delivery of the goods. ARTICLE 1475 PERFECTION OF CONTRACT OF SALE -a 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 the reciprocal obligations of the parties arise. But the ownership is not transferred until delivery of the thing. -in case one of the contracting parties should not comply with what is incumbent upon him, the injured party sue for FULFILLMENT or RESCISSION with the payment of damages in either case. RIGHT OF OWNER TO FIX HIS OWN PRICE 1. it is up to the buyer to accept or reject it. He may even impose a condition hard to fulfill and name a price quite out of proportion to the real value of the thing offered for sale 2. He is also well within his right to quote a small or nominal consideration and such consideration is just as effectual and valuable a consideration as a larger sum stipulated or paid. EFFECT OF FAILURE TO PAY PRICE/ ABSENCE OF PRICE 1. PRICE STIPULATED -the vendor’s remedy in such case is generally to demand specific performance or rescission with damages in either case.

2. NO PRICE STIPULATED -in such case, the sale is void and non-existent as without cause or consideration. Of course, if there is no stipulation or meeting of minds regarding the purchase price, there is no contract of sale. ARTICLE 1476

RULES GOVERNING AUCTION SALES 1. SALES OF SEPARATE LOTS BY AUCTION ARE SEPARATE SALES Each lot is the subject of a separate contract of sale.

2. SALE PERFECTED BY THE FALL OF THE HAMMER -the seller is making an invitation to those present to make offers which they do by making bids, one of which is ultimately accepted. It follows that the bidder may retract his bid and the auctioneer may withdraw the goods from sale any time before the hammer falls. However, if the sale has been announced to be without reserve, the auctioneer cannot withdraw the goods from sale once a bid has been made and the highest bidder has a right to enforce his bid 3. RIGHT OF THE SELLER TO BID IN THE AUCTION The seller or his agent may bid in an auction sale provided: 1. such right was reserved 2. notice was given that the sale is subject to a right to bid in behalf of the seller; and 3. the right to bid by the seller is not prohibited by law or stipulation a. WHEN NO NOTICE GIVEN OF RIGHT TO BID it shall be unlawful for the seller to bid either directly or indirectly or for the auctioneer to employ or induce any person to bid on behalf of the seller. The purpose of the notice is to prevent puffing or secret bidding by or on behalf of the seller by people who are not themselves bound b. WHEN NOTICE GIVEN OF RIGHT TO BID a right to bid may be expressly reserved by or on behalf of the seller. It is, therefore, the secrecy of puffing which renders it a fraud upon bidding. Where there is notice of the intention to bid by the seller, the bidding in such case would not operate as fraud. ARTICLE 1477-1478 OWNERSHIP OF THE THING TRANSFERRED BY DELIVERY -delivery of the thing sold is essential in a contract of sale, without it the buyer may not enjoy the thing sold to him. After the delivery of the thing sold that the buyer acquires a real right or ownership over it. -delivery may be actual or constructive EXCEPTION TO THIS RULE -the parties may stipulate that despite the delivery, the ownership of the thing shall remain with the seller until the purchaser has fully paid the price. ARTICLE 1479 KINDS OF PROMISE TREATED IN ARTICLE 1479 It applies specifically to a promise “to buy or to sell” it refers to 3 kinds of promise, namely: 1. AN ACCEPTED UNILATERAL PROMISE TO SELL IN WHICH THE PROMISEE

(acceptor) elects to buy. 2. AN ACCEPTED UNILATERAL PROMISE TO BUY IN WHICH THE PROMISEE (acceptor) elects to sell.

3. A BILATERAL promise to buy and sell reciprocally accepted in which either of the parties chooses to exact fulfillment. EFFECT OF UNACCEPTED UNILATERAL PROMISE -a unilateral promise or offer to sell or to buy a thing which is not accepted creates no juridical effect or legal bond. Such unaccepted offer is called policitation OPTION -is a privilege existing in one person for which he has paid a consideration which gives him the right to buy/sell. EFFECT OF ACCEPTED UNILATERAL PROMISE -a unilateral promise to sell or to buy a determinate thing for a price certain does not bind the promisor even if accepted and may be withdrawn at any time. EFFECT OF BILATERAL PROMISE TO BUY AND SELL -when the promise is bilateral, one party accepts the other’s promise to buy and the latter, the former’s promise to sell, a determinate thing for a certain price certain. The concurrence of both acts- the offer and the acceptance- generates a binding contract of sale. ARTICLE 1480 RISK OF LOSS OR DETERIORATION 1. IF THE THING IS LOST BEFORE PERFECTION -the seller bears the loss 2. IF THE THING IS LOST AT THE TIME OF PERFECTION -the contract is void or inexistent. ...