Nature And Form Of Contracts

Question 1

What is a CONTRACT OF SALE? (Art. 1458)

Answer 1

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver the determinate thing, and the other to pay therefor a price certain in or its equivalent.

A contract of sale may be absolute or conditional.

Question 2

What are the CHARACTERISTICS of a contract of sale?

Answer 2

1) Consensual
2) Bilateral
3) Onerous
4) Commutative
5) Nominate
6) Principal

Question 3

How can be a price be certain? (Art. 1469)

Answer 3

In order that the price may be considered CERTAIN, it shall be sufficient that it be so:

1) with reference to another thing certain; or
2) that the determination thereof be left to the judgment of a specified persons.

Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless…

3) the parties subsequently agree upon the price.

Question 4

What if the third person specified to determine the price certain acted in bad faith? (Art. 1469)

Answer 4

If the third person or persons acted in bad faith or by mistake, THE COURT MAY FIX THE PRICE.

Question 5

What if the third person specified to determine the price certain is prevented by the fault of the buyer/seller? (Art. 1469)

Answer 5

Where such third person or persons a prevented from fixing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer as the case may be.

Question 6

What is a DETERMINATE THING? (Art. 1460)

Answer 6

A thing is a determinate when:

1) It is particularly designated; or
2) Physically segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being determinate without the necessity of a new or further agreement between the parties.

Question 7

To be valid, what are the required characteristics of an object of a contract of sale? (Art. 1459)

Answer 7

The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

*determinate and within the commerce of men.

Question 8

What is a CONTRACT TO SELL?

Answer 8

It is a bilateral contract of conditional sale whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon (usually the payment of the full price)

Question 9

When is a deed of conditional sale is a deed of absolute sale? (Dignos v. CA)

Answer 9

A deed of sale is absolute in nature although denominated as a Deed of Conditional Sale where nowhere in the contract in question is a proviso or stipulation to the effect that the title to the property sold is reserved in the vendor until the full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period.

Question 10

What are the 2 kinds of illicit things?

Answer 10

1) Illicit per se;

2) Illicit per accidens (by provision of law)

Question 11

Emptio rei speratae and Emptio Spei (Art. 1461)

Answer 11

Things having a potential existence may be the object of the contact of sale.

The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence.

The sale of a vain hope or expectancy is void.

Question 12

Future Goods? (Art. 1462)

Answer 12

The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller or

Goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called “Future Goods.” (see. 1467)

There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen.

Question 13

What is a Contract of Agency? (Art. 1868)

Answer 13

By the contract of agency a person binds himself to render some service or to d something in representation or on behalf of another with the consent or authority of the latter

Question 14

Contract for a piece of work? (Art. 1467)

Answer 14

A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale…

But if the goods are to be manufactures SPECIALLY for the customer and upon his special order, and not for the general market, it is a contract piece of work.

Question 15

When the consideration of a contract consist partly in money and partly in another thing, when can you consider it a SALE? When can you consider it a BARTER? (Art. 1468)

Answer 15

If the consideration of the contract consists partly in money and partly in another thing , the transaction shall be characterized by the manifest intention of the parties.

If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise it is a sale.

Question 16

What is the effect of GROSS INADEQUACY OF PRICE? (Art. 1470)

Answer 16

Gross inadequacy of price does not affect of a contract of sale, EXCEPT as it may be indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.

“Gross inadequacy shocking to the conscience of men”

Question 17

Requisites of (Relative) simulation? (see. Art. 1345)

Answer 17

1) An outward declaration of will different from the will of the parties;
2) The false appearance must have been intended by mutual agreement; and
3) The PURPOSE is to deceive 3rd persons.

Question 18

In a contract of sale, when is the ownership of the thing transferred? (Art. 1477-1478)

Answer 18

The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

However…

The parties may stipulate that the ownership in the thing shall not pass to the purchaser until he has fully paid the price.

Question 19

Sampaguita v. Jalwindor

Answer 19

Ownership is not transferred by perfection of the contract but by delivery, either actual or constructive, This is true even if the purchase has been made on credit. Payment of the purchase is not essential to the transfer of ownership as long as the property sold has been delivered.

Question 20

Wha are the rules applicable to auctions? (Art. 1476)

Answer 20

In the case of a sale by auction:
1. Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.
2. A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; & the auctioneer may w/draw the goods from the sale unless the auction has
been announced w/o reserve.
3. A right to bid may be reserved expressly by or on behalf of the seller, unless o/w provided by law or by stipulation.
4. Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to
bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer.

Question 21

What is an OPTION? (Art. 1324)

Answer 21

A contractual privilege existing in one person for which he has paid a consideration which give him the right to buy or sell from to another person, if he chooses, at any time within the agreed period at a fixed price, or under, or in compliance with certain terms and conditions.

When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at anytime before acceptance by communicating such withdrawal except when the opition is founded upon a consideration as something is paid or promised.

Question 22

When is an option contract binding to the promissor? (Art. 1479)

Answer 22

A 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.

Question 23

Atkins v. Cua Hian Tek

Answer 23

If the option is given without consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration.

Question 24

What is EARNEST MONEY?

Answer 24

Something of value given by the buyer to the seller to show that the buyer is really earnest to bind to the bargain.

Question 25

What is the effect of EARNEST MONEY? (Art. 1482)

Answer 25

Whenever earnest money is given in a contract of sale it shall be considered as part of the price and as proof of the perfection of the contract.

Question 26

Sale by SAMPLE/DESCRIPTION (Art. 1481)

Answer 26

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 corresponds with the description or the sample, and

if the contract be by sample as well as description, it is not sufficient that the bulk goods correspond with the sample if they do no also correspond with the description.

The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample.

Question 27

Recto Law (Art. 1484)

Answer 27

In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee’s fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclosure the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

Question 28

Pascual v. Universal Motors Corp.; Recto Law

Answer 28

Sellers cannot go after guarantors if they have already chosen the 3rd remedy. Because if they were allowed to do so, guarantors would have a right to go after the original debtors, which would result in a situation the law seeks to prevent, DOUBLE RECOVERY.

Question 29

What are the circumstance when the Recto Law shall apply? (Art. 1484 and 1485)

Answer 29

1) In a contract of sale of personal property the price of which is payable in installments;
2) Contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee f the possession or enjoyment of the thing.

Question 30

To what circumstance is R.A. 6552 or the Maceda law? (Sec. 3)

Answer 30

All transaction or contract s involving the sale or financing of real estate on installment payments, including residential, including residential condominium apartments but

EXCLUDING: industrial lots, commercial buildings and sales to tenants under R.A. no. 3842, as amended by R.A. 3844.

Question 31

What are the rights of a buyer who paid at least two years of installments? (Sec. 3, R.A.6552)

Answer 31

The buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which hereby fixed at the rate of one (1) month grace period for every year of installment made, PROVIDED, that this right shall be exercised by the buyer only once in every five(5) years of the life of the contract and its extension, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty (50%) percent of the total payments made and, after five (5) years of installment, and additional five (5%) percent every year but not to exceed ninety (90%) percent of the total payments made: PROVIDED, That the actual cancellation of the contract shall take place after thirty (30) day from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrendered value to the buyer

Question 32

What are the requisite to cancel a contract of sale of real property payable on installment? (Layug v. IAC)

Answer 32

1) notice;

2) Refund/ cash surrender.

Question 33

Tan v. Benolirao

Answer 33

In a contract to sell, title remains the vendor and does not pass on to the vendee until the purchase price is fully paid. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but situation that prevent the obligation of the vendor to convey title from acquiring an obligatory force.

Contract to sell is terminated when the prospective vendors can no longer legally compel the vendee the balance of the purchase price as a result of the legal encumbrance attached to the title of the property.

Question 34

As to the quantity of the of the determination things. (Art. 1349)

Answer 34

The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, PROVIDED it is possible to determine the same, without the need of a new contract between the parties.

Question 35

What are ABSOLUTE and RELATIVE simulation? (Art. 1345 and 1346)

Answer 35

[Absolute Simulation] takes place when the parties do not intend to be bound at all; VOID

[Relative Simulation]… when the parties conceal their true agreement; when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order, or public policy binds the parties to their real agreement.

Question 36

What are the formal requirements of a contract of sale?(Art. 1483)

Answer 36

Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly in writing and partly by word of mouth or may be inferred from the conduct of the parties.

Question 37

Statutes of Fraud on the sales (Art. 1403 [d])

Answer 37

An agreement for the sale of goods, chattels or things in action, at a price not less than 500 pesos UNLESS:

(a) the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action;
(b) pay at the time some part of the purchase money;
(c) when a sale is made by the auctioneer in his sales book, at the time of the sale, of the price, name of the purchasers and persons on whose account the sale is made, it is a sufficient memorandum.

Question 38

Distinguish Agency to sell to a contract of sale?

Answer 38

(a) In AGENCY, an agent is not obliged to pay for price but merely obliged to deliver price received from buyer; in SALE, the buyer pays for the price of the object;
(b) In AGENCY, the principal remains the owner even if the object is delivered to the agent; In SALE, the buyer becomes the owner of the thing;
(c) In AGENCY, the agent assumes no risk nor liability as long as he acts within the authority given; In SALE, seller warrants;
(d) In AGENCY, may be revoked unilaterally because of breach of fiduciary and even when without ground; In SALE, cannot be unilaterally revoked;
(e) In AGENCY, the agent is not allowed to set the price for profit; In SALES, seller receives profit;
(f) AGENCY is a personal contract; SALE is a real contract.