law

• Definition of a contract of sale: 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
• Characteristics of a contract of sale:

  • Purpose: transfer of ownership
  • Perfection: by mere consent, even before delivery of the thing
  • Subject Matter: determinate thing
  • Cause: onerous, with the obligation to pay
  • Bilateral Contract: both parties have obligations
  • Nominate Contract: specific rules provided by law to govern rights and obligations
• Characteristics of a contract of sale:

  • Commutative: equivalence in the prestation of the parties
  • Aleatory: sale of hope where there is no equivalence in the value of prestations
• Kinds of sale as to nature of subject matter:

  • Real or Personal
  • Thing (corporeal or incorporeal) or Rights
• Absolute sale: ownership transfers upon delivery, even if full payment hasn't been made; remedy for the seller if no payment is rescission, not reconveyance
• Conditional sale: ownership transfers upon fulfillment of a condition, usually full payment, without needing a new agreement
• Contract of sale vs. Contract for a piece of work:

  • Both involve transfer of ownership and payment
  • Sale: for general market goods; Piece of work: specially manufactured for the customer
• Contract of sale vs. Dacion en Pago:

  • Both involve delivery transferring ownership
  • Dacion en Pago: special form of payment extinguishing an obligation
• Contract of sale vs. Barter:

  • Transaction characterized by the intention of the parties
  • Barter if the value of the thing given exceeds the money or its equivalent
• Relative incapacity - void sales:

  • Certain individuals like husband and wife, guardians, public officers, and others are restricted from selling property to each other
• Seller's lack of authority to sell:

  • General rule: buyer acquires no better title than the seller had
  • Exceptions: estoppel cases, sale by apparent owner, sale by statutory or judicial authority
• Price in a contract of sale:

  • For the seller, payment of the price is the cause or consideration
  • Price must be certain
• For the seller, payment of the price is the cause or consideration
• Rules as to PRICE:

  • It must be certain
  • With reference to another thing certain, or
  • The determination thereof be left to the judgment of a special person or persons
  • If unable or unwilling to fix it, the contract shall be inefficacious unless the parties subsequently agree upon the price
  • If the third person acted in bad faith or by mistake, the courts may fix the price
  • Where the third person is prevented from fixing the price by fault of the seller or the buyer, the party not in fault may have remedies against the party in fault
• 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
• The fixing of the price can never be left to the discretion of one of the contracting parties, but if the price fixed by one party is accepted by the other, the sale is perfected
• Where the price cannot be determined according to the rules, the contract is inefficacious, but if the thing has been delivered to and appropriated by the buyer, he must pay a reasonable price
• In sales, service cannot be a valid subject since no person acquires ownership over service, and transfer of ownership is the purpose of a contract of sale
• Rules as to Objects of Contracts of Sale:

  • It must be licit or within the commerce of men
  • The vendor must have a right to transfer the ownership at the time of delivery
  • It must be determinate, satisfied if the thing is capable of being made determinate without a new agreement
• In the case of fungible goods, there may be a sale of an undivided share of a specific mass, even if the number, weight, or measure of the goods in the mass is undetermined
• There may be a contract of sale of goods whose acquisition by the seller depends upon a contingency which may or may not happen
• The sole owner of a thing may sell an undivided interest therein
• Things subject to a resolutory condition may be the object of the contract of sale
• Consensual Contract: sale is perfected by mere consent as to the object of the contract and upon the price, with transfer of ownership happening after delivery
• Sale by Auction:

  • Each lot in an auction is the subject of a separate contract of sale
  • A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in another customary manner
• Option Agreement/Contract:

  • A promise to buy and sell a determinate thing for a price certain is reciprocally demandable
  • An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promissor if supported by a consideration distinct from the price, known as option money
• Whenever earnest money is given in a contract of sale, it is considered part of the price and proof of the perfection of the contract
• Sale by Description or Sample:

  • The contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample
  • If the contract is by sample as well as description, the bulk of goods must correspond with both the sample and the description
• Recto Law applies to a contract of sale of personal property with the price payable in installments
• Recto Law: The 3rd option entails that the foreclosed mortgage is on the personal property itself, not a mortgage on a different property
• Recto Law applies to contracts purporting to be leases of personal property with an option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing
• Maceda Law (Realty Installment Buyer Act - RA No. 6552) applies to a contract of sale of residential realty on installments, providing protection to the buyer in case of payment failure
• Maceda Law does not apply to sales "on credit", only to ones in installment
• Rights under the Maceda Law:

  • If installments already paid are not more than two years equivalent:

  a. Grace period of 60 days

  b. The buyer may sell or assign his interest

  c. Pay the entire balance

  • After two years’ worth of installments:

  a. Additional grace period of 30 days every year of installment payments after the first two years

  b. Cash Surrender Value equivalent to 50% of installments made

  c. Additional cash surrender value of 5% for every year of payment after five years (55% after 7 years equivalent payment) but not to exceed 90%
• Void stipulations under the Maceda Law include automatic cancellation or rescission upon default of the buyer, stipulation as to interest or damages or penalty during the grace period, and forfeiture clause
• Obligations of the Vendor:

  • To take care of the thing after the contract has been perfected, prior to delivery
  • Risk of Loss:

  a. Unless otherwise agreed, the goods remain at the seller's risk until the ownership is transferred to the buyer

  b. When the ownership is transferred to the buyer, the goods are at the buyer's risk whether actual delivery has been made or not
• If the thing is lost in part only, the buyer may choose between withdrawing from the contract or demanding the remaining part, paying its price in proportion to the total sum agreed upon
• Loss, Deterioration, or Improvement:

  • The thing is lost:

  a. Without fault of the seller – obligation is extinguished

  b. With fault of the seller – liable for damages

  • The thing deteriorates:

  a. Without fault of the seller – the impairment is borne by the buyer

  b. With fault of the seller – the debtor has two options: to exact fulfillment and ask for damages, or rescission with damages

  • There is improvement:

  a. By nature or time – the improvement benefits the buyer

  b. At the expense of the seller – the seller has no other right than that granted to the usufructuary
• Delivery is the mode by which ownership is transferred, accomplished by placing the thing in the control and possession of the vendee
• Modes of Delivery:

  • Actual Delivery: the actual and physical transfer of the thing to the buyer
  • Constructive Delivery:

  a. Execution of Public Instrument

  b. Traditio Longa Manu

  c. Consitutum Posessorium

  d. Brevi Manu

  e. Symbolic Delivery

  • Delivery to a common carrier