Sales Flashcards
What are the essential elements of a contract?
- Consent , or meeting of the minds to transfer ownership in exchange for the price
- Subject Matter (as opposed to object under Contracts)
- Price, certain in money or its equivalent (Consideration)
Absent any of the three elements, there is no contract of sale. It is INEXISTENT
It is VOIDABLE if there is a defect in the consent.
Sale as defined by the Civil Code
ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
When is the object of the contract licit?
ARTICLE 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. (n)
When is the object of the sale determinate
ARTICLE 1460. A thing is determinate when it is particularly designated or 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 made determinate without the necessity of a new or further agreement between the parties. (n)
Essential Characteristics of a Sale
A. Consensual - Sale is perfected by the mere consent, at the moment of the meeting of the minds.
B. Nominal – given a particular name by law, Sales, hence governed by provisions on Sales
C. Principal – Does not depend on another contract for its validity or existence.
D. Onerous - Onerous, it imposes a valuable consideration. Sufficiency of the price is subjective.
E. Bilateral and Reciprocal - There are reciprocal obligations. Both parties must be ready to comply with their obligations in order to demand performance.
F. Commutative – The value given is more or less the value expected in return.
G. Sale is a title not a mode if acquiring ownership
Stages of a Contract of Sale
- Negotiation - Discussion where parties indicate their interest in the contract to the time of perfection.
- Perfection
- Takes place upon the concurrence of the essential elements
- Consent gives rise to perfection. This creates an obligation. Therefore, the obligation becomes demandable.
- Hence, a vendor may demand that the vendee pay the price BUT the vendor must likewise be READY to comply with his obligation.
o Demandability is affected by whether or not the contract is subject to a suspensive or resolutory condition
Suspensive conditions cannot be dependent on the will of the obligor.
o Parties are subject to privity of contracts and pacta sunt servanda - Consummation
- Each party performs their undertaking under the CoS, culminating in the extinguishment thereof.
Sale vs Donation
S - One of the contracting parties obligates himself to transfer ownership and deliver possession of a determinate thing and the other to pay a price certain therefor;
D- an act of liberality whereby a person gratuitously disposes of a thing or right if favor of another, who accepts it
S -Perfected by mere consent;
D- Solemn contract – must be an acceptance on the part of the donee in writing
Sale vs. Barter
S - One party binds himself to deliver a thing in consideration of the other’s undertaking to pay the price in money;
B - One of the parties binds himself to give one thing in consideration of the other’s promise to give another thing;
S - Statute of Frauds applies for sale of RP and PP bought at P500 or more
B - SoF does not apply;
S - There exists a right of legal redemption granted to an adjoining owner of urban land
B - does not apply
Rules to Determine whether contract is a sale or barter
- Manifest intention of the parties
a. Even if the acquisition of a thing is paid for by another object of greater value than the money component, it may still be a sale when it was the intention of the parties - Consideration consists partly in money and party in another thing
a. It is a barter when the value of the thing given as part of the consideration exceeds the amount of money given
b. It is a sale where the value of the thing given as part of the consideration equals or is less than the amount of money given
Dacion En Pago
- Dation in payment is one whereby property is alienated to the creditor in full satisfaction of a debt in money.
- It is an objective novation of the obligation where:
- othe thing offered as unaccepted equivalent of the performance of an obligation is the considered as the object, while the debt is considered as the purchase price.
- The important part is that there is a meeting of the minds that there is an acceptance to extinguish the original obligation.
- Dacion en pago consideration are not in the realm of perfection but at the stage of consummation
- It is a special sale and regulated by the law on Sales.
Elements of a valid Dation in Payment
- Performance of the prestation in lieu of payment which may consist in the delivery of a corporeal thing, real right or a credit against the third person
- Some difference between the prestation due and that which is given in substitution
- An agreement between the creditor and debtor that the obligation is extinguished bt reason of the performance of the prestation
Contract of a piece of work
• The contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation.
• Tested by the inquiry of whether the thing transferred is one not in existence and which would never have existed but for the order of the party desiring to acquire it or a thing which would have existed and been the subject of the sale to some other person, even if the order had not been given
• Requires a special kind of skill by someone who is not regularly engaged in the sale of goods
Sale vs Contract of Agency
S- Not revocable
A- This covers an underlying fiduciary relationship is revocable even in the presence of an irrevocability clause
S- Buyer pays for the price of the object which is the main obligation
A- Agent is obliged to DELIVER the price which he may receive from the buyer
S- The buyer, after delivery, becomes the owner of the thing
A- The agent does not become the owner of the thing
S - Seller warrants
A- Agent who effects sale assumes no personal liability as long as he acts within his authority and in the name of the principal
When may minors enter into contract of Sales
o Although a minor is not capacitated to validly enter into a sale, where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor.
o Necessaries are now defined under Art. 194 of the Family code to cover everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation in keeping with the financial capacity of the family.
Prohibited Sales
ARTICLE 1491. 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)
Existing, future and contingent objects
ARTICLE 1461. Things having a potential existence may be the object of the contract 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. (n)
ARTICLE 1462. 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.”
There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n)
Emptio Rei Speratae
“Sale of an expected thing” is a contract covering future things and subject to a suspensive condition that the subject matter will come into existence. If it does not come into existence, it is deemed extinguished as soon as the time expires or it becomes apparent that the event will not take place.
Ex. Sale of crops yet to be harvested
Emptio Spei
“Sale of Hope”. The contracting parties intended the contract of sale to exist at all events whether or not the expected thing will come into existence such that the buyer will have to pay the purchase price. Ex. Sale of a Lotto Ticket
Requisites for a valid price
- It must be real
- It is real when there is an intention on the part of the buyer to pay the price and a part on the seller to receive the price.-
- It must be in money or its equivalent
- It may be anything of value.
- It must be certain or ascertainable
Simulated vs False Price
- Simulated Price
• No intention on the parties to pay the price certain. Hence, the sale is void as there is no intention to pay the price
• It is important to determine the nature of the intention of the parties to determine the true nature of the contract.
• Article 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n) - False Price
• There is real price agreed upon the by the parties but not declared in the deed
• Proper remedy is reformation to indicate the price upon which the parties have agreed upon.
• Basta may price.
When is the subject matter determinable
a. If the subject matter agreed upon is capable of being made determinate;
b. Without the necessity of a new or further agreement between the parties
Provisions on advertisements and invitations to sale
Article 1325. Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer. (n)
Article 1326. 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. (n)
When is an advertisement considered an offer?
When the advertisement specifies a determinate subject matter, price and terms of payment as to be equivalent to an offer certain
Withdrawal of an offer
Prior to its acceptance, even a certain offer remains subject to the complete will of the offeror and may be withdrawn or destroyed by the offeror prior to its acceptance.
