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(e) Principal (as distinguished from an accessory contract), because for the
contract of sale to validly exist, there is no necessity for it to depend upon
the existence of another valid contract. (Examples of accessory contracts
are those of pledge and mortgage.)
(f) Nominate (as distinguished from an innominate contract) because the
Code refers to it by a special designation or name, i.e. contract of sale)
Elements of the Contract of Sale
(a) Essential elements (those without which there can be no valid sale):
1) Consent or meeting of the minds, i.e., consent to transfer
ownership in exchange for the price.
2) Determinate subject matter (generally, there is no sale of generic
thing; moreover, if the parties differ as to the object, there can be
no meeting of the minds).
3) Price certain in money or its equivalent (this is the cause or
consideration). (The price need not be in money.)
(b) Natural elements (those which are inherent in the contract, and which in
the absence of any contrary provision, are deemed to exist in the contract).
1) warranty against eviction (deprivation of the property bought)
2) warranty against hidden defects
Bar Question
A has sold a baby grand piano to B, by private instrument for P500,000. In
that contract of sale, which is the object, and which is the cause?
ANS.: There are at least two viewpoints here, the latter of which appears
preferable:
First view The object (subject matter) of the sale is the piano, while the
cause (consideration) is P500,000 (or, as one authority puts it, the giving of
the P500,000, at least insofar as the seller A is concerned). Insofar as the
buyer B is concerned, the object is the P500,000, while the cause (the
consideration for which he parted with his money) is the piano (or, as the
same authority puts it, the giving of the piano).
Second view Insofar as both the seller and the buyer are concerned,
there is only one subject matter, namely, the piano. The cause or
consideration for the seller is the price paid; for the buyer, it is the delivery
to him of the piano.
Contract of Sale
the non-payment of price is a
resolutory condition, i.e., the
contract of sale may by such
occurrence put an end to a
transaction that once upon a time
existed
title over the property generally
passes to the buyer upon delivery
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Contract to Sell
the payment in full of the price is a
positive suspensive condition.
Hence, if the price is not paid, it is as
if the obligation of the seller to
deliver and to transfer ownership
never became effective and binding
ownership is retained by the seller,
regardless of delivery and is not to
pass until full payment of the price
since the seller retains ownership,
despite delivery, he is enforcing and
not rescinding the contract if he
seeks to oust the buyerfor failure to
pay
Dation in Payment
1 creditor is sufficient
Not all properties of the debtors are
conveyed
Debtor maybe solvent or insolvent
Creditor becomes owner
Cession
there must be 2 or more
All the debtors properties are
conveyed
Debtor must be insolvent
Creditors dont become owner
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Licit Object
(a) The word licit means lawful, i.e., within the commerce of man.
(b) Things may be illicit:
1) per se (of its nature)
Example: Sale of human flesh for human pleasure.
2) per accidens (made illegal by provision of the law)
Examples: Sale of land to an alien after the effective date of the
Constitution; sale of illegal lottery tickets.
(c) If the object of the sale is illicit, the contract is null and void (Art. 1409),
and cannot, therefore, be ratifi ed.
(d) The right of redemption may be sold. So also may literary, artistic,
and scientific works. A usufruct may also be sold.
Transfer of Ownership
(a)
It is essential for a seller to transfer ownership (Art. 1458) and,
therefore, the seller must be the owner of the subject sold. This stems from
the principle that nobody can dispose of that which does not belong to him
nemo dat quad non habet.
(b)
But although the seller must be the owner, he need not be the
owner at the time of the perfection of the contract. It is sufficient that he is
the owner at the time the object is delivered; otherwise, he may be held
liable for breach of warranty against eviction. Be it noted that the contract
of sale by itself, is not a mode of acquiring ownership. (See Art. 712, Civil
Code). The contract transfers no real rights; it merely causes certain
obligations to arise.
(c)
Indeed, the seller need not be the owner at the time of perfection
because, after all, future things or goods, inter alia, may be sold.
[NOTE: While there can be a sale of future property, there can generally be no
donation of future property. (Art. 751, Civil Code).]
(d)
A person who has a right over a thing (although he is not the owner
of the thing itself) may sell such right. Hence, a usufructuary may generally
sell his usufructuary right.
(e)
Of course, if the buyer was already the owner of the thing sold at
the time of sale, there can be no valid contract for then how can ownership
be transferred to one who already has it?
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Agency to Sell
the agent delivers the price which in
turn he got from his buyer
the buyer after delivery becomes the the agent who is supposed to sell
owner
does not become the owner, even if
the property has already been
delivered to him
the seller warrants
the agent who sells assumes
no personal liability as long as he
acts within his authority and in the
name of the principal
1467. Sale vs Piece of Work
a) If ordered in the ordinary course of business SALE
b) If manufactured specially and not for the market PIECE OF WORK
CONTRACT
Massachusetts Rule: If specially done at the order of another, this is a
contract of piece of work
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New York Rule: if the thing is already existing SALE, if not Piece of Work
1464. Fungible Goods personal property which may be replaced with
equivalent things
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FAILURE TO PAY the price does not cancel the validity or perfection of the
contract since there is still the consideration the price agreed upon or the
value
1470. Effect of Gross Inadequacy of Price
(a) In ordinary sale, the sale remains valid even if the price is very low,
UNLESS if there was vitiated consent (such as when fraud or undue
influence is present).
(b) In execution of judicial sales While mere inadequacy of price will not
set aside a judicial sale of real property, still if the price is so inadequate as
to shock the conscience of the Court, it will be set aside.
(c) It is possible that a donation, not a sale, was really intended. In such a
case, the parties may prove that the low price is sufficiently explained by
the consideration of liberality.
1471. Sale w/ Simulated/ Fictitious Price= VOID(NO CAUSE/CONSIDERATION)
UNLESS a donation or some other agreement, provided the
requirements of donations or other agreements have been
complied with = VALID
-if the requirements dont exist = VOID
1472 see 1469
1473 Setting of the price cannot be left to one partys discretion
UNLESS the price fixed is accepted by the other party and therefore
the sale is perfected
1474 Effect if the Price Cannot Be Determined
(a) The sale is void for the buyer cannot fulfill his duty to pay.
(b) If the buyer has made use of it, he should not be allowed to enrich
himself unjustly at anothers expense. So he must pay a reasonable price.
The sellers price, however, must be the one paid if the buyer knew how
much the seller was charging and there was an acceptance of the goods
delivered. Here, there is an implied assent to the price fixed.
1475. Perfection of the contract of sale at the moment there is a meeting
of minds upon the thing which is the object of the contract and upon the
price (Not the delivery)
-Effect of Perfection: the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
- Consummation of Contarct: upon delivery and payment
- Before perfection of the contract of sale, no mutual rights and obligations
exist between the would-be buyer and the would-be seller.
- Accepted Bilateral Promise to Buy and Sell (1479(1)) is, in a sense, similar
but not exactly the same as a perfected contract of sale
Requirements for Perfection
(a) When parties are face to face, when an offer is accepted without
conditions and without qualifications. (A conditional acceptance is a
counter-offer.)
(NOTE: If negotiated thru a phone, it is as if the parties are face to face.)
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[NOTE: If the buyer has already accepted, but the seller does not know yet of the
acceptance, the seller may still withdraw.]
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Transfer of Ownership
(a) Mere perfection of the contract does not transfer ownership.
Ownership of the object sold is transferred only after delivery (tradition),
actual, legal or constructive. The rule is, therefore, this: After delivery of the
object, ownership is transferred.
(b) How about a stipulation that even with delivery there will be no change
or transfer of ownership till the purchase price has been fully paid, is this
valid?
ANS.: Yes, but the stipulation is not binding on innocent third persons such
as customers at a store. The customers must not be prejudiced.
The Sales Tax
- Even if the object sold has not yet been delivered, once there has
been a meeting of the minds, the sale is perfected and, therefore,
Unilateral Promise
(a)
The acceptance of a unilateral promise to sell must be plain, clear,
and unconditional. Therefore, if there is a qualified acceptance with terms
different from the offer, there is no acceptance, that is, there is no promise
to buy and there is no perfected sale.
(b)
If an option is granted, how long is the offer bound by his promise?
ANS.: If no period has been stipulated, the court will fix the term.
(c)
Is the right to buy, a right that may be transmitted to others?
ANS.: Yes, unless it was granted for purely personal considerations.
1477. The ownership of the thing sold shall be transferred to the vendee
upon ACTUAL or CONSTRUCTIVE delivery
1478. The parties may stipulate that ownership in the thing shall not pass
to the purchaser until he has fully paid the price.
Option
- It is a contract granting a person the privilege to buy or not to buy
certain objects at any time within the agreed period at a fi xed price.
The contract of option is a separate and distinct contract from the
contract which the parties may enter into upon the consummation
of the contract; therefore, an option must have its own cause or
consideration. After the period of conventional redemption has
expired, there is no more right to repurchase. Should the period
later on be extended, this would really be an offer to sell, or any
option, and, therefore, there must be a consideration distinct from
the repurchase price.
1479.
Mutual Promise/ Bilateral Reciprocal Contract
- A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
Accepted Unilateral Promise
- A 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 OPTION MONEY.
- An acceptance of an offer to sell
- Only 1 makes the promise and the promise is accepted by the other
- If the option is given without consideration, it is a mere offer of
contract of sale which is not binding until accepted
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f.
Since the buyer gets the benefits during the intervening period,
it is clear that he must also shoulder the loss.
EXCEPT:
(a) If the object sold consists of fungibles sold for a price
fixed according to weight, number, or measure.
(b) If the seller is guilty of fraud, negligence, default, or
violation of contractual term.
(c) When the object sold is generic because genus does not
perish (genus nunquam perit).
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a) To pay without interest within the total grace period 1 month for
every 1 year installment (can only be availed 1x every 5 years)
b) Cancel the contract, seller give 50% + 5% per year if after 5 years of
installments but does not exceed 90% of the total payments
(Provided, the actual cancellation of the contract shall take place
after thirty days 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 surrender value to
the buyer)
Total Installments = Options + Downpayment + Deposits + Installments
Section 4: Rule if less than 2 years of installments were paid:
a) Grace period: not less than 60 days from installments became due
b) If during a, the obligation is not complied, the seller may cancel
the contract after 30 days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a
notarial act
Section 5: The buyer shall have:
a) Right to sell his rights; or
b) Assign the same to another person by a notarial act; or
c) To reinstate the contract by updating the account during the grace
period and before actual cancellation of the contract
Section 6: The buyer shall have the right to pay in advance any installment
or the full unpaid balance of the purchase price anytime without interest
and to have such full payment of the purchase price annotated in the
Certificate of Title covering the property.
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Just as a married couple cannot generally sell to each other, they also
generally cannot donate to each other. (Art. 87,Family Code). Incidentally,
this prohibition about donating to each other applies also to COMMON-LAW
husband and wife on the theory that here there can be an even greater
degree of undue infl uence; furthermore, if they will be allowed while those
lawfully married will generally be prohibited, this would be giving a reward
to illicit relationship.
1491 The following persons [Relatively Incapacitated to Buy] cannot
acquire by purchase, even at a public or judicial auction, either in person or
through the mediation of another: (VOIDABLE SALE)
(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
entrusted 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 entrusted 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.
Reason: Public policy prohibits the transactions in view of the fiduciary
relationship involved
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Reason Why Generally a Husband and Wife Cannot Sell to Each Other
To avoid prejudice to third persons
to prevent one spouse from unduly infl uencing the other
to avoid by indirection the violation of the prohibition against
donations.
Under the two (2) exceptions under Art. 1490, the sale is generally valid, but
of course, should there be vitiated consent (as in the case of undue
influence) the sale is voidable
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(b) compromises (Art. 2028, Civil Code) - a contract whereby the parties, by
making reciprocal concessions avoid litigation or put an end to one already
commenced.
(c) renunciation (Arts. 6, Civil Code) rights may be waived, unless the
waiver is contrary to law, morals, public order, public policy, good customs,
or prejudicial to 3rd persons with a right recognized by law
(Arts. 1270, Civil Code) condonation or remission is usually
gratuitous and requires acceptance by the obligor (expressly or impliedly)
CHAPTER 3: EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN
LOST
1493 Loss of the Object BEFORE SALE IS PERFECTED
Completely Lost
contract is void; no need to annul
No more cause of action
Partially Lost
Remedies:
Withdrawal or recision
Specific performance as to the remainder by the payment of
proportional price
1494 Loss of Specific Goods
Where the goods without the knowledge of the seller have perished in part
or have wholly or in a material part so deteriorated in quality as to be
substantially changed in character, the buyer may at his option treat the
sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have not
deteriorated, and as binding the buyer to pay the agreed price for the goods
in which the ownership will pass, if the sale was divisible.
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Remedy of non-delivery
If the seller fails to deliver, and the buyer has no fault, the latter may ask for
the resolution or rescission of the contract.
Duty to Deliver at Execution Sales
When the property is sold at an execution sale, the judgment
debtor is not required to deliver the property sold right away. Reason: He
has a period of one year within which to redeem the property. In the
meantime, the buyer should not take actual physical possession of the
property. If he does so, an action of forcible entry may be brought against
him. The judgment debtor would be entitled to get damaged as well as
possession of the property, unless the period of redemption has already
expired, in which case he can get only damages.
The period of redemption commences to run not from the date of
the auction or tax sale but from the day the sale was registered in the office
of the Register of Deeds, so that the delinquent registered owner or third
parties interested in the redemption may know that the delinquent
property has been sold.
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really obtain the material possession of the building. Hence, it may be said
that the execution of the contract is only presumptive delivery.
Effect of Non-Payment of Price
Execution of the deed of sale, in the absence of any defect, transfers
delivery, even if the selling price, in whole or in part has not yet been paid,
for it is not payment that transfers ownership.
Delivery Thru Execution of a Quedan
If the parties in a sale intended that the copra sold should be placed then
and there under the control of the buyer by the issuance of a quedan,
delivery is effected upon the execution of the quedan, and the subsequent
loss of the thing sold should be borne by the purchaser.
1499 (See 1497; Movable Property)
Traditio Longa Manu - The delivery of movable property may likewise be
made by the mere consent or agreement of the contracting parties, if the
thing sold cannot be transferred to the possession of the vendee at the time
of the sale
Traditio Brevi Manu - if the buyer had already the possession of the object
even before the purchase, as when the tenant of a car buys the car, that is,
his possession as an owner
1500 Traditio Constitutum Possessorium
(a) For meaning of traditio constitutum possessorium
- opposite of tradition brevi manu
- possession as owner changed, for example, to possession as a
lessee.
(b) The basis here is consent.
(c) Where a seller continues to occupy the land as tenant, the possession, by
fiction of law, is deemed to be constituted in the buyer
1501 Delivery of Incorporeal Property
(a) by constructive tradition execution of public instrument.
(b) by quasi-tradition placing of titles of ownership in the possession of
the buyer, or the use by the buyer of his rights, with the sellers consent.
The delivery of land title deeds is equivalent to a delivery of the property
itself. So is the use of the vendors right with the vendors consent.
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Exceptions:
1) if buyer is at fault;
2) if buyer had expressly agreed to bear loss.
(c) Buyer must give goods a trial except when it is evident that it cannot
perform the work intended.
(d) Period within which buyer must signify his acceptance commences to
run only when all the parts essential for the operation of the object have
been delivered.
(e) If it is stipulated that a third person must satisfy approval or satisfaction,
the provision is valid, but the third person must be in good faith. If refusal to
accept is not justified, seller may still sue.
(f) Generally, the sale and delivery to a buyer who is an expert on the object
purchased is NOT obviously a sale on approval, trial, or satisfaction.
1503 Reservation of Ownership Despite Delivery on Specific Goods
- Although delivery has been made, seller may reserve ownership till
certain conditions are fulfilled. Of course, the most important
controlling element is the INTENTION.
Instances When Seller Is Still Owner Despite Delivery
(a) Express stipulation.
(b) If under the bill of lading the goods are deliverable to seller or agent or
their order. (Reason the buyer cannot get.)
[NOTE: This is, of course, not conclusive. Thus, although the bill of lading was in the
sellers name, still if it is agreed in the contract that the buyer should receive and
dispose of the goods, it is evident that the buyer generally cannot do this unless
previously ownership has been transferred to him.]
(c) If bill of lading, although stating that the goods are to be delivered to
buyer or his agent, is KEPT by the seller or his agent. (Reason The buyer
also cannot get.)
(d) When the buyer although the goods are deliverable to order of buyer,
and although the bill of lading is given to him, does not honor the bill of
exchange sent along with it. But of course innocent third parties (innocent
holders and purchasers for value) should not be adversely affected.
Except:
(a) When the owner of the goods by his conduct precluded from denying
the sellers authority.
(b) Nothing in this Title, however, shall affect:
(1) The provisions of any factors acts, 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 merchants store or in fairs, or markets, in
accordance with the Code of Commerce and special laws.
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1506 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 sellers defect of title.
Reasons for the Law
(a) Before a voidable contract is annulled it is considered valid.
(b) Where one of two innocent parties must suffer, he who placed the
offender in a position to do wrong must suffer.
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