PART 1 Flashcards
Complete definition of an obligation
An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinative conduct (the giving, doing, or not doing), and in case of breach, may demand satisfaction from the assets of the latter.
Elements of a contract
a. essential - consent, object, consideration
b. natural - can be suppressed or waived (ex: warranty) (xpn: for pre-loved items, you cannot demand beyond wear & tear); those which are deemed to exist in certain contracts, in the absence of any contrary stipulations, like warranty against eviction (Art. 1548.) or hidden defects (Art. 1561.)
c. accidental - those which may be present or absent
depending on the stipulations of the parties, like conditions, interest, penalty, time or place of payment, etc.
Defective Contracts
a. rescissible
b. voidable
c. unenforceable
d. void & inexistent
A obliged himself to deliver a certain thing to B. Upon delivery, B would pay a sum of money to A. Is there a contract of sale?
Not necessarily. The contract may also be resolved in a contract of agency or lease.
When is a contract, therefore, considered a contract of sale?
When there is a transfer of ownership
A contract of sale may be absolute or conditional. T or F.
True.
Characteristics of contract of sale
(1) Consensual - it is perfected by mere consent without any further act;
(2) Bilateral - both the contracting parties are bound
to fulfill correlative obligations towards each other — the seller, to deliver and transfer ownership of the thing sold and the buyer, to pay the price;
(3) Onerous - the thing sold is conveyed in consideration of the price and vice versa
burden (seller - property/ownership; buyer - money)
(4) Commutative - the thing sold is considered the
equivalent of the price paid and vice versa. However,
the contract may be aleatory as in the case of the sale of a hope (e.g., sweepstakes ticket) gross inadequacy of price can make a contract of sale void
(5) Nominate - it is given a special name or designation
in the Civil Code, namely, “sale”; and
(6) Principal - it does not depend for its existence and
validity upon another contract.
What is a contract of sale?
By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. (1458)
The contract of sale is an agreement whereby one of the parties (called the seller or vendor) obligates himself to deliver something to the other (called the buyer or purchaser or vendee) who, on his part, binds himself to pay therefor a sum of money or its equivalent (known as the price).
Tender of payment is not necessary before the debtor can consign the thing due with the court in the following cases
- When the creditor is absent or unknown, or does not appear at the place of payment
- When he is incapacitated to receive the payment at the time it is due
- When, without just cause, he refuses to give a receipt
- When 2 or more persons claim the same right to collect
- When the title of the obligation has been lost
Tender of payment
The act, on the part of the debtor, of offering to the creditor the thing or amount due. The debtor must show that he has in his possession the thing or money to be delivered at the time of the offer.
Consignation
The act of depositing the thing or amount due with the proper court or judicial authorities when the creditor does not desire, or refuses to accept payment, or cannot receive it, after complying with the formalities required by law. It is necessarily judicial and it generally requires a prior tender of payment which is by its very nature extra-judicial.
Stages of a contract of sale
(1) negotiation, starting from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected
(2) perfection, which takes place upon the concurrence of the essential elements of the sale
[3] performance
(3) consummation, which commences when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment of the contract.
Kinds of Sale
A. As to the nature of the subject matter
- sale of real property
- sale of personal property
B. As to whether the object is tangible/corporeal or incorporeal
- sale of a thing
- sale of a right
C. As to validity or defect of the transaction
- valid sale
- rescissible
- voidable
- unenforceable
- void
D. As to the presence or absence of condition
- absolute sale
- conditional sale
- contract to sell
E. Distinguished from other transactions
- contract for a piece of work
- lease
- dacion en pago
- barter or exchange
- agency to sell
Maceda Law
to protect real property owners from inequitable conditions imposed on sale transactions involving real estate purchase financed through installment basis
Under the Maceda Law, buyers of real properties who have paid at least two (2) year installments but defaults in the payment of the remaining installments, and the contract is thereafter cancelled, are given the benefit of, among others, the refund of a percentage of the cash surrender value of the payments on the property
Under Section 3, it only applies to residential real estate, as it excludes other real estates, such as, industrial lots, commercial buildings [and/or commercial lots by implication] and sale to tenants under agrarian laws. Moreover, Section 2 of this law provides that it was enacted to protect buyers of real estate on installment payments against onerous and oppressive conditions.
Recto Law
to prevent abuses in foreclosure of chattel mortgages, especially when the mortgagee-creditors foreclosed the mortgaged properties and bought them at a much lower price, then continues collecting for deficiencies against the mortgagor-debtor.
It provides for remedies in case the buyer fails to pay.
3 alternatives or remedies provided under the Recto Law
- demand payment
- cancellation of sale
- foreclosure of mortgage
Rescissible contracts
- Those which are entered into by the guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof (in behalf of wards)
- Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number (in representation of absentees)
- Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them (those undertaken in fraud of creditors, when the latter cannot in any other manner collect claims due them) - accion pauliana
- Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority (things in litigation)
- All other contracts specially declared by law to be subject to rescission (other instances)
1381
Voidable contracts
- Those where one of the parties is incapable of giving consent to a contract
- Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud
1390
Unenforceable contracts
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
( f ) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
1403
Void Contracts
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
1409
Contract for a piece of work
When the subject good is manufactured especially for the customer or when it is requested to be customized for the buyer, and not just for the general market.
Sale v. Lease
Sale - transfer of ownership
Lease - temporary enjoyment or possession of a thing
Sale v. Dacion en Pago
(1)
s - there is no preexisting credit
dep - there is
(2)
s - obligation is created
dep - obligation is extinguished
(3)
s - causes are price paid and the thing sold
dep - causes are extinguishment of debt and acquisition of object
(4)
more freedom in fixing the price in sale
(5)
s - buyer still has to pay
dep - debtor shall receive payment for the contract to be perfected
Sale v. Barter or Exchange
In sale, the cause of the seller is money. In barter, it can be any thing or promise other than just money.
Sale v. Agency to Sell
(1)
s - the buyer receives the good as the owner
as - the agent receives the good and possesses temporary ownership until the principal owner gets the thing
(2)
s - buyer pays
as - agency to account for proceeds of the sale he may make on behalf of the principal
(3)
s - buyer cannot return the object
as - agent can return the object if he is unable to sell the same
(4)
s - there is warranty
a - agent makes no warranty
(5)
s - buyer can enjoy the thing according to his own terms
a - agent is responsible of taking care of the object according to the principal’s demands
(6)
s - there is transfer of ownership
a - there is only a transfer of authority
Essential Elements of a Contract
- Consent
a. Parties
b. Capacity of the parties (absolute, relative) - Object or subject matter (things & rights)
What is a contract?
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (1305)
What is consent?
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.
1319
Gross inadequacy of price can make a contract of sale void. T or F.
True.
Why is a contract of sale not a real contract?
A real contract requires the delivery of a thing. In a contract of sale, the contract is deemed perfected by mere consent.
Is a sale of piece of land valid if done orally?
Yes, but it is binding only between the buyer and the seller. It cannot affect 3rd persons. Legal basis: Arts. 1357 and 1358 (1)
What makes a contract legally binding?
Consent made in good faith.
Why should we study the different kinds of contract?
Different laws would govern every kind, relationship, scope
Ex: Condominium law
What is the subject matter of a contract?
The object of the contract itself
What is the subject matter in a contract of sale?
The thing itself that is being sold
What is the subject matter in a contract of piece of work?
The service rendered by the worker because there is work especially done to customize the said order
Why is there pre-existing credit in dacion en pago?
Because it is a special form of payment wherein transmission or delivery of a thing is considered an equivalent of the outstanding debt to extinguish the obligation.
Sale v. Dacion en Pago
There is pre-existing credit in dacion en pago
in sale, the obligation is created
dacion en pago is a form of payment which presuposses debtor-creditor relationship
contract of sale - suspensive
dacion - resolutory
In an agreement where A obliged himself to give to B a watch worth P800,000 and B obliged himself to give to A, his car and cash P350,000. What contract was entered into?
Art. 1468 - if party in money and thing, the parties shall determine if the contract is of sale or of barter. pero if no manifest intention, barter sya 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.
- if partly money or thing, depende sa parties
- if mas malaki yung value ng object to be paid than the value of the money to be paid, BARTER
- if mas malaki yung value ng money to be paid than the object to be paid, SALE
Who cannot give consent?
- unemancipated minors
2. insane or demented persons and deaf-mutes who do not know how to write
Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. T or F.
True.
When can husband and wife sell property to each other?
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under article 191.
The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession;
(6) Any others specially disqualified by law. (1459a)
A consensual contract is always valid.
False.
Despite consensuality, there may be forms required for the VALIDITY of a contract. It is not different to say that contract is valid and contract is perfected.
Until all of the terms and conditions are accepted by both parties, there is no contract yet. If a certain term or condition is given a counter-offer, there is no contract yet. T or F.
True.
Stages of a Contract of Sale
- Negotiation - starting from the time the prospective contracting parties indicate interest in the contract
- Perfection - concurrence of the essential elements
- Consummation - performance of respective undertakings resulting to the extinguishment of obligation
Conditional Sale v. Contract to Sell
Conditional sale - there is a condition imposed by the seller before there can be a transfer of ownership despite delivery of the thing. Before there is transfer, condition must be fulfilled first. But once a condition is fulfilled, the buyer becomes the absolute owner of the thing.
Contract to sell - it is a special type of conditional sale where ownership does not automatically passes to the buyer upon fulfillment. Both the buyer and the seller must fulfill another agreement that will transfer ownership. Ex: Sale of a new car. If you buy a car through installment, hindi naman kayo agad ang owner ng car ah kasi di pa tapos bayaran. Pero once mabuo yun, mag eexecute ulit ng contract sa bank (if naka-mortgage sa bank) this time to transfer ownership from seller to buyer.
In a conditional sale, once the condition is fulfilled, no need to execute deed of sale.
Absolute Sale v. Conditional Sale
Ordinary contract of sale, once there is delivery, there is also transfer of ownership. If there is no condition imposed > absolute contract of sale.
Arthur gave Richard a receipt which states
“Receipt
Received from Richard as down payment for my 1995 Toyota Corolla with plate no. XYZ-123….P50,000
Balance Payable 12/30/01….P50,000
Sept. 15, 2001
Sgd. Arturo.
Contract of Sale. Why? The seller did not reserve or make a condition on the ownership of the thing sold. Nothing in the facts say that upon full payment, there will be transfer of ownership. This is an absolute sale or contract of sale.
The assumption will always be that the contract is of sale if there is no condition clearly imposed. T or F.
True.
In a conditional sale or contract to sell, a condition must be clearly imposed. Otherwise, assumption is contract of sale because there is commutativeness or exchange of values. Ambiguity in contract is not appreciated so assumption will always be made that the contract is a contract of sale.
What is the remedy for breach of contract of sale?
Rescission, not recovery of possession because there is no reservation of ownership.
Nante, a registered owner of a parcel of land in QC sold the property to Monica under a Deed of Sale which reads as follows: “That for and in consideration of P500,000 to be delivered to me and receipt of which will be acknowledged by me, I hereby transfer, cede to Monica, a parcel of land covered by TCT No. 9138.”
After delivery of initial payment of P100,000, Monica took possession of the land but failed to pay the remaining balance. Nante filed an action to recover the property alleging that the contract is one to sell which was not perfected because of non-payment of the price in full. Is the contention of Nante tenable?
Contract of sale. No condition. No reservation.
If there is consent in the contract, the same is valid?
Not necessarily. Art. 1327
Article 1327. The following cannot give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write.
If there is no consent in one or both of the contracting parties, what is the status of the contract?
Void
If both of the contracting parties who gave consent are minors, what is the status of the contract?
Unenforceable. Art. 1403 (3)
What is a simulated contract?
Why do people enter into a simulated contract?
Real property in a contract. real value of property is bigger. to avoid paying higher taxes.
What would be the status of the contract if one of the contracting parties has no juridical capacity?
Void
Juridical Capacity v. Capacity to Act
Juridical capacity is the fitness to be the subject of legal relations; it is inherent in every natural person. Capacity to act is the power to do acts with legal effect; it may be acquired and it may also be lost; it is acquired upon the attainment of the age of majority.
What if one of the parties has incapacity to contract?
Voidable only
Incapacity may be absolute or relative.
If the contract does not have all of the essential requisites, that is an absolute incapacity. If relative, only one of the contracting parties is prohibited from transacting for one reason or another. T or F.
True.
Can a former Filipino citizen acquire land through succession?
Yes.
What if the property was sold to a 3rd person?
Any disposition of the conjugal property shall be void if without authority from the court especially if there are debtors of the family. This is an example of defrauding the creditors. Court authorization will now be required for you to sell that property.
Requisites for subject matter or object of contract
- Subject matter must have possibility of existence;
- Subject matter must be determinate or, at least, determinable;
- Subject matter must be licit; and
- Vendor must have the right to transmit ownership at the time of delivery.
Things having potential existence may be the object of a contract of sale. T or F.
True. Such a sale is subject to the condition that the thing will come into existence. If the thing does not come into existence, the contract is deemed extinguished.
What is a determinate thing?
A thing is determinate when it is particularly designated or physically segregated from all others of the same class (Art. 1460, 1st par., NCC).
Requisites for price
- It must be real.
- It must be certain.
- In certain cases, the price must not be grossly inferior to the value of the thing (V Tolentino, 1992 ed., 13).
Exception to the general rule of prohibited sale between husband and wife
The sale between them is not prohibited if they are governed by a regime of complete separation of property, either pursuant to a marriage settlement or a decree of the court obtained in legal separation or in petition for judicial separation of property.
Absolute incapacity
- unemancipated minors
2. insane/demented/deaf-mute
Relative Incapacity to Buy or Sell
- Husband & wife
- Guardian & ward
- Agent & principal unless principal gives consent
- Executors & administrators
- Public officers & employees
- Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice
- Any others specially disqualified by law.
- Seller (even on his behalf) in his own bid
Can a judge buy a property under litigation that he is not trying?
YES.
There is object, cause, consideration.
Ownership will only be acquired through delivery.
Despite the fact that the seller may be declared not the owner, at the time of sale, he WAS the owner and has the rights to sell. Pero if ultimately nadecide yung case against him, he will be liable for breach of warranty.
Does the law prohibit a lawyer from acquiring property made as payment for his professional services?
No, as long as the property was not the subject of litigation.
Other persons especially disqualified
- Aliens are disqualified to purchase private agricultural lands
- unpaid seller who has been prohibited from buying the resale
- officer conducting execution of sale
If H had abandoned W for 10 years, can they now sell property to each other?
Not until the requirement of a dissolution of properties have been satisfied after legal separation.
Is there a way for the husband to sell the property of the wife?
Yes. He can sell as an agent to a 3rd person.
Why is it important to know the status of contract?
to know which remedy to use
Why must the thing be licit?
If it’s illegal, it is void. If it’s a void contract, it can never be the subject of ratification.
PDAF case - those parties who have benefited shall not be prejudiced by a void contract. despite the fact that the thing came from an unconstitutional funding, the effects benefited the general public so it shall be valid.
ok
A obliged himself to deliver and transfer ownership of the palay that will be harvested from a specific parcel of rice land in May 2017.
a. what if by May 2017, no palay was harvested, what would be the status of the contract?
b. may the seller A be held liable for damages for failure to comply with his obligation?
a. consent object cause
there is consent already
no object but the object is CONSIDERED so the contract is valid
future thing may be the object of a contract as long as it it will come into existence
b. It depends.
Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.
OR
Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.
S and B. S sold a property to B. The property is under litigation. Is the sale valid, pending the result of the decision of the court?
No.
Is a contract of a sale is a mode of acquiring ownership over the thing?
No. It only gives rise to obligations. Art. 712
Article 712. Ownership is acquired by occupation and by intellectual creation.
Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition.
They may also be acquired by means of prescription.
When his father died, but before delivery of the property to him, a son sold his share of the property inherited. Is the sale valid?
Yes.
Article 777. The rights to the succession are transmitted from the moment of the death of the decedent.
My car as the object of a contract of sale. Is this determinate?
It depends. If the seller only has one car, it is determinate. If the seller has many cars, Art. 1460 contemplates a thing among many other things - several things of the same class - applies only to a multiple # of the same class but in the problem given, it was not stated. Answer is dependent on the # of objects.
Assuming that there are a lot of cars involved, but the contract only mentioned “my car.” What is the status of the contract?
Art. 1349 and 1409 (6)
VOID - another contract will necessitate the specificity of the object
The thing must be seen first before a thing is considered determinate. T or F.
False.
When can ownership be transmitted?
It is not required at the time of the perfection of the contract, but only at the time of the delivery.
A perfected contract of sale cannot be challenged on the ground of the seller’s non-ownership of the thing sold at the time of the perfection of the contract. T or F.
True. Ownership matters during consummation stage.
Reason: Sale only creates title; it is delivery which serves as the mode of transferring ownership
Effect if seller is not the owner at the time of delivery
The seller will only be liable for damages for breach of his obligation to transmit ownership to the buyer.
Assignment of credit v. Sale
(1)
ac - intangible
s - tangible
(2)
ac - involves no transfer of ownership but merely effects the transfer of rights which the assignor has at the time to the assignee –> 3rd party steps into the shoes of the original creditor
s - transfer of ownership
(3)
ac - may be done gratuitously or onerously
s - gratuitous = donation
so after transfer in ac, a definite 3rd person is obliged
in s, the subject obliged is the whole world which must respect the title of the buyer
ac onerous - exchange, dacion en pago
(4)
ac - consideration is not always a requisite
s - consideration is a requisite
(5)
ac - title is transferred but possession need not be delivered
s - there is a delivery of possession
Subject matter, consideration, and consent of assignment
credit or right assigned, price paid for the credit or right, agreement of the parties to the assignment of the credit or right at the agreed price
Assignment distinguished from other terms: renunciation, agency, substitution, subrogation.
- Renunciation - abandonment of right without a transfer
- Agency - involves representation, not transmission wherein the agent acts for the principal
- Substitution - change of a new debtor for the previous debtor with the credit remaining in the same creditor
- Subrogation - change in the person of the creditor with the credit being extinguished
A seller may sell the whole property. T or F.
True.
A seller may sell a specific portion of a thing only. T or F.
True.
A seller may sell an undivided interest in the thing itself. T or F.
True. ex: phone & battery
Effect of sale of an undivided interest
The buyer becomes the co-owner of the thing sold. As a co-owner, the buyer acquires full ownership if his part and he may sell it.
Co-ownership
When the ownership of an undivided thing or right belongs to different persons.
Things subject to a resolutory condition may be the object of the contract of sale. T or F.
True
The object of the contract is subject to the resolutory condition. T or F.
False. Not the thing which is the object that is the subject of condition. the sale itself is the condition.
Sale of right is governed by the contract of sale. T or F.
Not necessarily because it can also be governed by donation or dacion en pago.
Assignment of credit follows the rules provided for in a contract of sale under Articles 1624 and 1475. T or F.
False. There are differences between a contract of sale and assignment.
Assignment of credit requires delivery by public instrument but sale does not. Sale is always tangible as opposed to assignment of credits (intangible).
In the case of assignment of credit, a person is subrogated to the rights of the other. T or F.
False. Assignment is different from subrogation.
By sale, dacion en pago, exchange without the need of consent of creditors»_space; assignment. Consent is needed in subrogation.
Legal subrogation v. Conventional subrogation
(1)
LS - not presumed, except in some cases
CS - must be clearly established to take effect
(2)
LS - by operation of law
CS - agreement between parties
Subrogation v. Assignment
(1)
S: extinguishes the original obligation and gives rise to a new one
A: refers to the same right which passes from one person to another
(2)
S: nullity of an old obligation may be cured such that a new obligation will be perfectly valid
A: nullity of an obligation is not remedied by the assignment of the creditor’s right to another
(3)
S: needs consent (conventional: original creditor, debtor, new creditor consent)
A: no need for consent; mere notice is enough
Peter Co, a trader from Manila, has dealt business with Allied Commodities in HK for 5 years. All through the years, Peter Co accumulated an indebtedness of P500,000 with Allied Commodities. Upon demand by its agent in Manila, Peter Co paid Allied Commodities by check the amount owed. Upon deposit in the payee’s account in Manila, the check was dishonored for insufficiency of funds. For and in consideration of P1.00, Allied Commodities assigned the credit to Hadji Butu who brought suit against Peter Co in the RTC of Manila for recovery of the amount owed. Peter Co moved to dismiss the complaint against him on the ground that Hadju Butu was not a real party in interest and, therefore, without legal capacity to sue and that he had not agreed to a subrogation of creditor. Will Peter Co’s defense of absence of agreement to a subrogation of creditor prosper?
No, Co’s defense will not prosper. This is not a case of subrogation, but an assignment of credit. ASSIGNMENT OF CREDIT is the process of transferring the right of the assignor to the assignee. The assignment may be done either gratuitously or onerously, in which case, the assignment has an effect similar to that of a sale (Nyco Sales Corp. v.BA Finance Corp. G.R No.71694. Aug.16, 1991 200 SCRA 637). As a result of the assignment, the plaintiff acquired all the rights of the assignor including the right to sue in his own name as the legal assignee. In assignment, the debtor’sconsent is not essential for the validity of the assignment
(Art.1624; 1475, CC; Rodriguez v. CA, et al, G.R. No. 84220, March 25, 1992, 207 SCRA 553).
ALTERNATIVE ANSWER:
No, the defense of Peter Co will not prosper. Hadji Butu validly acquired his right by an assignment of credit under Article 1624 of the Civil Code. However, the provisions on the contract of sale (Article 1475 Civil Code) will apply, and the transaction is covered by the Statute of Frauds. (Art.1 403 par. (2) Civil Code)
An assignment of credit is valid despite the fact that it is in a private instrument. T or F.
True. Art. 1356 (De Leon)
State will not allow land to be registered orally. Public document is required if need ng notice to the govt
The assignment of a credit includes all the accessory rights, such as guaranty, mortgage, pledge or preference. T or F.
True. 1627
In 2 deeds of sale, real properties assuredly worth in actual value of at least P10,5000,000 going only by assessment for tax purposes “which, it is well known, are notoriously low indicators of actual value”–were sold at a stated price of only P100,000 in each deed plus unspecified past, present and future services to which no value was assigned. Status of contract?
Void
A deed of sale was entered into by A and B. The price agreed upon was 1M yen.
a. may that be a valid sale?
b. can the seller compel the buyer to pay in yen?
a. yes
b. it depends. if the contract was entered today, the contract would be valid despite the stipulation of yen. but if it was entered into prior to 1996 stipulation of yen must be converted (RA 8183)
Who can fix the price in a contract of sale?
Either both or one of them (with the consent of the other)
May the sale be perfected if the agreement of the parties was for one of them to fix the price?
Yes. Only if the other party accepts it.
If offer pa lang, wala pa perfection. Negotiation pa lang.
What if a third person was asked to fix the price – A and B agreed that X will fix the price. May the sale be voided?
Yes.
- may be voided not the same as voidable
- no meeting of the minds if hindi mag-aaggree si A and B
- may be voided if third person doesn’t want to or is unable to fix the price
If the third person fixed the price but it was too high or too low or maybe there was fraud committed by the third person or he was in connivance with one of the parties, may the sale be void?
No. Because the remedy would be to go to court and ask for price.
Art. 1469
General rule: price is stated in the contract.
Exceptions?
Exceptions: price is determinable by its relation to a certain thing
ex: price of the house when it was bought
Effect where price not fixed by third person designated
General rule is that this is legally binding to the parties.
Exceptions: when the person acted in bad faith (Art. 1469) or when the the 3rd person disregarded the specific instructions or procedure with fixing the price
ex: Parties asked third person to look at the stock market and determine price from there
unless the parties later on agree on the price
The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain. T or F.
True.
Exception to the general rule that contracts that do not state the price have no effect.
Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.
Pag ginamit mo na, you can no longer return the item. ex: underwear pero dapat reasonable price padin (accdg to shared market value, consent of both buyer and seller)
What is RA 8183?
All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. However, the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment.
Will you consider all of your money as legal tender?
No.
What is BSP Circular No. 537, Series of 2008?
In the case of coins in denomination
of 1-, 5-, and 10-Piso they shall be legal tender in amounts not exceeding PHP1,000.00 while
coins in denomination of 1-, 5-, 10-, and 25-Sentimo shall be legal tender in amounts not
exceeding PHP100.00, pursuant to BSP Circular No. 537, Series of 2008.
Legal tender in coins. What if tig P5 na P10,000? Is it valid?
It depends. If the person accepts it, ok lang.
Mercantile documents are not legal tender. T or F.
True. Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.
Regardless of the check issued, that is not a mode of extinguishing an obligation. the law requires that the check must be credited already to the account of the creditor.
What is earnest money?
Art. 1482
Money given by prospective buyer to manifest his interest to the property considered as part of the price
What is the effect of earnest money?
a. When earnest money is given, it shall be considered part of the price and proof of the perfection of the contract (Art. 1482, NCC).
b. And it in effect exempts the sale from the requirement of the Statute of Frauds. Recall that the Statute of Frauds does not apply when the contract has already been performed, either partial or complete.
If the contract does not push through, ibabalik yung earnest money.
Earnest money (1482) v. Option money (1479)
em - part of purchase price; paid in a perfected sale
om - not part; separate contract; wala pang perfection
What is lesion?
Injury or loss. In the civil law jurisdictions the word is often used in the context of an ‘unfair’ loss, as where an adult takes advantage of a minor or someone purchases something for much less than it’s worth.
art. 1470 and 1355
Can lesion be presumed?
Lesion cannot be presumed, it shall be proven as a fact.
The general rule is that gross inadequacy of price does not affect a contract of sale. What are the exceptions?
Except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.
Unless there has been fraud, mistake or undue influence (1355).
Simulated contract v. Gross inadequacy of price
SC - parties to an alleged contract do not really intend to be bound by it, the contract is simulated and void.
Contract of sale may be in any form because it is perfected by mere consent. T or F.
True. 1475
- 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 by word of mouth, or may be inferred from the conduct of the parties.
- Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.
Paredes was a prospective buyer. Espino owns a land in Palawan. Paredes is from Northern Luzon. Their negotiation was thru letters and telegrams. Espino sent a letter to Paredes stating that he and his wife agreed to sell the land to Paredes, that the deed of sale will be executed upon the arrival of Paredes in Palawan. When Paredes arrived, Espino said he is no longer interested in selling. Paredes filed a case to compel Espino to sell the land. Espino contended that the contract is unenforceable because it is not in writing. He contended that under the statute of frauds, it is unenforceable. Who has the better contention?
Nasa case to sa outline. Contention of Espino is untenable in this case
Rules governing auction sales
- Sales of separate lots by auction are separate contracts of sale
- Sale is perfected by the fall of the hammer
- Seller has the right to bid in the auction, provided:
a. such right was reserved
b. notice was given that the sale was subject to a right to bid on behalf of the seller
c. right is not prohibited by law or by stipulation - Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.
Who has the right to prescribe the terms of the public auction?
The owner.
The conditions of a public sale announced by an auctioneer or by the owner of the property at the time and place of the sale are binding upon all bidders, whether they know of such conditions or not. T or F.
True.
If a “by-bidder” or “puffer” is employed by a seller without notice in sale by
auction, the sale may be treated as fraudulent by the buyer. T or F.
True. It is the secrecy of puffing which renders it a fraud upon bidding.
It is not enough for the parties to agree on the price of the property, but they must also agree on the manner of payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. T or F.
True. This is so because the agreement as to the manner of payment goes into the price, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.
Effect of perfection
From that moment on, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. (Art. 1475, 2nd par., NCC).
Exception: In conditional sales, the obligations of the parties are subject to the general law of obligations with respect to conditional ones. Accordingly, the acquisition of the rights of the vendor and the vendee, as well as the extinguishment of those already acquired, depends upon the event which constitutes the condition.
Effect of loss of thing sold
- if prior to perfection - seller bears the loss, being the owner of the thing
- if at perfection
a. entirely lost - contract shall be without any effect
b. partly only - buyer may choose to withdraw or demand for the remaining price/part
c. specific good - buyer may treat sale as avoided or treat sale as valid - if after perfection but before delivery
a. if loss without vendor’s fault, obligation is extinguished
b. if loss through fault of vendor, he is obliged to pay damages
c. if thing deteriorates without fault of vendor, impairment is borne by buyer
d. if thing deteriorates through fault of vendor, buyer may choose between rescission or fulfillment with indemnity for damages. - if after delivery - buyer’s risk
Accepted unilateral promise to sell or buy
Mere acceptance but without a promise to buy does not bind the promissor and may be withdrawn anytime.
Policitation
An unaccepted unilateral promise to buy or sell. Even if accepted by the other party, it does not bind the promissor and maybe withdrawn anytime. This is a mere offer, and has not yet been converted into a
contract.
Option Contract
A contract granting a privilege in one person, for which he has paid a consideration, which gives him the right to buy certain merchandise, at anytime within the agreed period, at a fixed price.
An option without consideration is void and the effect is the same as if there was no option.
Kinds of Promise
- an accepted unilateral promise to sell in which the promisee (acceptor) elects to buy
- an accepted unilateral promise to buy in which the promisee (acceptor) elects to sell
- a bilateral promise to buy and sell reciprocally accepted in which either of the parties chooses to exact fulfillment
S offers or promises to sell to B his car at a stated price and B just let the promise go by without accepting it.
Neither S nor B is bound by any contract. Obviously, this is not the one contemplated in Article 1479.
Option
A privilege existing in one person for which he has paid a consideration which gives him the right to buy/sell, for example, certain merchandise or certain specified property, 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.
A contract of option to buy is separate from the contract to sell, and both contracts need separate and distinct considerations for validity. T or F.
True.
An option to buy is not a contract of purchase and
sale. T or F.
True. So full payment of price is not necessary for exercise of option to buy.
Option Contract
An option contract is a contract where one-person (the offeror/promissor) grants to another person (the offeree/promisee) the right or privilege to buy (or to sell) a determinate thing at a fixed price, if he or she chooses to do so within an agreed period.
An Option Contract is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time.
An option imposes no binding obligation on the person holding the option aside from the consideration for the offer. Until accepted, it is not treated as a sale.
An option contract must be supported by a separate consideration that is either clearly specified as such in the contract or duly proven by the offeree/promisee.
A purchaser who is unsure whether or not he wants to buy the property can enter into an option contract with the seller. This will give the him/her an option to buy a particular asset at a later date at an agreed upon price. If the seller reneges on his word and disposes of the property in favor of another before the end of the agreed time, the purchaser can sue him for damages. T or F.
True.
The consideration in an option contract may be anything of value, unlike in a sale where the purchase price must be in money or its equivalent. T or F.
True.
Exceptions to the general rule that sale is perfected by mere consent.
In order to be enforceable by action, the following must be in writing:
a. sale of property at a price not less than P500
b. sale of real property or an interest therein
c. sale of property not to be performed within a year from the date thereof
d. applicable statute
Statute of Frauds
A legal concept that requires certain types of contracts to be executed in writing.
Statute of Frauds is applicable only to executory contracts and not to contracts which are totally or partially performed. T or F.
True.
Is form generally important for validity of sale?
No. Formalities intended for greater efficacy or convenience or to bind third persons, if not done, would not adversely affect the validity or enforceability of the contract between the contracting parties
themselves.
Formalities of Contract of Sale
Article 1483. 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 by word of mouth, or may be inferred from the conduct of the parties. (n)
Article 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
( f ) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
Article 1625. An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property. (1526)
Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)
Article 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. (1279a)
Article 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by articles, 1403, No. 2 and 1405. (1280a)
Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (n)
For an assignment of credit to be binding against third persons if a movable property is involved, the same must be in a public instrument and recorded in a Registry of Property. T or F.
False.
On June 1, 2o14, S offered to sell his only car to B for P100,000. B accepted the offer by mailing his letter of acceptance on June 10, 2014. On June 12, 2014, B revoked his previous acceptance and mailed his letter of revocation on the same date. S received the letter of acceptance on June 14, 2014 and the letter of revocation on June 15, 2014.
The contract was not perfected because of the time the acceptance was received, the parties were no longer of one mind.
Article 1483
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 by word of mouth, or may be inferred from the conduct of the parties.
Article 1403
The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
( f ) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
Art. 1625
An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property. (1526)
Art. 1356
Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)
Art. 1357
If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. (1279a)
Art. 1358
The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by articles, 1403, No. 2 and 1405. (1280a)
Art. 1874
When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (n)
Sec. 22 of Act No. 1147
enacted May 3, 1904, provides that, “No transfer of large cattle shall be valid unless registered, and a certificate of transfer secured as herein provided.”
What is a sale by auction?
Public sale wherein people are to bid on the price they are willing to pay for the thing.
When can an offer be withdrawn in an auction sale?
Before the fall of the hammer
General rule: seller cannot bid. Exceptions?
a) the right shall be reserved from the beginning b) notice shall be given to the bidders c) right is not prohibited by law or stipulation
Sergio is the registered owner of a 500-square meter land. His friend, Marcelo, who has long
been interested in the property, succeeded in persuading Sergio to sell it to him. On June 2, 2012, they agreed on the purchase price of P600,000 and that Sergio would give Marcelo up to June 30, 2012 within which to raise the amount. Marcelo, in a light tone usual between them, said that they should seal their agreement through a case of Jack Daniels Black and P5,000 “pulutan” money which he immediately handed to Sergio and which the latter accepted. The friends then sat down and drank the first bottle from the case of bourbon.
On June 15, 2013, Sergio learned of another buyer, Roberto, who was offering P800,000 in
ready cash for the land. When Roberto confirmed that he could pay in cash as soon as Sergio could get the documentation ready, Sergio decided to withdraw his offer to Marcelo, hoping to just explain matters to his friend. Marcelo, however, objected when the withdrawal was communicated to him, taking the position that they have a firm and binding agreement that Sergio cannot simply walk away from because he has an option to buy that is duly supported by a duly accepted valuable consideration.
a. Does Marcelo have a cause of action against Sergio?
b. Can Sergio claim that whatever they might have agreed upon cannot be enforced because any agreement relating to the sale of real property must be supported by evidence in writing and they never reduced their agreement to writing?
a. Yes, Marcelo has a cause of action against Sergio. As a rule, an offer can be withdrawn at any time before acceptance by communicating such withdrawal (Art. 1324) except when the option is founded upon a consideration as something paid or promised. In this case, although there was no separate consideration for the option, the offer had already been accepted and thus, it resulted into a perfected contract of sale between Marcelo and Sergio. Sale being a consensual contract is perfected by mere consent.
b. No, Sergio cannot claim that the agreement cannot be enforced because it was not reduced into writing. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. (Art. 1356) In fact when the law requires a document or other special form, as in the acts and enumerated by law, the contracting parties may compel each other to observe that form, once the contract has been perfected, and this right may be exercised simultaneously with the action upon the contract. (Art. 1357) Even an oral sale of a parcel of land is valid between the parties.
- option contract lang kasi kaya valid. pero hindi pa naman yan sale of real property eh.
- the bottle and the pulutan are valid options for a consideration
- the law does not demand that option money shall be actual money
Option money is independent from a contract of sale. T or F.
True.
What is the purpose of an option money?
to reserve the property to the offeree until a certain period of time
Mrs. Rigos offered to sell her land to Sanchez for a certain price. Rigos gave Sanchez 2 years within which to decide. In this case, Sanchez has an option. Before the lapse of 2 years, Sanchez told Rigos that he is buying and offered the price agreed upon but Rigos refused claiming that she was not bound by the written option agreement because no option money (consideration) was given by Sanchez. According to Rigos, the option contract is void.
- Yes. An option without consideration is void. P. 83 of De Leon.
- Sanchez v. Rigos (case nasa outline)
- There is a perfected contract of sale. What was given to Sanchez was mere offer in a period of 2 years. Option shall be founded on a consideration separate and distinct from a contract of sale. Otherwise, it can be withdrawn any time.
- Consideration need not be money. But there MUST be a consideration.
- There is a valid contract of sale despite the fact that there is a void option contract. OFFER. Contract of sale was manifested to have been perfected when the offer was accepted. So the offer can no longer be withdrawn.
If 2 years was given within which to decide, and assuming there was an option money, before the offeree could decide to buy, the offeror withdraw on the 6th month. Can the offeree on the 10th month say “I would like to buy”?
No, because there was withdrawal.
Can the buyer compel the seller to sell?
No. Action for specific performance will not prosper because there was no more offer to be considered. There was a valid withdrawal. UNLESS inoffer ulit ni offeror.
If the offeree files an action for damages, may that action prosper there being option money given?
Yes. Because the option contract is perfected and the parties are bound by such contract.
- liquidated and actual damages.
Natural Elements of a Contract
Those that are inherent in the contract, and which in the absence of any contrary provision, are deemed to exist in the contract.
- Warranty against eviction
- Warranty against hidden defects
- Subrogation
Accidental Elements of a Contract
These elements may be present or absent depending on the stipulation of the parties (conditions, interest, penalty, time or place of payment)
Warranty against eviction
Warranty in which the seller guarantees that he has the right to sell the thing sold and to transfer ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof.
Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.
The contracting parties, however, may increase, diminish, or suppres’s this legal obligation of the vendor.
Warranty against hidden defects
Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them.
B bought on a partial payment of P1,000.00, evidenced
by a receipt, a portion of a subdivision from S, administrator of the testate estate of his deceased spouse. Subsequently, S was authorized by the court to sell the subdivision. In the meantime, PT Co. became the new administrator. It sold the lot to another which sale was judicially approved. B files a complaint which seeks, among other things, for the quieting of title over the lot in question.
Was there a valid and enforceable sale to B?
No. An examination of the receipt reveals that the
same can neither be regarded as a contract of sale nor a promise to sell. There was merely an acknowledgment of the sum P1,000.00. There was no agreement as to the total purchase price of the land nor to the monthly installments to be paid by B. The requisites for a valid contract of sale are lacking.
B Company and S, subdivision developer, agreed to
enter into a new Contract to Sell whereby S will sell seven (7) lots at P423,250.00 with a down payment of P42,325.00 and the balance payable in 48 monthly installments of P7,395.94. The draft of the Contract to Sell prepared by S was sent to B Company but B’s president did not sign it although he sent five (5) checks covering the down payment totalling P27,542.72. S received the checks but did not encash it because B’s president did not sign the draft contract, the reason given by the latter was that the draft covered seven (7) lots instead of six (6). Since no written contract was signed, S sued B to recover
possession of the lots still occupied by the latter.
(1) May the unsigned draft be deemed to embody the agreement between the parties?
(2) May the receipt of the five (5) checks by S serve to produce the effect of tender of down payment by B?
(1) Based on the facts, the parties had not arrived at a
definite agreement. The only agreement they arrived at was the price indicated in the draft contract. The number of lots to be sold was a material component of the Contract to Sell. Without an agreement on the matter, the parties may not in any way be considered as having arrived at a contract under the law.
(2) Moreover, since the five (5) checks were not encashed, B should have deposited the corresponding amount of the said checks as well as the installments agreed upon. A contract to sell, as in this case, involves the performance of an obligation, not merely the exercise of a privilege or a right. Consequently, performance or payment may be effected not by tender of payment alone but by both tender and consignation. It is consignation which is essential to extinguish B’s obligation to pay the balance of the purchase price. (see Arts. 1256-1258.) B did not even bother to tender and make consignation of the installments or to amend the contract to reflect the true intention of the parties as regards the number of lots to be sold.
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)
Art. 1479
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 promisor if the promise is supported by a consideration distinct from the price. (1451a)
Art. 1324
When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. (n)
Art. 1483
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 by word of mouth, or may be inferred from the conduct of the parties. (n)
Art. 1403
The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
( f ) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
Contracts that need to be in writing
- Sale of property at a price not less than P500
- Sale of real property or an interest therein
- Sale of property not to be performed within a year from the date thereof
- Applicable statute
- Executory contracts
- A special promise to answer for the debt, default, or miscarriage of another
- Agreement made in consideration of marriage, other than a mutual promise to marry
- Agreement for the sale of goods, chattels or things in action, at a price not less than 500 pesos, unless the buyer accept and receive part of such goods and chattels
- Agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein
- Representation as to the credit of a third person
- Sale of a piece of land or any interest therein done through an agent—such authority shall be in writing, otherwise the sale will be void
Contracts that need to be in a public instrument/document
- Assignment of a credit, right or action
a. Shall be recorded in the Registry of Property if the assignment involves real property - Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by Articles 1403 (2) and 1405
- Cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains
- Power to administer property, or any other power which has for its object an act appearing or which should be appear in a public document, or should prejudice a third person
- Cession of actions or rights proceeding from an act appearing in a public document
equitable mortgage
one which lacks the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible or contrary to law
General rule on the formalities of contract of sale
Sale is a consensual contract and is perfected by mere
consent.
S, for and in consideration of P1.00 and other valuable
considerations, executed in favor of B then a minor, a
Quitclaim Deed whereby she transferred to B all her rights and interests in the 1/2 undivided portion of a parcel of land. Later, S claimed that the deed is null and void as it is equivalent to a Deed of Donation, acceptance of which by the donee is necessary to give it validity.
Is the Quitclaim Deed a conveyance of property with
a valid cause or consideration?
Yes. The cause or consideration is not the P1.00 alone but also other valuable considerations. Although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary. (Art. 1354.) This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. Moreover, even granting that the Quitclaim Deed is a donation, Article 741 of the Civil Code provides that the requirement of the acceptance of the donation in favor of a minor by parents or legal representatives applies only to onerous and conditional donations where the donee may have to assume certain charges or burdens.
Obligations of a vendor/seller
Art. 1495
- To transfer ownership and to deliver the thing which is the object of the sale (not waivable)
- To warrant the thing which is the object of the sale (waivable and may be modified)
- To deliver fruits and accessories
- If contract of sale covers determinate object, seller, upon perfection of contract, is obliged to preserve the thing to be delivered (Art. 1163)
**5. pay for the execution and registration of the sale unless there is a contrary agreement
Who can transfer ownership?
- owner
- authorized seller
- other seller, with consent of the owner
Art. 1505
What if a buyer buys from an unauthorized seller?
The buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.
Instances sale can be valid in case of unauthorized seller
(1) The provisions of any factors’ act, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;
(3) Purchases made in a merchant’s store, or in fairs, or markets, in accordance with the Code of Commerce and special laws.
What if a buyer buys from a seller with voidable title?
Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller’s defect of title.
Art. 1506
Rules on implied warranty
Article 1547. In a contract of sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer.
This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest. (n)
Art. 1431
Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.
2 types of estoppel
- by pais
2. by deed
Art. 1434
When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.
The possession of movable property acquired in good faith is equivalent to a title. T or F.
True.
One who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. T or F.
True.
If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. T or F.
True.
Mode of transferring ownership in sales
Delivery
Sale is not a mode, but merely a title. Sale by itself does not transfer or affect ownership; the most that sales does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership.
