Law on Sales

Question 1

Sales Definition

Answer 1

One of the contracting parties obligates himself to transfer ownership and to deliver a determinate thing and the other to pay a certain price in money or its equivalent.

Question 2

Characteristics of Sales

Answer 2

1. Purpose- Transfer Ownership
2. Perfection- Mere Consent
3. Subject Matter- determinate thing
4. Cause- Onerous
5. Bilateral- Both Parties have their respective obligations
6. Nominate- specific designation in the law and have specific rules
7. Commutative- equivalence in prestation, although can be aleatory in sale of hope

Question 3

Contract for Piece of Work

Answer 3

Good that are to be manufactured specially for the customer upon his special order, and not for general market.
Subject is service

Question 4

Dacio en Pago

Answer 4

Cause for the debtor is the extinguishment of the obligation and delivery of the thing and transfer of ownership to the creditor

Question 5

Payment by Cession

Answer 5

Creditors do not become owners of the property assigned but are merely given the right to sell such property and apply the proceeds to their claims

Question 6

Barter

Answer 6

The cause of barter is a non-cash asset. Is not covered by the statute of frauds regardless of price

Question 7

Determination whether barter or sale when it comes to partly noncash and cash

Answer 7

1. Check the intention of the parties
2. If intention is not clear, check the monetary value of noncash:
   Barter if noncash is greater than the amount of money
   Sale if noncash is less than or equal to the amount of money

Question 8

Contract of Agency to Sell

Answer 8

There is no transfer of ownership upon delivery. Risk of loss remains with the principal owner and not the agent

Question 9

Kinds of Sale

Answer 9

1. Absolute Sale- ownership transfers upon delivery even if no total payment has been made
2. Conditional Sale- ownership automatically transfers upon fulfillment of the condition

Question 10

Contract to sell

Answer 10

Special type of conditional sale wherein fulfillment of the condition gives right to the buyer to demand execution of a deed of sale or compel seller to sell.

Question 11

Essential elements of a contract of sale

Answer 11

1. Consent
2. Object
3. Cause

Question 12

Absolute vs Relative Incapacity

Answer 12

Absolute Incapacity- party cannot give consent to any and all contracts which can result to the contract being void or voidable
Relative Incapacity- party is prohibited from entering specific transactions with some person or sometimes things

Question 13

Rules on minors in contract of sale

Answer 13

They are allowed to enter a valid contract when it comes to the sale of necessities as provided under Art. 1489

Question 14

Examples of Relative Incapacity

Answer 14

1. Husband and Wife cannot sell property to each other
   2.Following persons cannot purchase even at auction the following properties:
   - Guardians: The property of the ward
   - Agents: The property of the principal entrusted to them
   - Executors: Property of the estate under administration
   - Public Officers and Employees: The property of the state or of any subdivision which has been entrusted to them
   - Judges: The property and rights in litigation or levied upon an execution
   - Aliens: Land located in the Philippines except by succession or Filipino who lost citizenship

Question 15

Does gross inadequacy of price affect sale?

Answer 15

Generally it doesnt unless it indicates a defect in consent or parties intended a donation or some other contract

Question 16

Remedy if the special person acted in bad faith in determining the price

Answer 16

Courts will fix the price

Question 17

Rules on Object of Sale

Answer 17

1. Licit or within the commerce of men
2. Have right to transfer at the time of delivery
3. Determinate (particularly designated)

Question 18

Emptio rei Speratae

Answer 18

Sale of a future thing: must come into existence otherwise sale will be ineffective
Sale of future inheritance is cannot be the object of sale

Question 19

Emptio Spei

Answer 19

Sale of hope: produces effect even if the thing hoped does not come into existence

Question 20

Sale of Vain Hope

Answer 20

VOID

Question 21

When is a sale by auction perfected

Answer 21

perfected by the fall of the hammer or in other customary manner

Question 22

Seller’s right to bid

Answer 22

Seller has no right to bid unless:
1. expressly reserved
2. notice was given to the bidder; and
3. not prohibited by law or stipulation

Question 23

Option Agreement and Contract

Answer 23

A promise to buy and sell a terminate thing for a price certain is reciprocally demandable

Question 24

Rules Applicable in Option Contract

Answer 24

1. Not binding unless there is a price given called option money.
2. Offeror can withdraw at any time without being liable for damages.
3. If there is option money, he can still withdraw but is liable for damages.
4. If acceptance is communicated, withdrawal cannot be validly made since there is a perfected sale.

Question 25

Earnest Money

Answer 25

Money which forms part of the payment and is proof of perfection of contract of sale

Question 26

Sale of Goods by Description or Sample

Answer 26

Contract may be rescinded if the bulk of the goods do not correspond with the description or sample

Question 27

Sale of Good by Description and Sample

Answer 27

Contract may be rescinded if the bulk of the goods do not correspond with the description and the sample

Question 28

Application of Recto Law

Answer 28

Applies to sale of personal property in installment and leases of personal property with option to buy. Does not apply to sales on credit

Question 29

Alternative Remedies of Seller under Recto Law

Answer 29

1. Exact Fulfillment of the obligation 2. Cancel the sale 3. Foreclose the Chattel Mortgage on the property itself

Question 30

Remedy 1: Exact fulfillment of obligation

Answer 30

Can only be availed if unpaid amount covers only one installment

Question 31

Remedy 2: Cancel the sale

Answer 31

Can be availed upon vendee's failure to cover two or more installments. General Rule: Seller is allowed to retain a reasonable amount of price already paid as compensation for the use of the thing OR all of the price paid if there is a forfeiture clause. Retention of ALL the PURCHASE PRICE is UNCONSCIONABLE

Question 32

Remedy 3: Foreclosure of the Chattel Mortgage on the Property Itself

Answer 32

Must be on the property itself not other property mortgaged. Cannot recover deficiency because it would entitle remedy 1

Question 33

Application of Maceda Law

Answer 33

Applies on sale of immovable property on installment where the buyer is given protection in case of failure to pay installments

Question 34

Rights of the buyer if installments paid are less than 2 years equivalent under Maceda Law

Answer 34

1. 60 day grace period- wherein buyer can pay without interest; applicable only once every 5 years. 2. Buyer may sell or assign his interest 3. Pay the entire balance

Question 35

Rights of the buyer if more than 2 years worth of installments under the Maceda Law

Answer 35

1. In addition to the 60 day grace period, additional 30 days or 1 month for every year of installment 2. If seller exercise right to rescind contract, seller must give Cash Surrender Value

Question 36

Computation of Cash Surrender Value

Answer 36

1. Minimum of 50% of all payments including downpayment; plus 2. Additional 5% for every year after 5 years installment (55% on the 6th year, 60% on the 7th year)

Question 37

Void Stipulation in Maceda Law

Answer 37

1. Stipulation as to interest, damages, or penalty during the grace period 2. Forfeiture Clause due to the payment of CSV 3. Automatic cancellation upon default of the buyer