Polytechnic University of the Philippines

College of Law

SALES
NATURE AND FORM OF THE CONTRACT

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (1445a)

Special Contracts Atty. Gerardo Lara

Essential Characteristics of the Contract of Sale 1. Consensual: because the contract is perfected by consent. Note: real contract on the other hand is perfected by delivery (e.g. contract of deposit or commodatum)

2. Bilateral reciprocal: because both parties are bound by obligations dependent upon each other. 3. 4. Onerous: because to acquire the right, valuable consideration should be given Commutative: the values exchanged are almost equivalent (sometimes aleatory like the sale of genuine sweepstakes ticket)

5. Principal: (not accessory contract e.g. pledge or mortgage) not dependent upon other contract to validly exist. 6. Nominate: with special designation

Essential ELEMENTS of the Contract of Sale (without which the contract cannot be valid) 1. Consent: meeting of the minds 2. Determinate subject: generally no sale of generic things (affects the meeting of the minds) 3. Price certain in money or equivalent (cause or consideration)

Natural Elements 1. Inherent in the contract; deemed to exist e.g. warranty against eviction, warranty against hidden defects

Accidental Elements 1. Maybe present or absent e.g. place and time of payment

Generally based on the Civil Code Annotated by: Justice Edgardo L. Paras

Stages in the Contract of Sale Negotiation perfection (meeting of the minds) consummation (payment and delivery)

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Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)

Kinds of Sale 1. Nature of Subject Matter A. Sale of real property B. Sale of personal property Value of the thing exchanged A. Commutative B. Aleatory Tangibility A. Sale of property (chose in possession) B. Sale of right (chose in action) Validity and Defect A. Valid B. Rescissible C. Voidable D. Void Legality of the object A. Licit B. Illicit Presence of Conditions A. Absolute B. Conditional e.g. sale with pacto de retro Wholesale or Retail A. Wholesale: goods are resold unaltered, also in large quantities B. Retail:altered Proximate inducement for the sale A. Sale by description B. Sale by sample C. Sale by description and sample When the price is tendered A. Cash B. Installment

SALE 1. no pre-existing credit 2. gives rise to obligation 3. cause and consideration is price 4. freedom in price determination 5. giving the price ends the obligation

Dation in Payment 1. there is a pre-existing credit 2. extinguishes the obligation 3. extinguishment of debt 4. less freedom 5. extinguishment maybe partial or complete

2.

3.

4.

Contract of SALE 1. non payment of price is a resolutory condition

Contract to SELL 1. non payment results to as if the obligation to transfer ownership is not binding 2. the title is passed upon full payment 3. enforcement or specific performance

5.

6.

2. the title is passed upon delivery

7.

3. delivery results to lost of ownership that can only be regained through rescinded contract

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9.

Loan: the amount is substantially smaller than the security given Lease: transfer of temporary possession and use of the property Extrajudicial Foreclosure Sale 1. Ordinary execution 2. Judicial foreclosure sale 3. Extrajudicial foreclosure sale

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Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. (n) Licit : lawful and within the commerce of man Transfer of ownership required: nemo dat quad non habet.

Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. (n) 1. 2. No necessity of another agreement to effectuate the contract Generic things cannot be lost

Art. 1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. (n) 1. Future things can be sold. Emptio Rei Sperati Sale of an expected thing If the future thing does not materializes the sale is not effective Future thing Emptio Spei Sale of hope itself It does not matter whether the thing materialized or nor Present thing

Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n) Futures Goods: 1. 2. 3. 4. Manufactured: like future plane, new paper subscription Raised: young animals, future agricultural products Here-after acquired property: land in which the seller is expected to buy Things whose acquisition depends upon a contingency which may or may not happen

Art. 1463. The sole owner of a thing may sell an undivided interest therein. (n)

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Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)

1.

Undivided interest: aliquot part or usufruct

Art. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears. (n)

Note: This is a sale of a specific object because the mass is specific.

Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n) 1. 2. 3. Property subject to reserve troncal may be sold The usufruct that may end when the naked owner becomes a lawyer can be sold Selling of a land a retro

Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. (n) Sale 1. the buyer pays the price 2. the buyer becomes the owner after delivery 3. the seller warrants Agency to Sell 1. the agent delivers the price he got from the buyer 2. the agent does not becomes the owner 3. the agent assumes no personal liability as far as he acts in his authority and in the name of his principal

Art. 1467. 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, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. (n) Rules: 1. 2. Ordered in the ordinary course of business: SALE Manufactured specially and not for the market: PIECE OF WORK

MASSACHUSETTS RULE: if specially done at the order of another, this is a contract of piece of work.

Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. (1446a) Rules: 1. 2. Intent If the thing is more valuable than money: barter
Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)

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3. 4.

If 50/50: sale If thing is less valuable: sale

Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons. Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. If the third person or persons acted in bad faith or by mistake, the courts may fix the price. Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be. (1447a) 1. 2. 3. 4. If the price is not certain: there can be no true meeting of the minds (MANRESA) It is okay if the price is later on discounted. Failure to pay the price does not cancel the SALE. If the payment is made by counterfeit money, the SALE is still valid, because there is still the consideration is the PRICE or the VALUE of the thing being sold.

NB: if no specific amount has been agreed upon, the price is still considered certain: 1. 2. 3. If it be certain with reference to another thing which is certain If the price is left in the determination to the judgment of the specified person Art 1472: if the price can be determined later on by things like stock exchange

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n) 1. 2. 3. In ordinary sale, the very low price does not invalidate the sale, even it shocks the conscience of man. In judicial sale, if it shocks the conscience of the court, it can set it aside. e.g.: 10% of the value of the property It may also appear, that the contract is one of loan, the remedy is reformation of the contract

Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n) NB: the contract is absolutely void, an action for annulment is not essential.

Art. 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain. (1448) NB.: if the price failed to be ascertained, the sale is inefficacious.

Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. (1449a) Wisdom of the law: the other party cannot give consent to what he does not know. (Manresa)

Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the

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Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)

buyer he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. (n) NB: if the price cannot really be determined, the sale is void. Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. (1450a) 1. Requirement of perfection a. face to face : when the offer is accepted without any condition. b. Phone negotiations are considered face to face. c. Conditional acceptance is a counter offer d. correspondence: is when the offeror receives or has knowledge of such acceptance e. if the sale is subject to a suspensive condition, perfection is from the moment of the fulfillment of the condition Formalities of perfection (statutes of frauds) a. real property b. real property if the value exceeds 500 pesos must be in writing in order to be enforceable provided that it should not be completely or partially executed or the defense of the Statute of Frauds is waived c. sale that should be executed after 1 year or more should be in writing Wholesale vs Retail a. quantity should not be considered but the character of purchase b. if the buyer consumed the item its retail c. if the buyer resale the item its wholesale

2.

3.

Art. 1476. In the case of a sale by auction: (1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale. (2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. (3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation. (4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. (n)

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. (n) Delivery is placing the thing sold to the control and possession of the vendee Kinds of Delivery 1. 2. 3. Actual or real delivery Legal or constructive Quasi-tradition
Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)

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Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. (n) 1. Pactum reservati dominii

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. (1451a) 1. 2. 3. 4. Option without consideration is void The option must be distinct from the price Policitacion: a unilateral promise to buy or to sell which is not accepted Unilateral promise to sell must be plain, clear, and unconditional, qualified acceptance is no acceptance

Art. 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by Articles 1163 to 1165, and 1262. This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number, or measure. Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay. (1452a)

Art. 1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description. The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample. (n)

Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. (1454a) 1. 2. 3. Arras: is something of value to show that the buyer was really earnest and given to the seller to bind the bargain. Part of the purchase price Proof of the perfection of contract

Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties. (n)

Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay;

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(2) Cancel the sale, should the vendee's failure to pay cover two or more installments; 3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a) 1. These are alternative remedies. Election of one is waiver of the other. NB.: not applicable to sale of real property REPUBLIC ACT No. 6552 AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS. (Rep. Act No. 6552) Section 1. This Act shall be known as the "Realty Installment Buyer Act." Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.lawphi1 Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act.

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Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)

Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void. Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby.lawphi1 Section 9. This Act shall take effect upon its approval. Approved: August 26, 1972.

Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (1454-A-a) Art. 1486. In the case referred to in two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (n)

Art. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary. (1455a)

Art. 1488. The expropriation of property for public use is governed by special laws. (1456)

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Legal Annotations on Statutory Provisions Offered by Nonsensicals (LASON NOTES)