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2C 2019

SALES

QUICKIENOTES

DEFINITION OF SALE

Nice to know from D: Perfection of the

For a valuable consideration

Seller:

meeting of the minds is forever! Only ends

Rule of interpretation: In favor of greater

Transfer of ownership

when contract is consummated already (wala

reciprocity

Delivery of a determinate thing

palang forever :( HUHU)

Buyer:

Consummation

5. Commutative

Pays a price certain in money or its equivalent

A SALE HAS REAL OBLIGATIONS - OBLIGATION TO GIVE

can be subject to SPECIFIC PERFORMANCE

Buyer can compel to deliver plus damages

SUBJECT MATTER

DETERMINATE!

Thing is capable of being determinate

Without necessity of a new agreement

ELEMENT OF A CONTRACT OF SALE (COC HEHE para you’ll remember me)

Consent

Object (subject matter)

Consideration (price certain)

VOID CONTRACTS (LIONSCO - like “LIONS KO!!!” mehehe corny :( huhu)

By LAW

IMPOSSIBLE service

OBJECT of contract cannot be ascertained from the intention of the parties

NONEXISTENT object or cause at time of transaction

SIMULATED or fictitious (absolutely!)

CONTRARY to law, morals, etc. with regard to cause, object and purpose

objects OUTSIDE the commerce of men

STAGES OF A SALE

Policitation

Perfection

ESSENTIAL CHARACTERISTICS OF SALE

1. Nominate and principal

Can stand on its own

Not in preparation of another contract

Has its own name = has its own rules in Civil Code

SUBSTANCE OVER FORM

Even if a contract is called by another name, as long as that contract has the essential shit of a sale (see definition), it’s still considered a contract of sale

2. Consensual

Perfected by meeting of minds on the PRICE and OBJECT

Meeting of minds is FOREVER! Actual delivery or payment does not affect the meeting of the minds

Can be affected by a term or condition

So perfection by mere meeting of minds can be postponed due to suspensive condition or term

3. Bilateral and Reciprocal

Bilateral - both parties have obligations

Reciprocal - parties are debtors and creditors of each other

Power to rescind is IMPLIED

Neither incurs delay when one party is not ready to comply

When one person complies, the other is already in default without demand

4.

Onerous

A thing of value is exchanged for equal value

this is subjective! As long as a party gets what he deserves, it’s fine.

Which means gross inadequacy of price does not affect the sale

BUT!!! Should not be pushed to the limits of absurdity

Sell a car usually worth 500,000 for 500. ANO YON DIBA?

6. Sale: A title not a mode

A sale gives rise to rights and obligation

But it does not transfer ownership; tradition (delivery) does.

SALE COMPARED TO OTHER CONTRACTS (INTENTION IS KEY!!!):

1. Donation - PURE LIBERALITY

If the burden on donee is greater than value of thing donated, it may be a SALE or a barter

2. Barter - thing to thing

If parties intend to consider an exchange of things as sale, then it’s a sale

When no intention appears and transaction is part money part thing

thing is 50% greater than money = Barter

things is equal to 50% or less than money = sale

Statute of Frauds does not apply to barter

3. Contract of piece-of-work

One pays for the service, labor, knowledge, and skill and NOT THE THING MADE

KRABBY FATTY

2C 2019

When thing should not have existed except by order of the party = piece-of-work

Special order = specific orders = piece of work

It’s really a sale of service

4.

Agency

Agent does not pay and become the owner of thing. Everything is for the principal.

He assumes no personal liability

SALES

PARTIES WHO CANNOT ENTER INTO A SALE

(IF ENTERED INTO BY THEM, SALE IS VOID. VOID I TELL YOU. VOID!!!)

1. Husband and wife cannot sell TO EACH

OTHER

Useless because the property regime is ACP

To prevent defrauding of creditors

To avoid dominant spouse from taking advantage of weaker spouse

QUICKIENOTES

*MEM-AID: SPAGECO

Spouses, Public Officers, Agents, Guardians, Executors, Court employees, Others

SUBJECT MATTER OF SALE

1. Requisites (PLD)

Licit

Determinate

Possible

Nice to know; effect of absence of requisite

5. Dacion en pago

 

To avoid indirect violation of prohibition against donation between spouses

Lack of requisites = VOID AND NONEXISTENT = IN PARI DELICTO WILL

One requisite is illegal or prohibited = VOID

When a property is given as substitution for

Considered as a sale - Debt is the purchase

EXCEPTIONS (1490):

 

NOT APPLY = Buyer can recover what he

payment

 

Property regime is complete separation of property

has paid based on unjust enrichment

price

when there has been a judicial separation of property

OSTENSIBLE CONTRACT = in pare delicto will apply = cannot recover from each other

6. Lease

A sale between spouses is VOID

spouse selling ACP/CPG property must ask the

 

EXCEPT that innocent party can recover

Lease with option to buy is a conditional sale (SUBSTANCE OVER FORM! Lease in name, sales is the game)

Nice to know; SALE TO THIRD PARTY; A

what he has paid (Mel babies tama diba? HAHA)

Rent-to-own = sale in installments

 

consent of the other spouse; or else, SALE IS VOID

2.

POSSIBLE THING (PEFR)

 

but is a continuing offer to the third

EXISTING

PARTIES OF SALE

 

person until offer is withdrawn

HAS POTENTIAL TO EXIST

GR: Any person who has capacity to act, or the

2.

1491

FUTURE THING

power to do acts with legal effects, or with the

Guardians - as to property of the ward

SUBJECT TO A RESOLUTORY CONDITION

power to obligate himself, may enter into a sale

Agents - as to property of the principal unless

Executors and administration - as to property

Emptio rae spei is valid = sale of future thing=

GR: Minors, insane or demented persons, deaf-mutes who cannot WRITE (not read! WRITE ONLY) cannot enter into a sale.

consent is given

of estate under their administration

suspensive condition = buyer takes risk of getting nothing

Contracts entered into by these people are VOIDABLE (NOT VOID. VOIDABLE! Subject to annulment and ratification)

Public officers and employees - as to property of the State

Court employees (Justices, judges,

If event does not happen, contract is extinguished

Emptio spei = sale of hope is valid = buyer takes risk of getting nothing

Exception: If sale of necessaries, it’s fine.

prosecutors, clerks of court, lawyers) - as to

What is VOID is the SALE OF VAIN HOPE

Nice to know on senility and serious illness:

 

property and rights in litigation

If the person’s mental faculties prevented him

doesn’t matter if under their jurisdiction or

3.

LICIT THING

from properly, intelligently and firmly

not as long as litigation is PENDING

Must be within commerce of men

protecting his rights, the sale is VOID

If litigation is done, okay na! :D

(Paragas and Domingo cases where seller is so old and senile and sick)

Others disqualified by law

KRABBY FATTY

2C 2019

4. DETERMINATE OR DETERMINABLE THING

Particularly designated - capable of being made determinate

Physically segregated

Test: No need for further agreement to figure out the object of the sale

If the court cannot ascertain the principal object from the intention of the parties, the sale is void (1409).

Nice to know; QUANTITY IS ESSENTIAL TO THE VALIDITY OF A CONTRACT OF SALE

Also determines subject matter (how much to deliver) and price (how much to pay based on quantity)

If a max quantity is agreed upon, sale is still valid because subject matter need not be subjected to a new agreement

Nice to know; Non-determinable objects

Fungible things - can be replaced by another thing

Sale of fungible is valid as long as it can be made determinate at the time of delivery

Fungible things cannot be lost = obligation to give not extinguished by loss

Nice to know, SUBJECT MATTER CANNOT BE LEFT TO THE WILL OF A THIRD PARTY, unlike in price

Not a generic obligation

When 3rd party chooses a thing that a party is unwilling to give, there is no contract

WHEN SHOULD SELLER OWN THE THING? AT TIME OF DELIVERY!

GR: Ownership is required only upon delivery. It’s not required at perfection.

Exception: Judicial sale

If seller sells something and delivers it to the

buyer without owning it, the sale is VALID but the buyer has no better title than the seller.

SALES

However, if seller becomes the owner thereafter, the defect is cured and title passes to buyer by operation of law.

PRICE AND OTHER CONSIDERATION

Price - sum stipulated as the equivalent of the thing sold

should be certain in money or its equivalent

Price should be valid to preserve integrity and

enforceability of the underlying obligation of the buyer to pay

Requisites (RMECA like “army ka?” weeh corny :( HAHA)

1. Real

2. In Money or Equivalent

3. Certain or Ascertainable

When is price REAL?

When there is a LEGAL INTENTION TO PAY on the part of the buyer and LEGAL EXPECTATION TO RECEIVE on the part of seller

When neither of the parties had intention that the amount will be paid, PRICE IS SIMULATED

SALE IS VOID FOR LACK OF CONSIDERATION

but it can be some other contract

Intention must be present during time of perfection. No intent to pay and receive price = SALE IS VOID

When is price FALSE?

When the real price is agreed upon but is not declared, and another price is stated in the deed of sale

Sale is still valid though, subject to reformation

RELATIVE SIMULATION OF PRICE

QUICKIENOTES

Parties are estopped from denying the price in the instrument when interests of third parties will be affected by the reformation of the instrument

Non-payment of price will not affect validity of sale.

Failure to pay = Specific performance or rescission

No price = no contract = no passing of title

Money or its equivalent?

Anything BUT services. Services are not included in “its equivalent”

Can be part money or part another thing or consideration

Examples of consideration of sale not in money:

Expectation of profits

Cancellation of debt

Valuable consideration?

Consideration is PRESUMED TO EXIST

INADEQUACY DOES NOT AFFECT VALIDITY OF SALE

Except when price is false and fictitious, or shocking to the senses, or merely a nominal price

Price is certain or ascertainable?

Certain when expressed and agreed upon in SPECIFIC TERMS

Money is just the model of valuable consideration. Price can be any other consideration

Ascertainable when it is with reference to another thing certain, and determination is left to judgment of specified persons

Can price be fixed by a 3rd party? YES, unlike in subject matter

KRABBY FATTY

2C 2019

Payment of price is a generic obligation; cannot be extinguished by a fortuitous even

Price is ascertainable

Before price is ascertained by 3rd party, sale is already existing BUT conditional.

SALES

When there is downpayment made and manner of paying the balance was not agreed upon, no valid price = no valid sale (Velasco) It’s actually a contract to sell

QUICKIENOTES

FORMATION OF SALE!

1. Policitation - negotiation

2. Perfection - meeting of minds on object and price (amount and manner)

3. Consummation - performance of obligations

 

Parties cannot unilaterally withdraw

CAN THERE BE A SALE EVEN WHEN

POLICITATION

Offer is certain

If he fixes price in BAD WITH or MISTAKE, parties can GO TO COURT

THERE WAS NO PRICE AGREED UPON? YES!!! (1474)

Offer and acceptance

TO FIX PRICE

If things or any part of it has been delivered

Offeror can attach any term or condition

When prevented by one of the parties from fixing the price, condition is deemed fulfilled,

and appropriated, he must pay a reasonable price therefor.

he wants, and may fix the time, place and manner of acceptance. He has full control of the offer before it is accepted.

 

Innocent party has remedies against

Otherwise, there would be unjust enrichment.

Can be withdrawn anytime before

 

the guilty party

1474

is applicable when:

acceptance without notice to offeree.

Can price be fixed with the discretion of

1. Meeting of minds on subject matter

Acceptance is absolute and unconditional

one party without consent of the other?

2. No meeting of minds on PRICE

OFFER BECOMES INEFFECTIVE UPON

NO.

3. Delivery by seller

DEATH

THERE IS NO MEETING OF THE

4. Appropriation by buyer

CIVIL INTERDICTION

MINDS.

By appropriation, meaning BUYER TREATS

INSANITY

Can price be ascertained in reference to other certain things? Yes!

If based on estimates, it is uncertain

What if the price can’t be determined?

SALE IN INEFFICACIOUS

Not void; the sale is actually conditional upon the fixing of the price. Sale exists, but doesn’t materialize due to the non- happening of the condition

MANNER OF PAYMENT MUST BE AGREEN UPON!

Meeting of minds must include manner of payment

If price is certain but no manner of payment is stipulated, assume CASH and DEMANDABLE AT ONCE

If manner was discussed after acceptance of offer, such acceptance do not produce a valid sale (Navarro)

OBJECT AS HIS OWN.

GROSS INADEQUACY (SHOCKING TO THE CONSCIENCE) DOES NOT AFFECT SALE

except:

Consent is vitiated

Parties intended some other contract

Inadequacy may be a ground to set aside execution, but not cancellation of sale.

Compared to simulated price:

When absolutely simulated (parties did not intend to pay or get paid), VOID.

Can be a ground to rescind sale based on

1381 (lesion)

CAN MOTIVE NULLIFY SALE? YES!

When motive is illegal

GR: Motive is not the cause

INSOLVENCY

of either the offeror or offeree, BEFORE ACCEPTANCE IS CONVEYED and RECEIVED by offeror. Options and option contracts

Option - a preparatory contract in which one party grant to the other, for a fixed period and under specified conditions, the POWER to decide whether or not to enter into a contract of sale

There is a FLOATING OFFER, in which when accepted, a contact of sale is perfected.

Subject matter and price IS ALREADY AGREED UPON

Only consent is missing - offer is existing; acceptance is kulang

Must be for a consideration DISTINCT from the purchase price

can be anything of value

KRABBY FATTY

2C 2019

Obligations TO DO (Ang Yu):

Offeror must not withdraw before end of period If withdrawn, there is a breach of contract. Offeror is liable for damages.

To enter into a sale when offeree accepts

Specific performance is not available since it’s an obligation to do. But if accepted, there becomes a sale, and specific performance can be a remedy.

To exercise option, offeree merely advises the offeror his decision to buy and readiness to pay. WHAT IF THE OPTION IS NOT FOR A SEPARATE CONSIDERATION? (Ang Yu and Sanchez)

there is no option contract, but the offer is still valid.

can be withdrawn anytime before acceptance but must not be withdrawn whimsically. If done whimsically, offeree can sue damages under Art.

19

If accepted, there’s a valid sale

Right of first refusal

Promise on the part of the owner that IF HE DECIDES to sell the property, the same shall be offered to the lessee first.

It’s not a contract, but it can be a contract if parties want.

If with a separate consideration, it can be a basis for rescission and damages due breach of contract if violated by the offeror.

It’s not the same as an option contract because there is no agreed price yet,

SALES

and the same is still subject to the

decision of the lessor to sell the property.

If this is breached, depends if the right is included in a lease agreement or not.

If included, the subsequent sale can be rescinded with damages due to breach of contract (since the right should be recognized as an obligation in the principal contract of lease)

No defense of good faith is available to the third party buyer.

Subject to specific performance (sabi sa GN 2014; no involuntary servitued even if it’s an obligation to do because the lessee is just enforcing his right based on the principal contract)

If not included, no action for rescission, but only for damages under Art. 19 (Ang Yu applies)

How to exercise right of first refusal?

1. Seller must offer the property

2. Negotiations on the price will happen (right is deemed exercised even if there is no final price agreed upon)

3. if no price is agreed upon, seller can offer the same terms to other people

4. If seller and the third party negotiates new terms, seller must offer the new terms to the lessee first

5. If lessee still rejects, seller can offer this again to others

PERFECTION

Meeting of the minds happens when there is

a certain offer and absolute acceptance.

Deviation from the terms of the sale is allowed when the changes are merely clarificatory (Villonco)

Acceptance may be express or implied

Earnest money

QUICKIENOTES

When earnest money is given, it shall be considered part of the price and proof of perfection of the sale. Just a presumption.

In a conditional contract of sale, acceptance of earnest money proves the sale is conditionally consummated or partly executed.

Earnest money may be called by other terms. What is important is the INTENTION of the parties.

When the sale is rescinded, seller cannot keep the earnest money unless expressly stipulated.

FORM OF SALEZ

Form is no needed to validate a sale.

EXCEPT:

1. Power to sell piece of land by agent

2. Sale of large cattle

3. Sale of land by non-Muslim hill tribe

cultural minorities

Form is needed only for the convenience of the parties.

To bind third parties and for evidence

STATUTE OF FRAUDZ

to prevent fraud and perjury

These contracts of sale must be in writing or else UNENFORCEABLE

1. Sale not to be performed within 1 year

2. Sale of goods not less than 500

3. Sale of real property

EXCEPTIONS (F-PEN):

1. There is a note or a memo in writing

KRABBY FATTY

2C 2019

SALES

QUICKIENOTES

Must contain ALL the essential terms of a sale, including manner of payment

2. Partially executed contracts

Requisites:

Pertains to object or price

Must involve act on the party sought to be charged

Other things, not just payment of price, can be considered as partial execution (Alfredo)

Applicable only to goods and chattels

Can also apply to immovables, but registration of the sale is still needed to bind third parties.

3. Failure to object the evidence

Constitutes as a waiver.

Contract becomes enforceable

4. Electronic commerce

Electronic documents are admissible in court.

GOODLUCK! <3

 

KRABBY FATTY