LAW ON SALES

• Contract of Sale: a contract where one party (seller) obligates to transfer ownership and deliver a determinate thing, and the other party (buyer) agrees to pay a certain price in money or its equivalent
• Two kinds of contract of sale:

  • Absolute: title passes to the buyer upon delivery
  • Conditional: ownership transfer depends on certain conditions
• Characteristics of a Contract of Sale:

  • Consensual, bilateral, onerous, commutative, nominate, principal
• Essential requisites of a contract of sale:

  • Consent, object or subject matter, cause or consideration (price)
• Requisites for a thing to be the object of a contract of sale:

  • Determinate or capable of being determinate, lawful, not impossible, within the commerce of men, vendor must have the right to transfer ownership at the time of delivery
• Goods that may be the object of a contract of sale:

  • Existing goods owned by the seller, future goods to be manufactured, raised, or acquired after the contract
• A thing is determinate when it is particularly designated or physically segregated from others of the same class
• The sole owner of a thing may sell an undivided interest, making the buyer a co-owner
• Sale of fungible goods:

  • Parties become co-owners if the mass is more than sold
  • Buyer owns the whole mass if less, seller must make good the deficiency
• Things subject to a resolutory condition can be the object of the contract of sale
• Sale distinguished from agency to sell and contract for a piece of work
• Rule for contracts with consideration partly in money and partly in another thing: manifest intention of the parties determines the nature of the contract
• Rule for contracts with consideration partly in money and partly in another thing:

  • Manifest intention of the parties
  • If intention is unclear:

  i. Barter if the value of the thing is less than the money paid

  ii. Sale if the value of the thing is equal to or more than the money paid (Art. 1468)
• When the price in a contract is considered certain:

  • Specific amount agreed upon
  • If no specific amount agreed upon:

  i. Certainty with reference to another certain thing

  ii. Determination of price left to the judgment of a third person

  • If the third person is unable or unwilling to fix the price, the contract shall be inefficacious unless the parties subsequently agree on the price
  • Courts may fix the price if the third person acted in bad faith or by mistake
  • If the third person is prevented from fixing the price by fault of the seller or buyer, the party not at fault may have remedies against the party at fault (Art. 1469)
• Effect of gross inadequacy of price in a contract of sales:

  • General rule: Gross inadequacy of price does not affect a contract of sale
  • Exception: Gross inadequacy indicating a defect in consent may lead to annulment of the contract, not due to price inadequacy but vitiated consent (Art. 1470)
• The fixing of the price in a contract can never be left to the discretion of one of the contracting parties; however, if the price fixed by one party is accepted by the other, the sale is perfected (Art. 1473)
• Effect of failure to determine the price:

  • Where the contract is executory and the price cannot be determined, the contract is inefficacious
  • Where delivery has been made, the buyer must pay a reasonable price, dependent on the circumstances of each case (Art. 1474)
• Perfection of a contract of sale:

  • The contract of sale is perfected when there is a meeting of minds on the object of the contract and the price
  • Parties may demand performance from that moment, subject to contract form laws (Art. 1475)
• Rules governing auction sales:

  • Sales of separate lots by auction are separate sales
  • Sale is perfected by the fall of the hammer
  • The seller or agent may bid in an auction sale if the right was reserved and notice was given that the sale is subject to a right to bid on behalf of the seller, not prohibited by law or stipulation (Art. 1476)
• When ownership of the thing sold is transferred to the buyer:

  • Ownership is transferred upon actual or constructive delivery, unless parties stipulate otherwise (Art. 1477)
  • Parties may agree that ownership does not pass until full payment of the price (Art. 1478)
• Kinds of promise to buy and/or sell:

  • Bilateral promise: both parties promise to buy/sell a determinate thing at an agreed price, reciprocally demandable
  • Unilateral promise: one party promises to buy/sell a determinate thing at a certain price, acceptance may or may not occur with specific effects (Art. 1479)
• Risk of loss or deterioration:

  • Fungible and non-fungible things sold independently and for a single price:

  i. Lost before perfection: Seller bears the loss

  ii. Lost at perfection: Seller bears the loss

  iii. After perfection but before delivery: Buyer bears the loss

  iv. After delivery: Buyer bears the loss

  • Fungible things sold by weight, number, or measure:
  • General rule: Vendor bears the risk, except when goods have been weighed, counted, or measured and delivered, unless the buyer has incurred delay (Art. 1480)
• Sale of goods by description and/or sample:

  • Contract may be rescinded if the bulk of goods delivered does not correspond with the description or sample
  • Bulk of goods must correspond with the sample and description, buyer must have a reasonable opportunity to compare (Art. 1471)
• Earnest money vs. option money:

  • Earnest money is part of the purchase price and binds the buyer to pay the balance
  • Option money applies to a sale not yet perfected, and the buyer is not required to buy (Art. 1472)
• Forms of a contract of sale:

  • General rule: Contract of sale may be in writing, orally, partly written and partly oral, or inferred from conduct
  • Exceptions where form is required for validity, such as sales of property not to be performed within a year, real property regardless of price, or personal property over a certain amount (Art. 1483)
• Remedies of the vendor in the sale of personal property in installments:

  • Exact fulfillment of the obligation if the vendee fails to pay
  • Cancel the sale if the vendee fails to pay two or more installments
  • Foreclose the chattel mortgage if constituted, with no further action against the purchaser for unpaid balance, unless agreed otherwise (Art. 1484)
• Outline of lecture in Law on Sales (Obligation of the Vendor):

  • Principal obligation of the vendor: ownership of the determinate thing, deliver the thing, warrant against eviction and hidden defects, take care of the thing pending delivery with proper diligence, pay for the expenses of the deed of sale unless stipulated otherwise
  • Traditio or delivery: derivative mode of acquiring ownership, transfer of ownership, different ways of effective delivery (actual or real, constructive or legal)
  • "Sale of return" or "Sale on approval or on trial or on satisfaction": buyer has the option to return the property instead of paying the price, title remains with the seller until the sale becomes absolute
• Define documents of title of goods: used in the sale or transfer of goods, proof of possession or control, authorizing the possessor to transfer or receive goods
• Classes of documents of title:

  • Negotiable documents: deliverable to the bearer or to the order of a specified person
  • Non-negotiable documents: deliverable to a specific person
• Define unpaid seller: not paid the whole price, received a negotiable instrument as conditional payment which was dishonored
• Rights of an unpaid seller: lien on the goods for the price, right to stop goods in transit in buyer's insolvency, right of resale, right to rescind the sale
• Cases when the unpaid seller may exercise possessory lien: goods sold without credit stipulation, goods sold on credit with expired term, buyer becomes insolvent
• Right of stoppage in transitu: unpaid seller's right to stop goods in transit in buyer's insolvency, resume possession, entitled to same rights as if never parted with possession
• Implied warranties of seller: against eviction, hidden defects, fitness or merchantability
• Requisites for warranty against eviction: vendee deprived of purchased thing, deprived by final judgment based on pre-sale right or act imputable to vendor, vendor summoned in eviction suit, no waiver by vendee
• Rights of the vendee in case of eviction: return of value at time of eviction, income or fruits, costs of suit, contract expenses, damages and interests if sale made in bad faith
• Requisites of warranty against hidden physical defects: serious or important defect, hidden at time of sale, notice given within reasonable time, action brought within proper period
• Requisites of warranty against hidden encumbrances: important encumbrance, not registered unless warranted free from burdens, action brought within proper period
• Rules when some animals have redhibitory defects: redhibition affects only defective animals unless buyer wouldn't have purchased sound ones without defective ones
• Class of animals not for commerce: contagious diseases, unfit for stated use or service, sale declared void