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SALES Midterms | Karichi Santos

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I.
General Concepts
A. Definition of Sales
Article 1458, Civil Code By the contract of sale, one of the contracting parties (seller) obligates himself to (1)
transfer the ownership of and (2) to deliver a determinate thing and the other (buyer) to pay therefor a
price certain in money or its equivalent.
A contract of sale may beabsolute orconditional.
COMMERCIAL SALE

Is the sale of personal property for the purpose of resale, either in the same form or in a different form,
with
the intention of deriving profit in the resale

Prior sales law distinguished between commercial sales and civil sales

e.g. in terms of risk of loss and deterioration and hidden defects



Such distinction has been abrogated by the provisions of the Code of Commerce on Sales
B. Nature of obligations created
 Reciprocal obligations (contract of purchase and sale)
Article 1458, Civil Code – refer above
Article 1165, Civil Code When what is to be delivered is a determinate thing, the creditor, in addition to the
right granted him by Art 1170 (damages for breach of obligation), may compel the debtor to make the
delivery
If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of
the
debtor (substituted performance)
C. Sales distinguished from other transactions

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SALES
* CONTRACT OF SALE, defined (Art. 1458, CC)
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.
* SOURCES OF RIGHTS / OBLIGATIONS (Art. 1156)
1. Law
2. Contracts
3. Quasi – Contracts
4. Acts or omissions punished by law; and
5. Quasi – delicts
A contract of sale is a contract and is, therefore, a source of obligations. It has the force of law between the contracting
parties,
which should be complied with in good faith. (Art. 1159)
* CHARACTERISTICS OF A CONTRACT OF SALE

1.Nominate- law gave it a name, i.e . “SALE”

2.Principal- can stand on its own, unlike an accessory contract

3.Bilateral- imposes obligation on both parties


a.obligation of seller – transfer ownership & deliver
b.obligation of buyer – pay price
Consequence of being bilateral: power to rescind is implied in bilateral contracts (Art. 1191)
4.Onerous – imposes valuable consideration
Consequence:all doubts in construing contract to be resolved in greater reciprocity of interest
5.Commutative – a thing of value is exchanged for equal value
Subjective Test:as long as parties believe in all honesty that he is receiving equal value then it complies with the test &
would not be deemed a donation; but must not be absurd.

Inadequacy of price or aleatory character not sufficient ground to cancel contract of sale;

sale may be annulled based on vice of consent regarding inadequacy but not on inadequacy per se
6.Consensual – a contract of sale is perfected by mere consent.
7.Title & not a mode – title gives rise to an obligation to transfer; it is not a mode w/c actually transfers ownership.
On its own, sale is not a mode which transfers ownership. It creates ano blig at io n to transfer ownership. It is the delivery
that transfers ownership.
* CONTRACT OF ABSOLUTE SALE VS. CONTRACT OF CONDITIONAL SALE
A contract of sale may be absolute or conditional. (Art. 1458)
True Test:
A contract of sale gives rise to two obligations: for the seller, to transfer the ownership of and deliver a determinate
thing;
for the buyer, the payment of the price.
If the condition is imposed on the seller’s obligation to transfer the ownership of and deliver the thing, there is a conditional
sale. Note that the essence of sale is the acquisition of ownership.

However, if the condition is imposed on the buyer’s obligation to pay the price, the sale is still absolute. Payment of the purchase price is

part of the consummation stage (not perfection stage) of the contract of sale. Perfection of the contract of sale is not affected by the fact that

payment is subject to conditions, it being the case that a contract of sale is perfected by mere consent.
HYPOTHETICAL QUESTIONS:
1. A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain piano to B for P5,000. A and
B further agreed that the piano will be delivered to B immediately after the execution of the contract, and that B is given ten days to pay the
price. The ownership is, however, reserved to A until the full payment of the purchase price. Was the contract of sale entered into by A and
B absolute?
SALES AND LEASE REVIEWER
by Diory Rabajante
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No. The contract of sale between A and B was conditional because there was a condition imposed on A’s obligation to transfer the
ownership of the piano. B’s ownership of piano is automatically transferred to the buyer by operation of law upon fulfillment of a suspensive
condition which is the payment of the purchase price.
2. A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain piano
to B for P5,000. They further agreed that payment of the price by B is subject to the condition that B will receive money
from C. Is the contract of sale entered into by A and B absolute?
Yes. The condition is imposed only on the payment of the price.
Jurisprudential Doctrines:
People's
Homesite &
Housing Corp. vs
CA
There was no perfected sale of a lot when it was conditionally or contingently awarded
subject to the approval by the city council of the proposed consolidation subdivision plan and
the approval of the award by the valuation committee and higher authorities. When the plan
was approved, the Mendozas should have manifested in writing their acceptance of the award
for the purchase of the lot just to show that they were still interested in its purchase, although
the area was reduced. Yet, they did not do so. Article 1475 of the NCC provides that “the
contract of sale is perfected at the moment there is a meeting of the minds..." Under the facts
of this case, there was no meeting of minds on the purchase of Lot 4 with an area of 2,608.7
square meters at P21 a square meter.
As to the conditional nature of the sale, Article 1181 of the NCC states that “in conditional
obligations, the acquisition of rights, as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the event which constitutes the condition.
Dignos vs CA
A deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale"
where nowhere in the contract in question is a proviso or stipulation to the effect that title to
the property sold is reserved in the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the contract the moment
the vendee fails to pay within a fixed period. In this case, there is no such stipulation
reserving the title of the property on the vendors nor does it give them the right to unilaterally
rescind the contract upon non-payment of the balance thereof within a fixed period.
Furthermore, all the elements of a valid contract of sale under Article 1458 of the Civil Code,
are present.
* CONTRACT OF SALE VS. CONTRACT TO SELL
CONDITIONAL CONTRACT OF SALE
CONTRACT TO SELL
Failure to pay is a resolutory condition which puts
an end to the transaction
Failure to pay is a positive suspensive condition
Title passes to the vendee after compliance with
his obligation
Ownership is retained by the seller
After delivery, ownership is loss, unless it is
rescinded
Delivery does not affect loss of ownership
First element (consent) is present albeit
conditioned upon the happening of contingent
event which may or may not occur, in effect,
contract of sale is automatically perfected without
further act having to be performed by the seller
Ownership not automatically transferred to the buyer
(even if there has been previous delivery to him)
upon fulfillment of suspensive condition (i.e. full
payment of purchase price). Seller still has to convey
title to prospective buyer by entering into a contract
of absolute sale.
With respect to sale to third person:
-
Upon fulfillment of suspensive condition,
sale becomes absolute which affects seller’s
title
-
3P becomes buyer in bad faith if
possesses contrastive or actual knowledge of
defect in seller’s title
-
Second buyer cannot defeat the first
buyer’s title
With respect to sale to third person:
-
No double sale (bec no previous sale of
property despite fulfillment of suspensive
condition)
-
3P not a buyer in bad faith
-
Prospective buyer cannot seek relief of
reconveyance of property, but only sue under Art
19 (unjustified disregard of right)
* CONTRACT OF SALE VS. CONTRACT FOR A PIECE OF WORK
Article 1713: By the contract for 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. The contractor may either employ only his labor or skill or
also furnish the material.
SALES AND LEASE REVIEWER
by Diory Rabajante
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Article 1467:
CONTRACT OF SALE A contract for the delivery at a certain price of an article which the vendor in the ordinary course of
his business manufactures or procures for the general market, whether the same is on hand at the time or not
CONTRACT FOR A PIECE OF WORK if the goods are to be manufactured specially for the customer AND upon his special
order, and not for the general market. Here, service is the Subject Matter
BUT:
THERE CAN BE NO CONTRACT FOR PIECE-OF-WORK FOR PAST SERVICE RESULTING IN THE CREATION OF THE OBJECT
(ALWAYS A SALE)
JURISPRUDENTIAL DOCTRINES:
Celestino Co. vs Collector
When a factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally
performed by it, it thereby contracts for a piece of work.
- In the case at bar, the orders exhibited were not shown to be special. They were merely orders for work — nothing is shown to call
them special requiring extraordinary service of the factory. The factory sold materials ordinarily manufactured by it — sash, panels,
mouldings — to Teodoro & Co., although in such form or combination as suited the fancy of the purchaser. Such new form does not divest
the the factory of its character as manufacturer. Neither does it take the transaction out of the category of sales under Article 1467 above
quoted, because although the Factory does not, in the ordinary course of its business, manufacture and keep on stock doors of the kind
sold to Teodoro, it could stock and/or probably had in stock the sash, mouldings and panels it used therefor (some of them at least).
Commissioner vs Engineering and
Supply Company
The distinction between a contract of sale and one for work, labor and
materials is tested by the inquiry whether the thing transferred is one
not in existence and which never would have existed but for the order of
the party desiring to acquire it, or a thing which would have existed and
has been the subject of sale to some other persons even if the order had
not been given.
If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or
modification of it is made at defendant's request, it is a contract of sale, even though it may be entirely made after, and in consequence of,
the defendants order for it.
The word "contractor" has come to be used with special reference to a person who, in the pursuit of the independent business,
undertakes to do a specific job or piece of work for other persons, using his own means and methods without submitting himself to control
as to the petty details.
IMPORTANCE OF DISTINCTION

Difference in the rules governing both contracts (e.g. tax rates and other charges are lower for contractors) and
application of SoF

Inchausti v Cromwell - SC adopted Massachusetts rule that the test whether the thing transferred is one not in existence
and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have
existed and been subject of sale to some other person, even if the order had not been given.

True test of a Contractor – he renders service in the course of an independent occupation, representing the will of his
employer only as to the result of his work, and not as to the means by which it is accomplished (Luzon Stevedoring
Co v Trinidadan d La Carlota Sugar Central v Trinidad).

More examples of CONTRACT OF SALE:
o

future sale of articles which he is habitually making although at the time not made or finished
article ordered is exactly such as plaintiff makes and keeps on hand for sale to anyone and no change or modification of
it is
made at defendant’s request although made after and in consequence of, defendant’s order for it
* CONTRACT OF SALE VS. CONTRACT OF AGENCY TO SELL
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