Code III - Sales

Question 1

What is a sale?

Answer 1

A sale is a contract whereby a person transfers ownership of a thing to another for a price in money. Substantive elements: 1. Agreement; 2. On the object; 3. And the Price.

Question 2

What are items capable of sale?

Answer 2

1. All things susceptible of ownership; 2. Succession rights may not be sold before the death of the decedent; 3. Sale of a thing of oanther is null; may get damages if he did not know it belonged to another.

Question 3

What is litigous redemption?

Answer 3

When a litigous right has been sold, the party against whom the right has been transferred may get himself released by paying to the transfere the price the transferee has been paid. Need lawsuit to have been filed at the time of the transfer.

Question 4

Can a future things or a hope be sold?

Answer 4

1. A future thing is a thing not yet in existence; a future thing may be sold. 2. A hope may also be sold. 3.Sale of a hope–buyer assumes the risk that the thing will not materialize. Sale of a future thing–buyer does not assume risk that the thing will not materialize.

Question 5

What are the requirements for price for the contract to be classified as a sale?

Answer 5

1. Price must be in money. 2. Price must either certain or determinable.

Question 6

Can a third party determine price and contract still be considered a sale?

Answer 6

Yes, the price will be considered as certaine ven though the parties have agreed that it is to be determined by a third party. 1. Once agreed, judge can fix price if they fail to name a person/price.

Question 7

What is a reasonable price?

Answer 7

1. Thing is a movable of the kind that the seller habitually sells; 2. Parties fail to agree on a price after either they initially said nothing/left the price to be agreed to.

Question 8

Whar are the requirements for seriousness of price?

Answer 8

Price must not be out of all proportion to the value of the thing, and prites must intend that a price be paid, otherwise, it is a simulation. 1. If parties intend a transfer–then it is a relative simulaiton. 2. If true cause a contract can be shown, the contract will be upheld as a donation if the act was in authentic form.

Question 9

How is ownership perfected?

Answer 9

The contract of sale is perfected once the three elements of a sale–object, price, and the agreement–are satisfied. Ownership passes to the buyer upon perfection.

Question 10

When is risk of loss transferred to the buyer?

Answer 10

Risk of loss due to fortuitous events is trasnferred to the buyer when the thing is delivered. Fortuitous event–something that could not have been reasonably foreseen at the time of contracting.

Question 11

What are the special problems in the perfection of some sales?

Answer 11

1. Goods sold by weight/count/measure–once the weighing/counting/measuring is completed, the sale is perfected. If lump sale, sale is perfect without any measuring. 2. Individualization–once the seller sets aside goods for fulfillment of the contract under circumstnaces the seller could not change her mind easily. 3. Things in transit–risk of loss is transferred to buyer upon delivery to the carrier if the contract does not require the seller to deliver the things to any particular destination. If required to deliver at particular destination, risk of loss is transferred when things are duly tendered to the buyer at the place of destination.

Question 12

What is an option?

Answer 12

An option is a unilateral contract to sell or buy whereby the grantor of the option is bound to buy or sell if the grantee of the option accepts within the time stipulated. The option must specify the thing and price; have a term; and be in writing for immovables.

Question 13

What is the requirement of a term?

Answer 13

To be valid, an option contract must have a term. If the option is part of another contract, the option’s term is coextensive with the term of that other contract.

Question 14

What is the right of first refusal?

Answer 14

A right of first refusal is a unilateral contract in which one party agrees that she will not sell a certain thing without first offering it to a certain person. Right of first refusal may be enforced by specific performance. 1. Grantor may not sell to a third person without first offering to sell the thing to the holder of the right.

Question 15

What is a contract to sell?

Answer 15

A contract to sell is a bilateral agreement whereby the parties promise to enter into a sale at a later date. Agremeent must satisfy all the requirements for a sale.

Question 16

What is the effect of using earnest money in a contract to sell?

Answer 16

Earnet money is an amount given to the seller by the buyer that negates the availability of specific performance. If the promise of sale has been made with the giving of earnest money, both parties have the right to recede from the contract by: 1. If buyer receded, forfeits earnest money; 2. If seller recedes, must double earnest money; 3. Parties must expreslly stipulate the sum is earnest money; can’t just call it a deposit. 4. If a party’s failure to perform is excused, earnest money is not owed.

Question 17

Does the use of earnest money preclude the availability of specific performance?

Answer 17

Yes, precludes availability of specific performance and the recovery of actual damages.

Question 18

What is the prescription period for a contract to sell?

Answer 18

If the contract is one to sell an immovable, an action for breach or other failure ot perform is prescribed in five years.

Question 19

What are the time limits for exercise of the right of first refusal? For a movable?

Answer 19

The holder of the right of first refusal has 10 days to exercise the right if the thing is movable, and 30 days if the thing is immovable. If the holder does not decide to buy the thing, the right of first refusal reamins in the holder unless the grantor concludes a final sale, or contract to sell, with a third party within six months.

Question 20

What are the time limits for options and rights of first refusal on immovables?

Answer 20

An option/right of first refusal on an immovable generally cannot be granted for a term longer than 10 years. If the option or right of first refusal is granted in connection with a contract giving rise to obligations of continuous or periodic performance, the duration fo the option or right of first refusal may be the period of time required for performance of those obligations.

Question 21

Are agreements prepatory to the sale (options, rights of first refusal, and contracts to sell) effective against third parties?

Answer 21

1. If they affect immovables, then they are subject to the public records doctrine and thus are binding on third parties when recorded. 2. If they affect movables, then they are binding on third persons with actual knowledge.

Question 22

Are rights conferred by agreements prepatory to the sale indivisible?

Answer 22

1. Indivisible, so all must exercise the right when it belongs to more than one person.

Question 23

What id the doctrine of the implied warranty of merchantability?

Answer 23

1. Requires that the seller tender merchantable title. This doctrine permits the buyer to refuse to enter the sale if the title is suffestive of serious litigation.

Question 24

What are the seller’s obligations with respect to a contract of sale?

Answer 24

1. Delivering the thing; 2. Warranting the thing (against eviction & redhibitory effects); 3. Assuring that the thing sold is reasonably fit for ordinary use.

Question 25

What are the general rules underlying delivery?

Answer 25

1. If the seller remains in possession of the thing sold, there is a presumption that the sale is a simulation. 2. If the seller does not timely deliver the thing at the agreed-upon time, the buyer may demand dissolution of the sale or specific performance. In either case, seller is liable for damages. 3. Seller not bound to deliver th thing if the buyer has not paid the price and the seller has not granted the buyer a term for payment. 4. Thing must be in expected condition at time of delivery.

Question 26

What does the extent of delivery of immovables depend on?

Answer 26

Seller’s duty depends on which category of sales the transaction falls into: 1. Sale per aversionem; sale by measure; sale of immovable for lump price.

Question 27

What is a sale per aversionem?

Answer 27

A sale of an immovable falls into this category when it is described as a distinct object and it is sold for a lump price. This means there will be neither increase/decrease in price fi the quantiy of premises differs from that specified in the sale.

Question 28

What is a sale by measure?

Answer 28

A sale by measure occurs when the price is fixed at a rate of so much per measure. If the sale was made with an indication of the extent of the premises, discrepances will be addressed depending on ehwehter the seller delivers more or less than promised. 1. Less–price will be reduced accordingly but no right to recede. 2. More than the amount promied, but by 5% or less–price will be increased accordingly. 3. More than 5% promised–buyer has the option to recede.

Question 29

What is a sale of immovable for lump price?

Answer 29

If the sale falls into this category, discrepances are resolved in a manner similar to sale by measure.

Question 30

What is the liberative prescription for an action based on the extent of the premises?

Answer 30

One year from the date of the sale.

Question 31

What constitutes acceptance for the sale of movables?

Answer 31

An acceptance forms a contract of sale of a movable if there is agreement on the thing and the price, even if the acceptance contains different terms. NO MIRROR IMAGE RULE. However, no contract of sale is formed if acceptance is made conditional on the offeror’s acceptance of additional/different terms.

Question 32

What are the special rules for merchants?

Answer 32

Different terms become part of the contract unless: 1. Terms materially alter the offer; 2. Offer expressly limits acceptance to the terms of the offer; 3. Offeror objects within a reasonable time.

Question 33

What are the rules for nonmerchants?

Answer 33

If the parties are not merchants, the different terms are considered proposals for modification.

Question 34

What kind of goods must a seller deliver for sale of movables?

Answer 34

The seller must deliver conforming goods–1. Buyer has the right to inspect to determine whether the seller has furnished conforming goods; must reject nonconforming goods within a reasonable time. 2. Any buyer who knowingly accepts nonconforming goods may nto save them unless he accepted them in teh reasonable belief that the nonconformity would be cured.

Question 35

What is a seller’s right to cure?

Answer 35

After buyer’s rejection, seller may cure the nonconformity if: 1. Time for performance has not expired; 2. Seller reasonably believed that the nonconforming goods would be acceptable to the buyer.

Question 36

What is the warranty against eviction?

Answer 36

Eviction is the buyer’s loss of, or reasonable fear of losing the whole or part of the thing sold because of a third person’s right that existed at the time of the sale.

Question 37

How is the warranty against eviction breached?

Answer 37

1. Breached if third party has perfect title. 2. Warranty extends to undeclared conventional servitudes that have not been declared. (lot with pipeline running through). 3. Warranty implied in every sale. 4. Warranty covers rights existing at time of sale, except seller is always liable for what results from her personal acts, regardless of time.

Question 38

What is seller’s liability for breach of warranty against eviction?

Answer 38

1. Liability of the seller depends on the extent to which the parties have contractually modified the warranty: is it a warranty sale; sale without warranty; sale at buyer’s peril and risk; quitclaim deed; or partial eviction?

Question 39

What is the seller’s liability when it is a warranty sale?

Answer 39

Eviction in a warranty sale entitled the buyer to: 1. Resitution of the price; 2. Restitution of fruits and revenues if the buyer is bound to return them to the owner who evicts him; 4. All costs occasioned by the lawsuits concerning the warranty/suit resulting in eviction; and 5. Damages IF the buyer did not know fo the danger of the eviction.

Question 40

What is a seller’s liability for a sale at buyer’s peril and risk?

Answer 40

Buyer gets NOTHING back in the event of eviction. Nonwarranty sale PLUS: 1. Buyer was aware at the time of the sale the danger of eviction OR 2. Buyer declared that he was buying the property at his peril and risk; or 3. Seller’s obligation of returning the price has been expressly excluded.

Question 41

What is a seller’s liability for a sale by quitclaim deed?

Answer 41

A quitclaim deed to land is probably not a sale of a corporeal immovable but rather an assignment of a right. If the transferee is evicted, the transferor owes nothing.

Question 42

What is a seller’s liability for partial eviction?

Answer 42

If there is a partial eviction, the general rule is that the buyer is entitled to a proportionate reduction of the price. Buyer can cancel sale if eviction is on the part on which eviction occurred.

Question 43

What is a call in warranty?

Answer 43

1. Buyer threatened with eviction must timely notify the seller, pref. by calling the seller in warranty to defend the suit. 2. If buyer does not timely notify the seller of the threat of eviction, the buyer loses rights under the warranty to the extent that the seller could have successfully defended the action.

Question 44

Can a buyer suspend payment if he has a reasonable fear of eviction?

Answer 44

If buyer is evicted/has reasonable fear of eviction, he may suspend payment of the price UNLESS the seller gives security.

Question 45

Does the buyer have subrogation rights?

Answer 45

Yes, even where the warranty is excluded, the buyer is subrogated to his seller’s actions in warranty against all others. Buyer’s recourse when there has been a breach of the warranty of eviction is not limited to his immediate vendor.

Question 46

What is the after-acquired title doctrine?

Answer 46

Doctirne oeprates to automatically vest title in a buyer so as to cure a breach of warranty. 1. Operates automatically, regardless of seller’s intentions; 2. Buyer must not have filed a lawsuit against the seller for breach of warranty. Once such a suit is filed, the buyer cannot be compelled to accept the after-acquired title. Doctrine DOES NOT APPLY IF THERE IS NO WARRANTY, e.g., a quitclaim deed.

Question 47

What is the warranty against redhibition?

Answer 47

A redhibitory defect is a vice in the thing that meets one of the following criteria: 1. Defect renders the thing useless to the extent the buyer would not have purchased if he had known of the defect; (entitled to recission of the sale) 2. Defect does not render the the thing totally useless, but diminishes its value to the extent the buyer would still have bought it but at a LESSER price. (entitled to a reduction in the price)

Question 48

What are the essential elements of a redhibitory defect?

Answer 48

1. It must not have been apparent, discoverable by a reasonably prudent buyer of such things; 2. It must not have been known to the buyer at the time of the sale; 3. It must have existed at time of delivery or within three days of delivery; 4. Must render absolutely useless/diminish usefulness and price.

Question 49

What is the burden of proof of redhibitory defect?

Answer 49

1. Burden is on the buyer, but buyer does not need to prove exact cause. If the defect appears soon after the thing is put into use, the inference is that the defect existed at the time of the sale. 2. If the thing is not defective, but lacks qualities reped by seller/not of the kind specified in the contract, the dispute is not governed by redhibition. 3. Intentional misrepresentation is governed by redhibition.

Question 50

What is the liability of a seller for a redhibitory defect?

Answer 50

1. Liability depends on whether the seller is in good faith. A manufacturer selling a defective product is always a bad faith seller.

Question 51

What is a liability of a good faith seller for a redhibitory defect?

Answer 51

1. Must restore the purchase price and the buyer’s reasonable expenses, if buyer shows redhibitory effect renders the thing totally useless/so inconvenient that it presumes the buyer would not have bought the thing.

Question 52

Does the good faith seller have an opportunity to repair before the buyer dissolves the sale?

Answer 52

Yes, good faith seller is entitled to an opportunity to repair/remedy/correct the defect before the buyer can dissolve the sale.

Question 53

What is the liberative prescription for an action for redhibition when it is a good faith seller?

Answer 53

Shorter of: 1. Four years from the date the thing was delivered; or 2. One year from the date the buyer discovered the defect. *However, if the thing sold is residential/commerical immovabl property, liberative prescription against a good faith seller is one year from the date the thing was delivered.

Question 54

What is the liability of a bad faith seller for a redhibitory defect?

Answer 54

1. Must restore the purchase price and the buyer’s expenses, and in addition must pay damages and attorneys’ fees. 2. Bad faith seller is not entitled to an opportunity to repair.

Question 55

What is the liberative prescription for an action for redhibition when it is a bad faith seller?

Answer 55

1. One year from the discovery of the defect.

Question 56

Do either the good or bad faith seller get a deduction from damages for a redhibitory defect?

Answer 56

Yes, may by entitled to a deduction at court’s discretion for the value fo the use of the thing derived by the buyer.

Question 57

What are the requirements for the buyer to have given the seller notice of the defect?

Answer 57

The buyer must give the seller notice of the defect, and suffers a diminuition of the warranty to the extent that his failure to give timely notice made repair impossible or more burdensome. Notice is not encessary when seller has actual notice of the defect.

Question 58

What is the buyer’s obligations to taking care of the thing once he has been granted the remedy of recission?

Answer 58

Pending satisfaction of his claim/judgment, buyer must take care of the thing as a prudent administrator.

Question 59

Who bears the risk of loss when the thing is destroyed?

Answer 59

1. If thing is destoryed due to redhibitory effect–buyer can still seek the remedy of recission. 2. Thing is destroyed by a fortuitous event–if before seller is on notice of redhbiitory effect, buyer bears loss; if seller is on notice, seller bears loss.

Question 60

What is quantis minoris?

Answer 60

Reduction of the price on account of a redhibitory effect. A buyer who seeks reduction of price cannot thereafter seek dissolution.

Question 61

What is the subrogation of the buyer to the seller’s rights?

Answer 61

As with the warranty against eviction, in redhibition the buyer is subrogated to the seller’s right against all others. Buyer has recourse against all sellers; can sue the manufacturer directly.

Question 62

Can the warranty against redhibition be waived?

Answer 62

Yes, but the waiver must be in clear and unambiguous terms, and must be brought to the buyer’s attention. Waiver is ineffective if the seller declared that the thing had a quality it knew it did not have.

Question 63

What is the warranty of fitness for ordinary use?

Answer 63

1. Seller warrants that the thing is reasonably fir for oridinary use. Goverend by the general law of contracts. 2. Limited to the ordinary use made of such things unless (1) buyer has some particular use in mind for the thing; (2) seller knows/should know the buyer’s particular purposes; and (3) seller knows/should know that the buyer is relying on the seller’s skill/judgment in selecting the thing.

Question 64

What are the obligations of the buyer in a sale?

Answer 64

1. Pay the price; 2. Take delivery of the thing. Buyer must pay the price at the time and place delivery is to be made, unless the parties have agreed to another arrangment.

Question 65

What happens on buyer’s breach fo the duty to take delivery?

Answer 65

Buyer who fails to take delivery is liable to the seller for those damages the seller has sustained as well as those expenses incurred for preservation of the thing.

Question 66

What is the buyer’s breach of duty to pay price?

Answer 66

Seller can compel him to do so by offering the thing; on the buyer’s failure to pay the price, seller can choose to either (1) dissolve the sale; or (2) seek enforcement of sale (through suit for specific performance).

Question 67

What is the right of resale?

Answer 67

If the buyer breaches a contract to buy movable things, the seller has the right of resale, whereby the thing is sold to a third party and the buyer is held responsible for any loss realized in the resale.

Question 68

Can the sale be dissolved for nonpayment of price?

Answer 68

Yes, even after delivery.

Question 69

What is lesion beyond moiety?

Answer 69

An additional remedy. Favorite of bar examiners.

Question 70

What are the three requriements to bring an action for lesion?

Answer 70

1. Contract must be for a sale of a corporeal immovable; 2. Only the vendor can bring an action for lesion; 3. The lesion must be beyond one-half. A sale is lesionary if the price is less than one-half the value of the thing, value being determined at the time of the sale.

Question 71

What are the effects of lesion beyong moiety?

Answer 71

1. Buyer given a choice–buyer can either return the thing and get the price back, or keep the thing and give the seller a supplement equal to the difference between the price paid to the buyer and its FMV. 2. Special rule if buyer has sold thing–If buyer has sold the thing to a third party, the action for lesion is available against the original buyer only, and recovery is limited to the profit made by buyer on the resale.

Question 72

What is the liberative prescription on an action for lesion?

Answer 72

One year from the date of sale.

Question 73

What is a sale with a right of redemption? What are the time limits?

Answer 73

Right of redemeption is the right to take back the thing from the buyer. Cannot be reserved for more than 10 years if the thing is immovable, and 5 years if the thing is movable. Cannot contract around this.

Question 74

Is the redemption period peremptive?

Answer 74

Yes, period fixed for redemption is peremptive, and runs against all persons, including minors.

Question 75

What is the effectiveness of the right of redemption against third parties?

Answer 75

If the thing is immovable, the right of redemption is effective when the sale is recorded. If the thing is movable, the right of redemption is effective against third persons who bought the thing with actual knowledge of the right of redemption.

Question 76

What is an exchange?

Answer 76

In the contract of an exchange, each party transfers to the other the ownership of a thing other than money. Laws governing sales also apply to exchane, unless specific rules apply.

Question 77

What is the effect of the exchange contract?

Answer 77

Agreement on the things transfers ownership even if no delivery has been made. Parties may also agree that the transfer of ownership will not occur until some later time; that is a contract to exchange.

Question 78

What are the rights and duties of parties to an exchange?

Answer 78

The rules of sales apply to govern the rights and duties of both the buyer and seller in an exchange.

Question 79

Does the warranty of eviction apply to exchanges?

Answer 79

Yes, a person evicted from a thing received in exchange may demand the value of the thing from which he was evicted or return of the thing. In eaither case, he may also seek damages.

Question 80

May a party claim lesion on an exchange?

Answer 80

Yes, a party giving a corporeal immovable in exchange for property worth less than one half FMV of the immovable given by him may claim recission on grounds of lesion.

Question 81

What is giving in payment?

Answer 81

Debtor gives a thing to a creditor as payment of a sum that is due. Giving in payment is perfected by delivery.

Question 82

What is a contract to build?

Answer 82

A builder must build something in a good and workmanlike manner.

Question 83

What distinguishes a contract to build from a sale?

Answer 83

1. Buyer has some control over the specifications of the object; 2. Negotiatons in a contract to build take place before the object is constructed; 3. Contract contemplates that one party will supply the materials and also will furnish her skill and labor in order to build the desired object. (Warranty against redhibiton v. warranty of workmanlike perfromance)