RFIL (1)

• Definition of Contract of Sale:

  • Contract of Sale is a contract where one party obligates to transfer ownership and deliver a determinate thing, while the other party agrees to pay a certain price in money or its equivalent
  • Contract of Sale can be absolute or conditional
• Characteristics of a Contract of Sale:

  • Consensual: Perfected by mere consent of the parties
  • Principal: Can exist independently
  • Commutative: Values exchanged are almost equivalent
  • Bilateral: Both parties have reciprocal obligations
  • Onerous: Both parties give valuable considerations
  • Nominate: Has a name provided by the law
• Elements of Sale:

  Essential Elements:

  1. Consent: Seller agrees to transfer and deliver, buyer agrees to pay

  2. Object: Refers to the determinate thing

  3. Cause/Consideration: Refers to a price certain in money or its equivalent

  Natural Elements:

  • Warranty against eviction
  • Warranty against hidden defects

  Accidental Elements:

  • Time and place of payment
• Sale distinguished from Dacion en Pago:

  • Sale: No pre-existing credit, creates obligations
  • Dacion en Pago: Pre-existing credit, extinguishes obligations
• Sale distinguished from Cession:

  • Sale: No pre-existing credit, creates obligations
  • Cession: Pre-existing credits, extinguishes obligations
• Sale distinguished from contract for a piece of work:

  • Sale: Title passes to vendee upon delivery
  • Contract for a piece of work: Ownership reserved until full payment
• Sale distinguished from contract to sell:

  • Sale: Title passes to vendee upon delivery
  • Contract to sell: Ownership reserved until full payment
• Sale distinguished from agency to sell:

  • Sale: Title transferred to buyer upon delivery
  • Agency to sell: Title retained by owner despite delivery
• Sale distinguished from Barter:

  • Sale: Thing given in exchange for a price certain in money
  • Barter: Thing given in exchange for another thing
• Rules on the Object of the Contract of Sale:

  Requisites:

  1. Thing within the commerce of men

  2. Not contrary to law, morals, good customs, public order or public policy

  3. Determinate thing

  4. Vendor must have the right to transfer ownership at the time of delivery
• Determinate Thing:

  • Particularly designated or physically segregated from others of the same class
• Things Having Potential Existence:

  • Emptio rei speratae: Sale of a thing not yet in existence
  • Emptio spei: Sale of mere hope or expectancy
• Existing and Future Goods:

  • Existing goods: Owned or possessed by the seller
  • Future goods: To be manufactured, raised, or acquired after the contract
• Sale of undivided interest in a thing:

  • Seller and buyer become co-owners
  • Applies if the seller is the sole owner
• Fungible Goods:

  • Interchangeable goods that can be replaced without loss of value
• Things Subject to Resolutory Condition:

  • Objects that may be the object of a contract of sale
• Price:

  • Sum stipulated as the equivalent of the thing sold
  • Real and certain or ascertainable
• Rules on Price:

  • Real: Intention to pay and receive the price
  • Certain or ascertainable
• Certain or ascertainable price:

  • Certain: expressed and agreed upon in specific pesos and/or centavos
  • Ascertainable: with reference to another certain thing or left to the judgment of a specified person or persons
• Effect where price fixed by third person designated:

  • Price fixed by a third person designated by the parties is binding upon them
  • Exceptions: third person acts in bad faith or by mistake, or disregards specific instructions
• Effect where price not fixed by third person designated:

  • If third person refuses or cannot fix the price without fault of seller and buyer, the contract becomes ineffective
  • If third person is prevented from fixing the price by fault of seller or buyer, innocent party may choose rescission or fulfillment with damages
• In money or its equivalent:

  • "Its equivalent" means certainty in price but payment is an object
• Manner of payment must be agreed upon
• Gross inadequacy of price:

  • Does not affect a contract of sale, except may indicate a defect in consent or intention of donation
• Simulated Price:

  • If price is simulated or false, sale is void unless shown to be a donation or another contract
  • Parties make it appear that a certain price in money is to be paid
• Formalities of Contract of Sale:

  • Contract of sale is consensual and perfected with a meeting of minds on object and price
  • Sale may be in writing, by word of mouth, or inferred from conduct
• Capacity to buy or sell:

  • All persons who can bind themselves have legal capacity to buy and sell
  • Exceptions: absolute incapacity (minors, insane, deaf-mutes) and relative incapacity (e.g., prohibited persons from acquiring by purchase)
• Effects on the Contract When the Thing Sold Has Been Lost:

  • Seller must preserve thing after perfection but before delivery
  • Buyer has right to fruits of thing from time of perfection
  • Loss before perfection makes sale void, loss after perfection has differing views on risk of loss