Philippine law on sales reviewer 1458 1543 PDF

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ART ANNOTATION NOTESFORM & INTERPRETATION1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of & to deliver a determinate thing, & the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolu...

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ART 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of & to deliver a determinate thing, & the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (This Art serves as def’n for Sale)

ANNOTATION FORM & INTERPRETATION Characteristics of a contract of sale: 1. Consensual –perfected by mere consent 2. Bilateral –parties are bound to fulfill correlative oblis toward each other 3. Onerous – the thing sold is conveyed in consideration of the price & vice versa 4. Commutative – thing sold is considered equivalent of the price paid & vice versa 5. Nominate – given a special name & designation 6. Principal –its existence & validity does not depend upon another contract Essential requisites of sale: 1. Consent or meeting of the minds (1475) 2. Object or subject matter (1460) 3. Cause or consideration (1458) Kinds of contract of sale: 1. Absolute – not subject to condition. Ownership is transferred upon constructive or actual delivery. 2. Conditional – subject to a contingency. Ownership is reserved until fulfillment of a suspensive condition or extinguished upon the happening of a resolutory condition. Contract of Absolute Sale Title passes upon delivery Non-payment of the price may be seen as a negative resolutory condition (b/c ownership will revert to the seller if he chooses to rescind the contract) Non-payment gives seller right to either demand specific performance or rescind the contract Seller loses ownership of the thing sold & delivered unless the sale is rescinded Remedy of rescission available (b/c rescission found in 1191 is not based upon the non-payment of the price but rather on the failure of the debtor to comply w/ an ALREADY EXISTING obli) Contract to Sell Similar to the nature of a conditional sale, since transfer of title is conditioned upon the full payment of the purchase price Full payment of the purchase price does not automatically vest ownership or title to the prospective buyer as the prospective seller explicitly reserves its transfer. Seller still has to convey title. If seller sells the object of sale to a 3rd person once condition is fulfilled, 3rd person’s right is better than original buyer but seller incurs damages.

1459. The thing must be licit & the vendor must have a right to transfer the ownership

Requisites of Object:

Contract to Sell Title shall not pass until buyer has paid the price despite delivery Full payment of the price is a positive suspensive condition. (b/c ownership will be vested upon the buyer only when he pays the price) Non-payment is not a breach but simply an event that prevents the obli of the vendor to convey title from acquiring binding force Seller retains ownership until buyer’s fulfillment of the condition Remedy of rescission not available

NOTES *Correlate w/: - 1459, 1460, re: determinate thing - 1469, 1472, re: price Contract to Sell – a bilateral contract of conditional sale whereby the prospective seller, while expressly reserving the ownership of the subject prop despite delivery thereof to the prospective buyer, binds himself to sell the said prop exclusively to the prospective buyer upon fulfillment of the condition agreed upon. Dignos v CA: “A deed of sale is absolute in nature although denominated as a ‘Deed of Conditional Sale’ where nowhere in the contract in question is a proviso or stipulation to the effect that title to the prop sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay w/in a fixed period.” (Hence, designation of the parties to the contract is not, in a word, ‘controlling’ as to what the contract is) In People’s Homesite & Housing Corp v CA, it would appear that in a conditional sale, there is no perfected contract of sale until the fulfillment of the suspensive condition. It is the willingness of the seller to sell the object w/c is dependent upon the condition. So if the condition is not fulfilled, there is NO MEETING OF THE MINDS hence there is no perfected contract of sale. *This gives us another difference b/w contract to sell & conditional sale. In a contract to sell, the sale is perfected but the transfer of ownership depends upon the fulfillment of the suspensive condition, the full payment of the purchase price.

Conditional Sale Willingness of the vendee to sell is dependent upon a condition not necessarily the payment of the purchase price Fulfillment of the suspensive condition makes the sale absolute. If there has been previous delivery to the buyer, ownership/title automatically transfers to the buyer. If seller sells the object of sale to a 3rd person once condition is fulfilled, 3rd person’s right cannot defeat that of the orig buyer. (The orig buyer may even ask for reconveyance if the object has been delivered to such 3rd person.) Read the cases of Artates v Urbi, Heirs of Zambales v CA for examples of sales involving

thereof at the time it is delivered.

1. 2. 3. 4.

It must be determinate It must be licit It must be w/in the commerce of men As to rights, it must be transmissible or personal

2 kinds of illicit things: (relate w/ 1409) 1. Illicit per se 2. Illicit per accidens

things illicit per accidens *When the thing is sold in violation of a right of 1st refusal of another person, the sale is valid but rescissible *Relate w/ Arts. 1347-48, 1460, CC

Seller need not own the thing to be sold, all that is required of him is the right to transfer ownership thereof at the time it is delivered. 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class. *Relate w/ Art. 1349, CC ‘Things having a potential existence’ – something that is reasonably certain to come into existence as the natural increment or usual incident of something in existence already 1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition belonging to the seller - The moment the thing does come into existence, title is vested upon the buyer. that the thing will come into existence. The sale of a vain hope or expectancy is void. Emptio Rei Speratae Emptio Spei Sale of a thing not yet in existence subject to the condition that the thing will exist & on Sale of hope itself that the thing will come into existence even if the thing does not failure of the condition, the contract becomes ineffective & hence, the buyer has no obli eventually exist to pay the price Future thing is certain as to itself but uncertain as to its quantity & quality It is not certain that the thing itself will exist, much less its quantity & quality Deals w/ a future thing Deals w/ a present thing – the hope or expectancy Presumption is in favor of Emptio Rei Speratae 1462. The goods w/c form the subject of a contract of sale may be either existing goods, Existing goods – goods owned or possessed by the seller owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the Future goods – goods to be manufactured, raised, or acquired by the seller seller after the perfection of the contract of sale, in this Title called “future goods”. In the sale of future goods, the seller assumes the risk of acquiring the title (to the future goods) & making the conveyance, or responding in damages for the buyer’s loss of his bargain 1462 does not apply if the goods are to be manufactured ESPECIALLY for the buyer, b/c that case is a contract for a piece of work & not of sale. Legal effect of the sale of an undivided interest in a thing is to make the buyer a co-owner in the thing sold 1463. The sole owner of a thing may sell an undivided interest therein. Fungible goods – goods of w/c any unit is, from its nature or by mercantile usage, treated as the equivalent of any other unit 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell & the buyer to buy a definite number, weight or measure of the goods in the mass, & though the number, weight or measure of the goods in the mass is undetermined. By such sale the buyer becomes owner in common of such a share of the mass as the number, weight or Owner of mass may sell only an undivided share thereof, provided the mass is specific or capable of being made determinate. measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure - By such sale, buyer becomes a co-owner of the seller of the whole mass in proportion in w/c the definite share bought bears to the bought, the buyer becomes the owner of the whole mass & the seller is bound to make good the deficiency from goods of the same kind mass & quality, unless a contrary intent appears. - Aliquot share of each owner can be determined only by the measurement of the entire mass. If it turns out that the whole mass is actually LESS than the thing sold, the buyer becomes the owner of the whole mass & the seller must supply the deficiency. *Resolutory condition – an uncertain event upon the happening of w/c the obli (or right) subject to it is extinguished. 1465. Things subject to a resolutory condition may be the object of the contract of sale. 1466. In construing a contract containing characteristics of both the contract of sale & of By the contract of agency, a person binds himself to render some service or to do Read: Quiroga v Parsons the contract of agency to sell, the essential clauses of the whole instrument shall be something in representation or on behalf of another, w/ the consent or authority of the latter. (1868, CC) Atty. Busmente: Is there a case wherein a contract is both a contract of sale & a considered. contract of agency to sell at the same time? Transaction b/w car dealerships & manufacturers. The dealers will own the cars sold Sale Agency by the manufacturers but are still able to give the warranties of the manufacturers Buyer receives the goods as owner Agent receives the goods as the goods of when they sell the cars in turn. the principal who retains ownership over them & has the right to fix the price & terms of the sale & receive the proceeds less the agent’s commission upon the sales made Buyer has to pay the price Agent simply has to account for the proceeds of the sale he may make on the principal’s behalf Buyer, generally, cannot return the object Agent can return the object in case he is sold unable to sell the same to a 3rd person Seller warrants the thing sold Agent makes no warranty for w/c he assumes personal liability as long as he

1467. A contract for the delivery at a certain price of an art w/c the vendor in the ordinary course of his business manufactures or procures for the gen’l 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 & upon his special order, & not for the gen’l market, it is a contract for a piece of work.

1468. If the consideration of the contract consists partly in money, & 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 exceeds the amount of the money or its equivalent; o/w, it is a sale.

acts w/in his authority & in the name of the seller Buyer can deal w/ the thing sold as he Agent in dealing w/ the thing received, pleases must act & is bound according to the instructions of his principal. By the contract of 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 distinction b/w a contract of sale & one for a piece of work is tested by the inquiry whether the thing transferred is one not in existence & w/c NEVER WOULD HAVE EXISTED IF NOT FOR THE ORDER of the party desiring to acquire it or a thing w/c WOULD HAVE EXISTED & been the subject of sale to some other person, even if the order had not been given. Contract of Sale The object of the sale would have existed & been the subject of sale to some other person, even if the order had not been given Risk of loss before delivery is borne by the buyer (at least according to 1480) W/in the statute of frauds Read: Concrete Aggregates v CTA By the contract of barter/exchange, one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing. Rule in determining the character of a contract the consideration of which is partly in money & partly in another thing: 1. Determine intention of the parties 2. If such intention does not appear: a. Value of thing given > amount of money or its equivalent = BARTER b. Value of thing given < amount of money or its equivalent = SALE

Contract for a Piece of Work The object of the sale never would have existed if not for the order of the party desiring to acquire it Risk of loss before delivery is borne by the contractor Not w/in the Statute of Frauds In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain & for a period w/c may be definite or indefinite. *Difference b/w sales & lease is in lease, only TEMPORARY possession & enjoyment is transferred unto the lessee. Dacion en pago – Alienation of prop to the creditor in satisfaction of a debt in money. Sale No preexisting credit or debt Oblis are created Cause is, as to the seller, the price paid & as to the buyer, the thing sold.

More freedom in fixing the price Buyer still has to pay the price

1469. In order that price may be considered certain, it shall be sufficient that it be so w/ reference to another thing certain, or that the determination thereof be left to the judgment of a specified person or persons. Should such person/s be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. If the 3rd person/s acted in BF or by mistake, the courts may fix the price. Where such 3rd person/s are prevented from fixing the price or terms by fault of the seller or the buyer, the party in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be.

1470. Gross inadequacy of price 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. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.

Dacion En Pago Pre-existing credit or debt Oblis are extinguished Cause is, as to the debtor, the extinguishment of debt & as to the creditor, he object acquired in lieu of the credit Less freedom. Lols Debtor has already received payment before the contract (of dation) is perfected.

The price is certain if: a. The parties have fixed or agreed upon a definite amount b. It be certain w/ reference to another thing certain (relate to 1472) c. The determination of the price is left to the judgment of a specified person/s *(b) & (c) apply only in absence of (a). Gen’l rule: Price fixed by a 3rd person is binding upon the parties Exceptions: 1. When the 3rd person acts in BF or by mistake (mistake ≠ error in judgment). In such a case, the courts may fix the price. 2. When the 3rd person disregards specific instructions or procedure or data given him (Walang sinabi si De Leon kung anong mangyayari but it’s analogous to the 1st exception, so I think courts will fix the price din ang ending nito) 3. When the 3rd person refuses or cannot fix it. If this happens, the contract is void unless the parties subsequently agree upon the price. 4. When the 3rd person is prevented from fixing the price either by the seller or the buyer. In this case, innocent party may choose b/w rescission & fulfillment, w/ damages in either case. (De Leon) Inadequacy of price however, may indicate a defect in the consent such as when fraud, mistake or undue influence is present. Read arts. 1355 & 1381, pars 1 & 2 Where the price is so low that ‘a man in his senses & not under a delusion’ would not accept it, the sale may be set aside. Simulation – occurs when an apparent contract is a declaration of a fictitious will 1345. Simulation of a contract may be absolute or relative. The former takes place deliberately made by agreement of the parties, in order to produce, for the purpose of when the parties do not intend to be bound at all; the latter when the parties conceal deception, the appearance of a juridical act w/c does not exist or is different from that w/c their true agreement. was really executed. 1409. The ff contracts are inexistent & void from the beginning:

Requisites of simulation: 2. Those w/c are absolutely simulated or fictitious. 1. An outward declaration of will different from the will of the parties; 2. The false appearance must have been intended by mutual agreement; & Hence, only those acts of absolute simulation where the parties do not intend to be 3. The purpose is to deceive 3rd persons. bound at all are void. 1472. The price of securities, grain, liquid, & other things shall also be considered certain, when the price fixed is that w/c the thing sold would have on a definite day, or a particular exchange or market or when an amount fixed is above or below the price on such day, or in such exchange or market, provided said amount be certain. 1473. The fixing of the price can never be left to the discretion of one of the contracting Acceptance by one of the parties of the price fixed by the other produces a meeting of the Read the case of Serra v CA & RCBC, re the part of adhesion contracts w/c is similar to parties. However, if the price fixed by one of the parties is accepted by the other, the sale minds b/w the parties as to the price. Therefore, the fact that only one of the parties fixed a price fixed by one of the parties is perfected. the price does not automatically invalidate the sale. Applies only where the means contemplated by the parties for fixing the price have, 1474. Where the price cannot be determined in accordance w/ the preceding arts, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to & appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each for any reason, proved ineffectual. particular case. Reasonable price = generally (but not necessarily) market price at the time & place fixed by the contract or by law for the delivery of goods. Toyota Shaw v CA: “A definite agreement on the MANNER of payment of the price is 1475. The contract of sale is perfected at the moment there is a meeting of minds upon Perfection ≠ Consummation Validity of contract ≠ Enforceability of the contract an essential element in the formation of a binding & enforceable contract of sale. This the thing w/c is the object of the contract & upon the price. is so b/c the agreement as to the manner of payment goes into the price such that a From that moment, the parties may reciprocally demand performance, subject to the Reluctance ≠ Absence of consent DISAGREEMENT ON THE MANNER OF PAYMENT IS TANTAMOUNT TO A FAILURE TO provisions of the law governing the form of contracts. Absence of Price v Non-Payment of Price AGREE ON THE PRICE. Definiteness as to the price is an essential element of a binding Absence of price will render the contract void while non-payment of price is a resolutory agreement to sell personal prop.” condition for w/c the seller may choose b/w rescission or specific performance. Read & understand 1403, 2(d). Atty. Busmente hinted na lalabas yan sa midterms. He At the moment of perfection, the reciprocal oblis imposed upon the parties by the asked this question i...