Law on Sales and Credit Transactions Flashcards
Article 1458
By the contract of sale one of the contracting parties (SELLER) obligates himself to (a) transfer the ownership and to (b) deliver a determinate (specific only) thing, and the other (BUYER) to pay therefor a price certain in money or its equivalent.
Obligations of the SELLER [5]
1. Transfer ownership
2. Deliver the thing
3. Warrant against eviction and hidden defects (natural)
4. Observe DGFF (default)
5. Pay for expenses
first two cannot be waived
Obligations of BUYER [2]
1. Accept delivery
- if refusal is unjust - liable for damages, automatically owner
2. Pay the price
Elements of Contract
1. Essential
- Common - COC / COPrice
- Special (e.g. - delivery in real contracts)
- Extraordinary (e.g. - price in a sale)
2. Accidental - may or may not be present
3. Natural - automatic part of the contract
Characteristics of sale [7]
- Consensual v. Real
- Bilateral v. Unilateral
- Reciprocal v. Non-reciprocal
- Onerous v. Gratuitous
- Commutative v. Aleatory [OR]
- Nominate v. Innominate
- Principal v. Accessory
Stages of Sale
(1) Preparation / Bargaining / Negotiation
(2) Perfection / Creation / Birth
(3)Termination / Consummation
Is delivery required to create the contract of sale?
No, it is a consensual contract. Delivery is required at the time of termination/consummation
When is ownership required?
At the time of delivery, which is required at the time of termination.
Art 1475
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. (1450a)
Perfection of Sale (1475)
GR - No form is required
Exceptions
- If covered by Statute of Frauds (For
ENFORCEABILITY)
- Sale of personal property 500 or more
- IN WRITING, otherwise - UNENFORCEABLE - Sale of Real Property, regardless of value
- IN WRITING
- Auction Sales (1476)
Form in Donation is for VALIDITY
If donation of PP more than 5000, should be in writing, otherwise void
Auction Sales (1476)
When is sale perfected?
Can bidder withdraw?
Can auctioneer withdraw? GR / E Can seller bid? GR / E Can seller employ by-bidders or puffers?
Sale of separate lots by auction are separate sales
When is sale perfected?
upon the fall of the hammer, or any customary manner
Can bidder withdraw?
Yes, before the fall of the hammer
Can auctioneer withdraw?
GR: Yes, before the fall of the hammer
XPN: Announces without reserve
Can seller bid?
GR: No
XPN: If the seller bids
Can seller employ by-bidders or puffers?
No, void.
Sale of separate lots by auction are separate sales
Each lot is a separate sale, contract
Theories of perfection of contract [4]
Manifestation - declares acceptance
Expedition - acceptance is sent
Reception - acceptance is received
Cognition- knowledge of acceptance
Requisites of Objects in Sale
- determinate
- licit / lawful
- not impossible
- right to transfer ownership at the time the object is delivered
What could be the object of sale? [HE SCUUP?]
HE SCUUP
- Hope or expectancy [emptio spei]
- Existing [owned, possessed] or future goods [manufactured, raised, acquired]
- Subject to resolutory condition - pacto de retro
- Contingency / subj to suspensive condition
- Undivided interest in a thing
- Undivided interest in a mass
- Potential existence [emptio res speratae]
When is the price certain?
- fixed by parties
- fixed by TP - with mutual consent
- if fixed by TP - VALID
- if not fixed by TP - VOID
When is the decision of TP not valid [2 instances]
- disregarded a specific procedure
- BF or mistake on part of TP
If prevented by one of the parties [2 remedies]
- cancel / rescind
- demand for damages - Fixed by court [2 instances]
- bad faith
- thing has been delivered or appropriated (1474) - Price on a given day at a particular market
- With reference to another thing which is certain
Effects of Price on contract of sale
- No cause / absence of cause
- Illegal cause
- False cause
- Failure of cause
- Inadequate / Insufficient cause
- No cause / absence of cause = VOID
- Illegal cause = VOID
- False cause = VOID
- Failure of cause = VALID
- Inadequate / Insufficient cause = VALID
Effect of gross inadequacy of the price
GR
XPN
GR Sale is VALID
XPN
Rescissible - lesion of at least 1/4 [1380], if guardian is unauthorized = unenforceable
Voidable - 1330, MIVUF
Void - no intention to be bound / simulated
1470 - parties intended a donation - comply with form of donation
- PP exceeding 5k - in writing
1471 if the price is simulated = VOID. Follow form if it is a donation
Effect of gross inadequacy in involuntary sale/execution sale
- Sale is VALID, unless shocking to the conscience of men
Option money v Earnest money
Earnest money
- part of purchase price
- given where there is already a sale
- buyer is bound to pay the balance
Contract of sale v Contract of agency to sell
Contract of sale
- buyer is owner
- buyer has to pay price
- buyer acquires ownership after delivery
- the seller warrants
- buyer, as GR, cannot return object sold
Contract to sell
- agent receives goods as goods of principal
- agent is not owner
- agent does not warrant unless there is agreement of authority
- agent can return object if unable to sell to TP
Contract for a piece of work
- special order by a party desiring it
- borne by the worker or contractor
- formalities under certain circumstances
Schools of thought on sale [3]
Massachusetts Rule - specifically done
New York Rule - if thing already exists, sale
English Rule - if material is more valuable, sale
What then is the rule?
Sale if ordered in the ordinary course of business
Piece of work - if manufactured SPECIALLY for the customer and upon his special order and not for the market
Barter
First rule = intention of the parties
If intent does not clearly appear
- Barter - if thing is more valuable than money
- Sale - if 50-50 or if thing is less valuable than money
Deliver - Actual or constructive
GR = Delivery transfers ownership
XPN - PACTUM RESERVATI DOMINII (Only pactum that is valid)
1. Express reservation
2. Implied reservation
Sale or return v sale on trial
Sale or return
- resolutory
- Will of buyer
- Ownership is transferred upon delivery
- Option to RETURN instead of paying
Sale on trial/approval/satisfaction
- suspensive
- quality of goods
- seller retains ownership
- ownership passes when buyer signifies (3)
Promise to buy or sell
Art. 1479. A (mutual) promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from the price. (1451a)
dapat both promises are mutual to have a contract of sale
res perit domino
- thing perishes with owner
- Lost before perfection
- void
- seller bears loss
- Lost at the time of perfection
- sale is void
- seller bears loss
- Lost after perfection and BEFORE delivery
- buyer bears loss, but in 1504 it is seller
- Lost after perfection and AFTER delivery
- buyer bears loss
What is the status of the contract?
Who bears the loss?
1480 v 1504
After perfection and BEFORE delivery - BUYER bears loss
XPN
1. 1480, 3rd par - fungible things sold for price fixed accdg to weight, number, or measure
2. to secure performance by buyer
3. party at fault
Sale by sample / description
Art. 1481. In the contract of sale of goods by description or by sample, the contract may be
rescinded if the bulk of the goods delivered do not correspond with the description or the sample,
and if the contract be by sample as well as description, it is not sufficient that the bulk of goods
correspond with the sample if they do not also correspond with the description.
The buyer shall have a reasonable opportunity of comparing the bulk with the description or the
sample. (n)
Remedy: Rescission
Prohibition between Spouses
GR= H&W cannot sell properties to each otehr
XPN
1. Marriage settlement executed prior to the marriage
2. Judicial separation of property during marriage
Not allowed to donate properties to each other or enter into universal partnership
Incapacity by reason of relation to property 1491
Voidable
1. Guardian
2. Agents
3. Executors / administrators
Void
4. Public officers and employees
5. justices, judges, prosecutors
6. Other persons specially disqualified
- aliens
- unpaid seller
- officer conducting execution sale
Effect of total and partial loss at time of perfection 1493
Entirely lost - INEFFECTIVE
Partially lost
- remedies
1. Withdrawal
2. Specific performance
1494 In case of specific goods
1. withdraw
2. proportionate reduction
Ways of effecting deliver
- Actual or real delivery
- covers personal property - Constructive or legal delivery
- legal formalities
- symbolical or traditio symbolica / clavium - only to movable
- tradition longa manu - only to movable
- tradition brevi manu - short hand
- traditio constitutom possessorium - opposite of brevi manu - Quasi-traditio delivery - incorporeal things
- public instrument
- placing of titles of ownership
- allowing vendee to use rights as new owner with consent of vendor
