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BUSLAW4 – Lesson 2 RISK OF LOSS

EFFECT OF GROSS INADEQUACY OF PRICE 1. If the thing is lost before perfection, the seller bears the loss.
2. If the thing is lost at the time of the perfection, the contract is
Mere inadequacy of the price does not affect the validity of the sale, void or inexistent.
except: 3. If the thing is lost after perfection but before delivery, the risk of
1. When there is fraud, mistake, or undue influence. loss is shifted to the buyer.
2. When it shows that the parties really intended a donation or 4. If the thing is lost after delivery, the buyer bears the risk of loss.
some other act or contract. ART. 1481
EFFECT WHERE PRICE IS SIMULATED 1. Sale of Goods by Description
1. The act may be shown to have been in reality a donation, or 2. Sale of Goods by Sample
some other act or contract. 3. Sale by Description and Sample
2. If not and either party had any intention whatsoever that the EARNEST MONEY
amount will be paid (absolutely simulated): the sale is void.
3. If there is a real price but what is stated in the contract is not the  Money given by the buyer to the seller to bind the bargain.
one intended to be paid (only relatively simulated): the contract  Part of the price and as proof of the perfection of the contract.
of sale is valid but subject to reformation.
EARNEST MONEY VS. OPTION MONEY
EFFECT OF FAILURE TO DETERMINE PRICE
Earnest Money Option Money
1. In executory contract – the contract is without effect. It is part of the purchase price. It is given as a distinct
2. Where delivery has been made – the buyer must pay a consideration for an option
reasonable price. contract which gives the
buyer specific period within
PERFECTION OF CONTRACT OF SALE which to purchase the thing.
It is given only when there is It is given at a time when the
Perfected at the moment there is meeting of the minds upon the already a perfected sale. sale had not yet been
thing and price. perfected. What had been
perfected only is the option
Effect: parties may reciprocally demand performance
contract
RULES GOVERNING AUCTION SALE When it is given, the buyer is Even if option money is paid
bound to pay the balance of by the would-be-buyer he is
1. Sales of separate lots by auction are separate sales. the agreed purchase price. not bound to buy the thing.
2. Sale perfected by the fall of the hammer. If the sale does not materialize, If the buyer decides not to
3. Right of Seller to bid in the auction. the earnest money paid must buy the thing, he cannot
be returned, unless a contrary recover the option money he
DELIVERY OF THING SOLD agreement had been paid as consideration for the
stipulated. contract of option.
General Rule:

Ownership is transferred upon delivery of thing sold. FORM OF SALES


Exception: I. When form is not important in validity of sale
a. Sale being consensual, may be oral or written perfected by
If there is a stipulation that ownership shall not be transferred until
mere consent as to price and subject matter.
the purchaser has fully paid the price.
b. If particular form is required under the statute of frauds –
KINDS OF PROMISE TO BUY OR TO SELL valid and binding between parties but not binding to third
persons.
1. An accepted unilateral promise to sell in which the acceptor II. When form is important for validity
elects to buy. a. Power to sell a piece of land granted to an agent.
2. An accepted unilateral promise to buy in which the acceptor b. Sale of land or real property.
elects to sell. III. When form is important for enforceability (Statue of Frauds
3. A bilateral promise to buy and sell reciprocally accepted in which Article 1403)
either of the parties chooses to exact fulfilment. a. A sale agreement which by its terms is not to be performed
within a year from the making thereof
OPTION
b. An agreement for the sale of goods, chattels, or things in
A privilege to which a person has paid a consideration which gives action, at a price not less than P500
him the right to buy or to sell a certain specified property at any c. A sale of real property or of an interest therein
time within the agreed period at a fixed price.
SALE OF PERSONAL PROPERTY IN INSTALLMENTS 2. Buyer paid less than 2 years installment
a. Grace period is not less than 60 days from due date
Remedies of vendor: b. Cancellation if failure to pay within 60 days grace
1. Elect fulfilment upon the vendee’s failure to pay c. 30 days notice before final cancellation
2. Cancel the sale, if the vendee failed to pay two or more PD 957 SUBDIVISION AND CONDOMINIUM BUYER’S PROTECTIVE
installments DECREE
3. Foreclose the chattel mortgage, if any, if the vendee failed to
pay two or more installments. To protect the buyers of condominium projects and subdivision
development against misrepresentations and fraudulent activities of
LEASE OF PERSONAL PROPERTY WITH OPTION TO BUY developers, sellers and operators
a. Leases of personal property with option to buy is similar to sale RA 4726 – THE CONDOMINIUM ACT
by installment
b. Rule on sale by installment is applicable to leases of personal  Provides the rights of the owner and the extent of his influence
property with option to buy in the property where he has purchased the unit.
 It serves to protect the rights of buyers to ensure that they are
FORFEITURE OF INSTALLMENTS OR RENTS PAID
not being misled by property owners or developers.
a. The parties may stipulate that instalments paid or rents paid  It allows foreigners to purchase condos in the Philippines, given
are not to be returned. that they do not own the land on which it is built.
b. Such stipulation should not be unconscionable under the
circumstances
c. The court has the power to order the return of a portion of the
total amount paid in instalments or rents

EXPENSES FOR EXECUTION AND REGISTRATION

a. Vendor has the duty to pay expenses for execution of the sale
and registration, unless stipulated otherwise
b. Expenses subsequent to the transfer of title shall be borne by
the buyer

EXPROPRIATION OF PROPERTY FOR PUBLIC USE

Constitutional Provision under Bill of Rights

1. That private property shall not be taken for public use without
just compensation
2. That o person shall be deprived of his/her life, liberty, or
property without due process

RA 6552 – REALTY INSTALLMENT BUYER ACT

The law involves the sale of immovable on instalment

1. Coverage: Residential Real Estate


2. Exclude:
a. Industrial lots
b. Commercial buildings and lots
c. Sale to tenants under agrarian laws

RIGHTS GRANTED TO BUYERS OF REALTY BY INSTALLMENT

1. Buyer paid at least 2 years instalment


a. Pay without interest the unpaid instalments due within
grace period of 1 month for every year of instalment
payment. Grace period to be exercised every 5 years.
b. When no payment – cancelled; buyer entitled to 50% of
what he has paid plus 5% for every year but not exceeding
90% of payments made.

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