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(CONTRACT OF SALES)
CONTRACT OF SALES
Article 1458 of the New Civil Code
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 money or its equivalent.
A contract of sale may be absolute or conditional.
ESSENTIAL ELEMENTS OF A VALID CONTRACT OF SALE
(CONTRACT OF SALES)
DISTINGUISHED FROM OTHER
CONTRACTS
Sale Dacion en pago
No pre-existing debt Pre-existing debt
(CONTRACT OF SALES)
Distinction
OPTION money Earnest Money
Money Separate and distinct consideration Part of purchase price [Art 1482, CC]
from the purchase price
Option Given when sale is not yet perfected Given only when there is already a sale
When given, the would be-buyer is not When given, the buyer is bound to pay the
required to buy, but may even forfeit it balance
depending on the terms of the option
Grantee of option is still undecided whether Buyer manifests his earnest desire to buy the
or not to buy or sell the property [Baviera] property
RIGHTS/OBLIGATION OF
VENDOR AND VENDEE
(CONTRACT OF SALES)
Principal Obligations of the
Vendor
1. to transfer the ownership of the determinate thing sold (Art. 1495);
The vendor need not be the owner of the thing at the time of perfection of the contract; it is
sufficient that he has a right to transfer the ownership thereof at the time it is delivered (Art.
1459).
If the seller promised to deliver at a stipulated period and such period is of the essence of the
contract but did not comply with his obligation on time, he has no right to demand payment of
the price.
The vendee-buyer is in fact may ask for the rescission or resolution of the sale.
If the failure of the seller to deliver on time is not due to his fault, as when it was the buyer who
failed to supply the necessary credit for the transportation of the goods, delay on the part of the
seller may be said to be sufficiently excused.
Principal Obligations of the
Vendor
2. to deliver the thing, with its accessions and accessories, if any, in the
condition in which they were upon the perfection of the contract (Art. 1537);
3. to warrant against eviction and against hidden defects (Arts. 1495,
1547);
4. to take care of the thing, pending delivery, with proper diligence (Art.
1163);
5. to pay for the expenses of the deed of sale, unless there is a
stipulation to the contrary (Art. 1487).
OBLIGATIONS OF THE BUYER
1. Pay the price
Buyer is obligated to pay price according to terms agreed upon regarding time, place &
amount
If payment of interest is stipulated must pay;
if amount of interest not mentioned apply legal rate
When buyer defaults constitutes breach: subject to specific performance/rescission &
damages ; interest to be paid also from of default
OBLIGATIONS OF THE BUYER
2. Accept delivery of thing sold
Where to accept: at time & place stipulated in the contract; if none specified at the time & place of
delivery
Goods; there is acceptance when:
a. He intimates to seller that he has accepted
b. When delivered & does any act inconsistent with ownership of seller
c. Retains without intimating to seller that he has rejected
Sale of Goods on installment:
a. Goods must be delivered in full, except when stipulated
b. When not examined by buyer not accepted until examined or at least had reasonable time to
examine
OBLIGATIONS OF THE BUYER
Acceptance of goods in general, absent contrary express stipulation,
does not discharges seller from liability in case of breach of warranties
(unless no notice or failure to give it within reasonable time)
When buyer has a right to refuse goods, no need to return; shall be
considered as depositary; unless there is stipulation to contrary
REMEDIES OF
UNPAID SELLER
(CONTRACT OF SALES)
UNPAID SELLER
one who has not been paid or rendered the whole price or who
has received a bill of exchange or other negotiable instrument as
conditional payment and the condition on which it was received
has been broken by reason of the dishonor of the instrument.
RIGHTS OF UNPAID SELLER
1. A lien on the goods or right to retain them for the price while in his possession
2. A right of stopping the goods in transitu in case of insolvency of the buyer; requisites:
(a) the seller must be unpaid;
(b) the buyer must be insolvent;
(c) the goods must be in transit;
(d) the seller must either actually take possession of the goods sold or give notice of his claim to the carrier or other person in
possession;
(e) the seller must surrender the negotiable document of title, if any, issued by the carrier or bailee; and
(f) the seller must bear the expenses of delivery of the goods after the exercise of the right.
3. A right of resale
4. A right to rescind the sale
WARRANTIES
(CONTRACT OF SALES)
WARRANTIES
A statement or representation made by the seller
contemporaneously and as part of the contract of sale, having
reference to the character, quality, or title of the goods, and by
which he promises or undertakes to ensure that certain facts are
or shall be as he then represents.
EXPRESS WARRANTIES
For there to be express warranty, the following requisites must concur:
(1) An affirmation of fact or any promise relating to the thing sold;
(2) The natural tendency of such affirmation or promise is to induce the buyer to buy;
(3) The buyer buys the thing relying thereon. [Art. 1546]
(4) Made before the sale not upon delivery or any other point
An express warranty can be made by and also be binding on the seller even in the sale of a second hand
article. [Moles v. IAC, 1989]
IMPLIED WARRANTIES
- arises by operation of law and need not be stipulated in the contract of sale.
(1) Implied Warranty of Title
Warranty of Sellers Right to Sell: Seller warrants his right to sell at the time the ownership is to pass.
Inapplicable to a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell
by virtue of authority in fact or law. [Art. 1547]
Warranty against Eviction: seller warrants that buyer, from the time ownership passes,
shall have and enjoy legal and peaceful possession of the thing. Its requisites are:
(a) Buyer is deprived of the whole or a part of the thing sold;
(b) Eviction is by final judgment
IMPLIED WARRANTIES
(2) Implied Warranty against Encumbrance/ Non-Apparent Servitudes
Requisites for breach:
(a) Thing sold is an immovable
(b) Burden or servitude encumbering the thing sold is:
Non-apparent to the naked eye
Not mentioned in the agreement
Of such nature that it must be presumed that the buyer would not have
bought it had he been aware of it.
Not recorded in the Registry of Property unless there is an express warranty
that the thing is free from all burdens and encumbrances [Art.1560]
IMPLIED WARRANTIES
(3) IMPLIED WARRANTY AGAINST HIDDEN DEFECTS
Requisites for breach:
(1) The defect renders the thing sold unfit for the use for which it was intended OR
diminishes its fitness for such use to such an extent that had the buyer been aware thereof,
he would not have bought it or would have paid a lower price;
(2) The defect is not patent or visible;
(3) The buyer is not an expert who, by reason of his trade or profession, should have known the defect
(4) The seller is aware of the hidden fault or defect, OR even if he is not aware thereof, if there is no
stipulation to the contrary [Arts.1561 &1566]
IMPLIED WARRANTIES
General rule: The commission agent cannot sell on credit. Should he do so, the principal
may:
(1) Demand from him payment in cash, in which case the commission agent shall be
entitled to any interest or benefit, which may result from such sale [Article 1905]; or
(2) Ratify the sale on credit, in which case the principal will have all the risks
and advantages to him [De Leon (2010)].
Exception: The commission agent can sell on credit with the express or implied consent
of the principal.
SALE OF GOODS ON CREDIT WITH
AUTHORITY
If the commission agent was authorized to sell on credit and should he so sell on credit, he shall
inform the principal of such sale, with a statement of the names of the buyers.
Should he fail to inform the principal, the sale is deemed to have been made for cash as far as the
principal is concerned. [Article 1906] As such, as to the buyer, the sale may be on credit, but the
principal may demand the payment in cash from the agent.
Should the commission agent receive a guarantee commission (del credere commission) on
a sale, in addition to the ordinary commission, he shall:
(1) Bear the risk of collection; and
(2) Pay the principal the proceeds of the sale on the terms agreed upon with the purchaser.
SALE OF GOODS ON CREDIT WITHOUT AUTHORITY
(5) During the grace period, buyer shall have the right:
(a) To sell or assign his rights, to be evidenced in a notarial instrument.
(b) To update his account.
(c) To pay in advance any installment, or the full unpaid balance of the
price, without any interest.
P.D. 957. The Law on Sale of Subdivision and
Condominium
The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or
unit. No fee, except those required for the registration of the deed of sale in the Registry of Deeds,
shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding
at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage
or the corresponding portion thereof within six months from such issuance in order that the title
over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith.
R.A. 4726. CONDOMINIUM ACT
DEFINITION OF A CONDOMINIUM
Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in
a residential, industrial or commercial building and an undivided interest in common, directly
or indirectly, in the land on which it is located and in other common areas of the building. A
condominium may include, in addition, a separate interest in other portions of such real
property. Title to the common areas, including the land, or the appurtenant interests in such
areas, may be held by a corporation specially formed for the purpose (hereinafter known as the
"condominium corporation") in which the holders of separate interest shall automatically be
members or shareholders, to the exclusion of others, in proportion to the appurtenant interest
of their respective units in the common areas
R.A. 4726. CONDOMINIUM ACT
DEFINITION OF A CONDOMINIUM
(a)separate interest in a unit in a residential, industrial or commercial building
(b) undivided interest in the land on which the building is located and other common areas
i. common areas may not be partitioned even by judicial decree [Section 7]
(c)title to land and common areas held by condominium corporation - owners of separate
interest are automatically members/shareholders, exclusively.
R.A. 4726. CONDOMINIUM ACT
TRANSFERS OR CONVEYANCES OF A UNIT OR AN APARTMENT, OFFICE
OR STORE, OR OTHER SPACE THEREIN [SECTION 5, RA 4726]