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CONTRACT OF SALE – One of the contracting parties obligates himself to transfer the ownership of and to 1. Donation
deliver a determinate thing, and donation is gratuitous; sale is onerous
the other to pay therefor a price certain money or its equivalent. A contract of sale may be donation is formal contract; sale is consensual
absolute or conditional. donation is governed by law on donation; sale is governed by law on sales
SALES 2. Barter
1. Contract of sale (absolute) in barter, the consideration is the giving of a thing; in sale, it is giving of money
real obligation – obligation to give as payment
remedies available: both are governed by law on sales; both are species of the genus sales
a. specific performance if consideration consists party in money & partly by thing – look at manifest
b. rescission intention; if intention is not clear (1468 ):
c. damages a. value of thing is equal or less than amount of money – sale
b. value of thing is more than amount of money – barter
2. Contract to sell (conditional) 3. Contract for piece of work
personal obligation – obligation to do test in article 1467:
remedies available: a. contract for delivery of an article which the vendor in the ordinary course
a. resolution of business manufactures or procures for general market ( whether on
b. damages hand or not ) – sale
b. goods are to be manufactured specially for a customer and upon special
ESSENTIAL REQUISITES OF A CONTRACT OF SALE order and not for the general market – contract for piece of work.
1. consent jurisprudence:
2. subject matter a. Timing test – under art 1467; Inchausti; whether the thing transferred
3. price would have never existed but for the order – contract for piece of work
(abandoned)
CHARACTERISTICS OF CONTRACT OF SALE: b. Habituality test – enunciated in Celestino v CIR; contract of sale if
1. Nominate - law gave it a name manufacturer engages in activity without need to employ extraordinary
2. Principal - can stand on its own; unlike accessory contract skills and equipment; contract for piece of work is sale of service; contract
3. Bilateral - imposes obligation on both parties of sale is sale of things.
a. obligation of seller – transfer ownership & deliver c. Nature of the object test – enunciated in EEI v CIR; each product’s nature
b. obligation of buyer – pay for price of execution differs from the others; products are not ordinary products of
Consequence: power to rescind is implied in bilateral contracts manufacturer.
4. Onerous – with valuable consideration main factor in decision of the SC: essence of why parties enter into it:
Consequence: all doubts in construing contract to be resolved in a. essence is object – contract of sale
greater reciprocity of interest b. essence is service – contract for piece of work
5. Commutative – equal value is exchanged for equal value 4. Agency to sell
Test: subjective – as long as parties in all honesty that he is receiving equal in sale, buyer pays for price of object; in agency to sell, agent not obliged to pay
value then it complies with test & would not be deemed a donation; but must not for price, merely obliged to deliver price received from buyer.
be absurd. in sale, buyer becomes owner of thing; in agency; principal remains owner even
Inadequacy of price or aleatory character not sufficient ground to cancel if object delivered to him
contract of sale; inadequacy can show vitiation of consent & sale may be in sale, seller warrants; in agency, agent assumes no risk/liability as long as
annulled based on vice but not on inadequacy within authority given
6. Consensual – meeting of minds makes a perfect contract of sale but needs delivery to in sale, not unilaterally revocable; in agency, may be revoked unilaterally
consummate. because fiduciary & even w/o ground
7. Title & not a mode – gives rise to an obligation to transfer; it is delivery w/c actually in sale, seller receives profit; in agency, agent not allowed to profit
transfer ownership; mode which actually transfer ownership. TEST: essential clauses of whole instrument ( art 1466 – motherhood
statement, not good law )
STAGES IN LIFE OF CONTRACT OF SALE: Agency is a personal contract; sale is real contract ( to give ) – rescission not
1. negotiation available in agency
2. perfection – by mere consent; performance may be demanded (specific perf) 5. Dacion en pago
3. consummation dacion: contract where property is alienated to satisfy/extinguish obligation to
pay debt
in dacion: novates creditor-debtor relationship into seller-buyer
in dacion: delivery is required ( real contract )
6. Lease
in sale: obligation to absolutely transfer ownership of thing; in lease: use of thing
is for specified period only with obligation to return
in sale: consideration is price; in lease: consideration is rent
in sale: seller needs to be owner of thing to transfer ownership; in lease: lessor
need not be owner
lease with option to by: really a contract of sale but designated as lease in name
only; it is a safe by installments
CHAPTER 2: PARTIES TO A CONTRACT OF SALE ATTORNEYS REQUISITES:
1. Lawyer-client relationship exists
GENERAL RULE: All parties with capacity to contract can enter into a valid contract of sale 2. Subject matter – property in litigation (all types)
1. Natural 3. Duration – while in litigation (from filing of complaint to final judgment); may be future
2. Judicial - corporation/partnership/associations/Cooperatives litigation
Status of contract valid Reason: due to public policy; ground for mal practice
Remedies available therefore are: a. Client is at the mercy of the lawyer
a. specific performance b. Law is a noble profession
b. rescission c. 2 Masters – 2 interest; one cannot serve 2 masters at the same time
c. damages Exception: CONTINGENT FEE ARRANGEMENT
a. Amount of legal fees is based on a value of property
EXCEPTION TO GENERAL RULE: b. Property itself is involved
1. Minors Not a sale but service contract
status of contract: voidable only, therefor ratifiable I give that you may do (innominate contract) so has to be governed by law
remedy is action for annulment (with partial restitution in so far as the minor is on sales but because of public policy, considered VALID
benefited) Reason why contingent fee is followed:
2. SALE BY & BETWEEN SPOUSES i. constitutional prohibition v impairment of contract
a. Contract with 3rd parties ii. subject to control of courts (may be reduced if unconscionable or nullified)
status of contract is valid iii. canons of legal ethics
b. Sale between parties iv. higher public policy litigants
Status not provided for by law but VOID according to case law
Reason:
i. prevent defraudation of creditors
ii. avoid situation where dominant spouse take advantage of others
iii. avoid circumvention on prohibition of donation between spouses
Exception
i. separation of property agreed (marriage settlement)
ii. judicial separation of property
c. Common Law Spouses (Paramours)
Status of contract: VOID (per case law)
Rationale: evil sought to be avoided is present
3. OTHERS PER SPECIFIC PROVISIONS OF LAW
a. Guardian with regards to property of ward during period of guardianship
b. Agent with regards to property of principal
c. Executor/administrator with regards to the estate of the deceased
d. Public officers with regards to the property of the estate
e. Officer of court & employee – with regards to property in litigation
GUARDIAN/AGENT/ADMINISTRATOR
1. Legal status of contract: VOID (case law)
2. Direct or indirect
3. If mediator – no need to prove collusion; inutile
4. Even if court approved sale
5. Reason: fiduciary relationship is based on trust
CHAPTER 3: SUBJECT MATTER OF SALE CHARTER 4: PRICE – signifies the sum stipulated as equivalent of the thing sold
TO BE A VALID & BINDING SUBJECT MATTER, THE FOLLOWING MUST CONCUR: CHARACTERISTICS OF VALID PRICE
1. Existing, Future & Contingent 1. Must be real
2. Licit 2. Must be in money or its equivalent
3. Determinate or determinable 3. Must be certain or ascertainable at the time of the perfection of the contract
4. Manner of payment provided for
EXISTING, FUTURE, CONTINGENT
Refers to subject matter that are existing & not existing but capable of existence REAL
(pursuant to present, technology) 1. When price stated is one intended by parties
1. if this is present, status of contract: VALID If fictitious: no intention with respect to price - VOID
2. if absent : NO CONTRACT SITUATION, THEREFORE NO CAUSE OF ACTION If False/simulated: what appears in contract is not the true price
3. if mere pipe dream : VOID a. VALID if there is true consideration
a. SALE OF THINGS HAVING POTENTIAL EXISTENCE (Emptio Rei Speratae) b. VOID but if none (because it is fictitious)
Sale of future things; no physical existence yet 2. Valuable
A resolutory condition that thing will come into existence When not valuable – VOID
Non happening of condition: RESULUTORY: EXTINGUISH THE CONTRACT When contract is onerous, presumed to have valuable consideration
Remedy: can recover what has been paid Nominal consideration w/c is common law concept does not apply (P1.00)
b. SALE OF HOPE (Emptio Spei) Gross inadequacy of price in ordinary sale does not render contract void unless
Every sale of future thing is subject to condition that they will come into it is shocking to conscience of man.
existence Except:
If hope does not come true – NO RECOVERY OF PAYMENT/NO a. Judicial sale
RESCISSION Shocking to conscience of man
Aleatory character but valid Higher price can be obtained at re-sale
b. Rescissible contracts due to lesion
LICIT & VENDOR MUST HAVE A RIGHT TO TRANSFER SUBJECT MATTER c. Sales with right to repurchase (raises presumption of equitable mortgage)
1. LICIT – must be within the commerce of men – Remedy is reformation
VOID SUBJECT MATTER:
a. Contrary to law CERTAIN OR ASCERTAINABLE CERTAIN
b. Simulated/fictitious 1. Sufficient that it is fixed with reference to another thing certain
c. Did not exist at a time of transaction That thing will have on a definite day, or in a particular exchange or market, or
d. Outside commerce of men when an amount is fixed above or below the price on such day, or in such
e. Impossible service exchange or market provided said amount be certain
f. Intention can not be ascertained
g. By provision of law 2. Determination be left to judgment of specified person/s
If contract states that price is to be determined by 3rd party, contract is already
2. SELLER MUST BE OWNER – only at a time of consummation since tradition perfected (there is just a suspensive condition – actual fixing of price)
transfers ownership but to have a perfected contract of sale, Vendor need not be 3rd party fixes price in bad faith or mistake – court remedy can be made
owner of thing; can be validated/ratified by subsequent acquisition of title byseller 3rd party is unable or unwilling to fix price – parties have no cause of action
Reason:
DETERMINATE & DETERMINABLE a. suspensive condition does not happen yet – courts have no jurisdiction
Absence: VOID; there is subject matter but Intention regarding subject matter can not b. enforceable contract have not yet arisen – court with no jurisdiction to
be ascertained – VOID create contract between parties
Kinds of subject matter: Result: INEFFICACIOUS
1. Specific - Determinate When price can not be determined in accordance with any of the preceding
Particularly designated or segregated from all others of the same class rules, contract of sale in INEFFICACIOUS
2. Generic - Determinable However, when SM delivered, BUYER must pay
Test: reach a point of description where both minds concur reasonable rice therefore – court can fix price
At the time the contract is entered in to the thing is capable of being made
determinate without the necessity of a new or further agreement between MANNER OF PAYMENT MUST BE AGREED UPON
parties Deemed to be an essential requisite because it is part of the presentation of the
Exact quantity not essential contract
Sale of generic things – VALID; still executory Integral part of concept of price
There can only be contract of sale when subject is finally chosen for delivery If there is failure to meet minds as regards term of payment: CASH BASIS
– already segregated or designated; but before designation, valid K of sale Must be certain or at least ascertainable
already exists Effect is absent: NO CONTRACT SITUATION
3. Undivided interest (BUYER becomes co-owner)
4. Undivided share in mass of fungible goods (BUYER becomes co-owner)
RIGHT OF FIRST REFUSAL:
CHAPTER 5: FORMATION OF CONTRACT OF SALE creates a promise to enter into a contract of sale and it has no separate
consideration, not subject to specific performance because there is no contractual
3 STAGES IN LIFE OF A CONTRACT OF SALE relationship here & it is not an obligation to give (not a real contract)
1. Policitacion/negotiation Stage – offer is floated, acceptance is floated but they do not New doctrine: may be subject to specific performance
meet; time parties indicate their interest but no concurrence of offer & acceptance Effect of new doctrine: turned the world of policitacion upside down because while
2. Perfection – concurrence of all requisites; meeting of the minds valid option contract is not subject to specific performance, right of first refusal which
3. Consummation – parties perform their respective undertakings does not even have a separate consideration may be subject to specific performance
Perfection of contract of sale which is not Res perit domino; owner bears risk of loss 1. possessory lien
2. stoppage in transitu
Conditional include goods which are not 3. special right of re-sale Can only be exercised when 2 prior rights
deliverable; transfers risk to buyer 4. special right to rescind have been exercised
POSSESSORY LIEN
WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS
Seller not bound to deliver if buyer has no paid him the price
1. Before perfection
Right to retain; cannot be availed when seller does not have custody
Res perit domino
Exercisable only in following circumstances:
Owner is seller so seller bears risk of loss
a. goods sold without stipulation as to credit
2. At Perfection
b. goods sold on credit but term of credit has expired
Res perit domino
c. buyer becomes insolvent
Contract is merely inefficacious because loss of the subject matter does not
When part of goods delivered, may still exercise right on goods undelivered
affect the validity of the sale
Instances when possessory lien lost:
Seller cannot anymore comply with obligation so buyer cannot anymore be
a. seller delivers goods to carrier for transmission to buyer without reserving
compelled
ownership in goods or right to possess them
3. After Perfection but before delivery
b. buyer or agent lawfully obtains possession of goods
a. Loss – confused state
c. waiver
2 views:
loses lien when he parts with goods (still has stoppage in transitu)
Ras: BUYER Tolentino: SELLER
notice by seller to buyer not essential
b. Deterioration & fruits - Buyer bears loss
4. After delivery
STOPPAGE IN TRANSITU
Res perit domino
Requisites:
Owner is buyer so buyer bears risk of loss
1. Goods are in transit
Delivery extinguish ownership vis-a-vis the seller & creates a new one in favor
When goods are in transit
of the buyer
From the time goods are delivered to carrier for purpose of
transmission to buyer
Goods rejected by buyer & carrier continues to possess them
When goods no longer in transit
Reached point of destination
Before reaching destination, buyer met seller along the way
Goods are supposed to have been delivered to buyer but carrier refused
2. Shown by seller that buyer is insolvent ( failure to pay when debts come due )
How is right exercised:
a. Obtain actual possession of goods
b. Give notice of claim to carrier / bailee in possession thereof
Notice by seller to buyer is not required; notice to carrier is essential
LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole subject matter)
1. value of thing at time of eviction ( whether or not -/+ of price of sale )
2. value of income of fruits
3. cost of suit which caused the eviction
4. expenses of contract if buyer paid for them
5. damages & interests and ornamental expenses if sale was made in bad faith
BREACH OF WARRANTY
1. if in good faith - expenses of the contract & other legitimate payments made by
reason of the assessment ANTI-DUMMY LAW
2. if in bad faith - expenses of contract & other legitimate payments plus Penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy
useful & necessary expenses privileges reserved only for Filipinos
Management, operation as officers, employees or laborers
ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION Control or non-control position
speculative
law would rather benefit the debtor of such credits rather than the one who merely
speculates for profit
when credit or incorporeal right in litigation is assigned or sold, debtor has a right to
extinguish it by reimbursing the assignee for the price the buyer paid plus interest
right to redeem to be exercised within 30 days from demand by assignee for payment
Constitution of the contract on the mortgagor can execute another mortgage on same Antichresis can only be
thing can be pledged once
same object property constituted once
COMMODATUM MUTUUM DEPOSIT
Movable or Immovable; non- Movable and immovables
money or
Object of the Contract consumable but may be in the case of judicial
consumable/fungible things
consumable but non-fungible deposit
may be gratuitous or
kind of cause essentially gratuitous presumed gratuitous
onerous
intention Use;safekeeping is incidental Consumption Safekeeping