Flashcards in Code III - Sales Deck (83):
What is a sale?
A sale is a contract whereby a person transfers ownership of a thing to another for a price in money. Substantive elements: 1. Agreement; 2. On the object; 3. And the Price.
What are items capable of sale?
1. All things susceptible of ownership; 2. Succession rights may not be sold before the death of the decedent; 3. Sale of a thing of oanther is null; may get damages if he did not know it belonged to another.
What is litigous redemption?
When a litigous right has been sold, the party against whom the right has been transferred may get himself released by paying to the transfere the price the transferee has been paid. Need lawsuit to have been filed at the time of the transfer.
Can a future things or a hope be sold?
1. A future thing is a thing not yet in existence; a future thing may be sold. 2. A hope may also be sold. 3.Sale of a hope--buyer assumes the risk that the thing will not materialize. Sale of a future thing--buyer does not assume risk that the thing will not materialize.
What are the requirements for price for the contract to be classified as a sale?
1. Price must be in money. 2. Price must either certain or determinable.
Can a third party determine price and contract still be considered a sale?
Yes, the price will be considered as certaine ven though the parties have agreed that it is to be determined by a third party. 1. Once agreed, judge can fix price if they fail to name a person/price.
What is a reasonable price?
1. Thing is a movable of the kind that the seller habitually sells; 2. Parties fail to agree on a price after either they initially said nothing/left the price to be agreed to.
Whar are the requirements for seriousness of price?
Price must not be out of all proportion to the value of the thing, and prites must intend that a price be paid, otherwise, it is a simulation. 1. If parties intend a transfer--then it is a relative simulaiton. 2. If true cause a contract can be shown, the contract will be upheld as a donation if the act was in authentic form.
How is ownership perfected?
The contract of sale is perfected once the three elements of a sale--object, price, and the agreement--are satisfied. Ownership passes to the buyer upon perfection.
When is risk of loss transferred to the buyer?
Risk of loss due to fortuitous events is trasnferred to the buyer when the thing is delivered. Fortuitous event--something that could not have been reasonably foreseen at the time of contracting.
What are the special problems in the perfection of some sales?
1. Goods sold by weight/count/measure--once the weighing/counting/measuring is completed, the sale is perfected. If lump sale, sale is perfect without any measuring. 2. Individualization--once the seller sets aside goods for fulfillment of the contract under circumstnaces the seller could not change her mind easily. 3. Things in transit--risk of loss is transferred to buyer upon delivery to the carrier if the contract does not require the seller to deliver the things to any particular destination. If required to deliver at particular destination, risk of loss is transferred when things are duly tendered to the buyer at the place of destination.
What is an option?
An option is a unilateral contract to sell or buy whereby the grantor of the option is bound to buy or sell if the grantee of the option accepts within the time stipulated. The option must specify the thing and price; have a term; and be in writing for immovables.
What is the requirement of a term?
To be valid, an option contract must have a term. If the option is part of another contract, the option's term is coextensive with the term of that other contract.
What is the right of first refusal?
A right of first refusal is a unilateral contract in which one party agrees that she will not sell a certain thing without first offering it to a certain person. Right of first refusal may be enforced by specific performance. 1. Grantor may not sell to a third person without first offering to sell the thing to the holder of the right.
What is a contract to sell?
A contract to sell is a bilateral agreement whereby the parties promise to enter into a sale at a later date. Agremeent must satisfy all the requirements for a sale.
What is the effect of using earnest money in a contract to sell?
Earnet money is an amount given to the seller by the buyer that negates the availability of specific performance. If the promise of sale has been made with the giving of earnest money, both parties have the right to recede from the contract by: 1. If buyer receded, forfeits earnest money; 2. If seller recedes, must double earnest money; 3. Parties must expreslly stipulate the sum is earnest money; can't just call it a deposit. 4. If a party's failure to perform is excused, earnest money is not owed.
Does the use of earnest money preclude the availability of specific performance?
Yes, precludes availability of specific performance and the recovery of actual damages.
What is the prescription period for a contract to sell?
If the contract is one to sell an immovable, an action for breach or other failure ot perform is prescribed in five years.
What are the time limits for exercise of the right of first refusal? For a movable?
The holder of the right of first refusal has 10 days to exercise the right if the thing is movable, and 30 days if the thing is immovable. If the holder does not decide to buy the thing, the right of first refusal reamins in the holder unless the grantor concludes a final sale, or contract to sell, with a third party within six months.
What are the time limits for options and rights of first refusal on immovables?
An option/right of first refusal on an immovable generally cannot be granted for a term longer than 10 years. If the option or right of first refusal is granted in connection with a contract giving rise to obligations of continuous or periodic performance, the duration fo the option or right of first refusal may be the period of time required for performance of those obligations.
Are agreements prepatory to the sale (options, rights of first refusal, and contracts to sell) effective against third parties?
1. If they affect immovables, then they are subject to the public records doctrine and thus are binding on third parties when recorded. 2. If they affect movables, then they are binding on third persons with actual knowledge.
Are rights conferred by agreements prepatory to the sale indivisible?
1. Indivisible, so all must exercise the right when it belongs to more than one person.
What id the doctrine of the implied warranty of merchantability?
1. Requires that the seller tender merchantable title. This doctrine permits the buyer to refuse to enter the sale if the title is suffestive of serious litigation.
What are the seller's obligations with respect to a contract of sale?
1. Delivering the thing; 2. Warranting the thing (against eviction & redhibitory effects); 3. Assuring that the thing sold is reasonably fit for ordinary use.
What are the general rules underlying delivery?
1. If the seller remains in possession of the thing sold, there is a presumption that the sale is a simulation. 2. If the seller does not timely deliver the thing at the agreed-upon time, the buyer may demand dissolution of the sale or specific performance. In either case, seller is liable for damages. 3. Seller not bound to deliver th thing if the buyer has not paid the price and the seller has not granted the buyer a term for payment. 4. Thing must be in expected condition at time of delivery.
What does the extent of delivery of immovables depend on?
Seller's duty depends on which category of sales the transaction falls into: 1. Sale per aversionem; sale by measure; sale of immovable for lump price.
What is a sale per aversionem?
A sale of an immovable falls into this category when it is described as a distinct object and it is sold for a lump price. This means there will be neither increase/decrease in price fi the quantiy of premises differs from that specified in the sale.
What is a sale by measure?
A sale by measure occurs when the price is fixed at a rate of so much per measure. If the sale was made with an indication of the extent of the premises, discrepances will be addressed depending on ehwehter the seller delivers more or less than promised. 1. Less--price will be reduced accordingly but no right to recede. 2. More than the amount promied, but by 5% or less--price will be increased accordingly. 3. More than 5% promised--buyer has the option to recede.
What is a sale of immovable for lump price?
If the sale falls into this category, discrepances are resolved in a manner similar to sale by measure.
What is the liberative prescription for an action based on the extent of the premises?
One year from the date of the sale.
What constitutes acceptance for the sale of movables?
An acceptance forms a contract of sale of a movable if there is agreement on the thing and the price, even if the acceptance contains different terms. NO MIRROR IMAGE RULE. However, no contract of sale is formed if acceptance is made conditional on the offeror's acceptance of additional/different terms.
What are the special rules for merchants?
Different terms become part of the contract unless: 1. Terms materially alter the offer; 2. Offer expressly limits acceptance to the terms of the offer; 3. Offeror objects within a reasonable time.
What are the rules for nonmerchants?
If the parties are not merchants, the different terms are considered proposals for modification.
What kind of goods must a seller deliver for sale of movables?
The seller must deliver conforming goods--1. Buyer has the right to inspect to determine whether the seller has furnished conforming goods; must reject nonconforming goods within a reasonable time. 2. Any buyer who knowingly accepts nonconforming goods may nto save them unless he accepted them in teh reasonable belief that the nonconformity would be cured.
What is a seller's right to cure?
After buyer's rejection, seller may cure the nonconformity if: 1. Time for performance has not expired; 2. Seller reasonably believed that the nonconforming goods would be acceptable to the buyer.
What is the warranty against eviction?
Eviction is the buyer's loss of, or reasonable fear of losing the whole or part of the thing sold because of a third person's right that existed at the time of the sale.
How is the warranty against eviction breached?
1. Breached if third party has perfect title. 2. Warranty extends to undeclared conventional servitudes that have not been declared. (lot with pipeline running through). 3. Warranty implied in every sale. 4. Warranty covers rights existing at time of sale, except seller is always liable for what results from her personal acts, regardless of time.
What is seller's liability for breach of warranty against eviction?
1. Liability of the seller depends on the extent to which the parties have contractually modified the warranty: is it a warranty sale; sale without warranty; sale at buyer's peril and risk; quitclaim deed; or partial eviction?
What is the seller's liability when it is a warranty sale?
Eviction in a warranty sale entitled the buyer to: 1. Resitution of the price; 2. Restitution of fruits and revenues if the buyer is bound to return them to the owner who evicts him; 4. All costs occasioned by the lawsuits concerning the warranty/suit resulting in eviction; and 5. Damages IF the buyer did not know fo the danger of the eviction.
What is a seller's liability for a sale at buyer's peril and risk?
Buyer gets NOTHING back in the event of eviction. Nonwarranty sale PLUS: 1. Buyer was aware at the time of the sale the danger of eviction OR 2. Buyer declared that he was buying the property at his peril and risk; or 3. Seller's obligation of returning the price has been expressly excluded.
What is a seller's liability for a sale by quitclaim deed?
A quitclaim deed to land is probably not a sale of a corporeal immovable but rather an assignment of a right. If the transferee is evicted, the transferor owes nothing.
What is a seller's liability for partial eviction?
If there is a partial eviction, the general rule is that the buyer is entitled to a proportionate reduction of the price. Buyer can cancel sale if eviction is on the part on which eviction occurred.
What is a call in warranty?
1. Buyer threatened with eviction must timely notify the seller, pref. by calling the seller in warranty to defend the suit. 2. If buyer does not timely notify the seller of the threat of eviction, the buyer loses rights under the warranty to the extent that the seller could have successfully defended the action.
Can a buyer suspend payment if he has a reasonable fear of eviction?
If buyer is evicted/has reasonable fear of eviction, he may suspend payment of the price UNLESS the seller gives security.
Does the buyer have subrogation rights?
Yes, even where the warranty is excluded, the buyer is subrogated to his seller's actions in warranty against all others. Buyer's recourse when there has been a breach of the warranty of eviction is not limited to his immediate vendor.
What is the after-acquired title doctrine?
Doctirne oeprates to automatically vest title in a buyer so as to cure a breach of warranty. 1. Operates automatically, regardless of seller's intentions; 2. Buyer must not have filed a lawsuit against the seller for breach of warranty. Once such a suit is filed, the buyer cannot be compelled to accept the after-acquired title. Doctrine DOES NOT APPLY IF THERE IS NO WARRANTY, e.g., a quitclaim deed.
What is the warranty against redhibition?
A redhibitory defect is a vice in the thing that meets one of the following criteria: 1. Defect renders the thing useless to the extent the buyer would not have purchased if he had known of the defect; (entitled to recission of the sale) 2. Defect does not render the the thing totally useless, but diminishes its value to the extent the buyer would still have bought it but at a LESSER price. (entitled to a reduction in the price)
What are the essential elements of a redhibitory defect?
1. It must not have been apparent, discoverable by a reasonably prudent buyer of such things; 2. It must not have been known to the buyer at the time of the sale; 3. It must have existed at time of delivery or within three days of delivery; 4. Must render absolutely useless/diminish usefulness and price.
What is the burden of proof of redhibitory defect?
1. Burden is on the buyer, but buyer does not need to prove exact cause. If the defect appears soon after the thing is put into use, the inference is that the defect existed at the time of the sale. 2. If the thing is not defective, but lacks qualities reped by seller/not of the kind specified in the contract, the dispute is not governed by redhibition. 3. Intentional misrepresentation is governed by redhibition.
What is the liability of a seller for a redhibitory defect?
1. Liability depends on whether the seller is in good faith. A manufacturer selling a defective product is always a bad faith seller.
What is a liability of a good faith seller for a redhibitory defect?
1. Must restore the purchase price and the buyer's reasonable expenses, if buyer shows redhibitory effect renders the thing totally useless/so inconvenient that it presumes the buyer would not have bought the thing.
Does the good faith seller have an opportunity to repair before the buyer dissolves the sale?
Yes, good faith seller is entitled to an opportunity to repair/remedy/correct the defect before the buyer can dissolve the sale.
What is the liberative prescription for an action for redhibition when it is a good faith seller?
Shorter of: 1. Four years from the date the thing was delivered; or 2. One year from the date the buyer discovered the defect. *However, if the thing sold is residential/commerical immovabl property, liberative prescription against a good faith seller is one year from the date the thing was delivered.
What is the liability of a bad faith seller for a redhibitory defect?
1. Must restore the purchase price and the buyer's expenses, and in addition must pay damages and attorneys' fees. 2. Bad faith seller is not entitled to an opportunity to repair.
What is the liberative prescription for an action for redhibition when it is a bad faith seller?
1. One year from the discovery of the defect.
Do either the good or bad faith seller get a deduction from damages for a redhibitory defect?
Yes, may by entitled to a deduction at court's discretion for the value fo the use of the thing derived by the buyer.
What are the requirements for the buyer to have given the seller notice of the defect?
The buyer must give the seller notice of the defect, and suffers a diminuition of the warranty to the extent that his failure to give timely notice made repair impossible or more burdensome. Notice is not encessary when seller has actual notice of the defect.
What is the buyer's obligations to taking care of the thing once he has been granted the remedy of recission?
Pending satisfaction of his claim/judgment, buyer must take care of the thing as a prudent administrator.
Who bears the risk of loss when the thing is destroyed?
1. If thing is destoryed due to redhibitory effect--buyer can still seek the remedy of recission. 2. Thing is destroyed by a fortuitous event--if before seller is on notice of redhbiitory effect, buyer bears loss; if seller is on notice, seller bears loss.
What is quantis minoris?
Reduction of the price on account of a redhibitory effect. A buyer who seeks reduction of price cannot thereafter seek dissolution.
What is the subrogation of the buyer to the seller's rights?
As with the warranty against eviction, in redhibition the buyer is subrogated to the seller's right against all others. Buyer has recourse against all sellers; can sue the manufacturer directly.
Can the warranty against redhibition be waived?
Yes, but the waiver must be in clear and unambiguous terms, and must be brought to the buyer's attention. Waiver is ineffective if the seller declared that the thing had a quality it knew it did not have.
What is the warranty of fitness for ordinary use?
1. Seller warrants that the thing is reasonably fir for oridinary use. Goverend by the general law of contracts. 2. Limited to the ordinary use made of such things unless (1) buyer has some particular use in mind for the thing; (2) seller knows/should know the buyer's particular purposes; and (3) seller knows/should know that the buyer is relying on the seller's skill/judgment in selecting the thing.
What are the obligations of the buyer in a sale?
1. Pay the price; 2. Take delivery of the thing. Buyer must pay the price at the time and place delivery is to be made, unless the parties have agreed to another arrangment.
What happens on buyer's breach fo the duty to take delivery?
Buyer who fails to take delivery is liable to the seller for those damages the seller has sustained as well as those expenses incurred for preservation of the thing.
What is the buyer's breach of duty to pay price?
Seller can compel him to do so by offering the thing; on the buyer's failure to pay the price, seller can choose to either (1) dissolve the sale; or (2) seek enforcement of sale (through suit for specific performance).
What is the right of resale?
If the buyer breaches a contract to buy movable things, the seller has the right of resale, whereby the thing is sold to a third party and the buyer is held responsible for any loss realized in the resale.
Can the sale be dissolved for nonpayment of price?
Yes, even after delivery.
What is lesion beyond moiety?
An additional remedy. Favorite of bar examiners.
What are the three requriements to bring an action for lesion?
1. Contract must be for a sale of a corporeal immovable; 2. Only the vendor can bring an action for lesion; 3. The lesion must be beyond one-half. A sale is lesionary if the price is less than one-half the value of the thing, value being determined at the time of the sale.
What are the effects of lesion beyong moiety?
1. Buyer given a choice--buyer can either return the thing and get the price back, or keep the thing and give the seller a supplement equal to the difference between the price paid to the buyer and its FMV. 2. Special rule if buyer has sold thing--If buyer has sold the thing to a third party, the action for lesion is available against the original buyer only, and recovery is limited to the profit made by buyer on the resale.
What is the liberative prescription on an action for lesion?
One year from the date of sale.
What is a sale with a right of redemption? What are the time limits?
Right of redemeption is the right to take back the thing from the buyer. Cannot be reserved for more than 10 years if the thing is immovable, and 5 years if the thing is movable. Cannot contract around this.
Is the redemption period peremptive?
Yes, period fixed for redemption is peremptive, and runs against all persons, including minors.
What is the effectiveness of the right of redemption against third parties?
If the thing is immovable, the right of redemption is effective when the sale is recorded. If the thing is movable, the right of redemption is effective against third persons who bought the thing with actual knowledge of the right of redemption.
What is an exchange?
In the contract of an exchange, each party transfers to the other the ownership of a thing other than money. Laws governing sales also apply to exchane, unless specific rules apply.
What is the effect of the exchange contract?
Agreement on the things transfers ownership even if no delivery has been made. Parties may also agree that the transfer of ownership will not occur until some later time; that is a contract to exchange.
What are the rights and duties of parties to an exchange?
The rules of sales apply to govern the rights and duties of both the buyer and seller in an exchange.
Does the warranty of eviction apply to exchanges?
Yes, a person evicted from a thing received in exchange may demand the value of the thing from which he was evicted or return of the thing. In eaither case, he may also seek damages.
May a party claim lesion on an exchange?
Yes, a party giving a corporeal immovable in exchange for property worth less than one half FMV of the immovable given by him may claim recission on grounds of lesion.
What is giving in payment?
Debtor gives a thing to a creditor as payment of a sum that is due. Giving in payment is perfected by delivery.
What is a contract to build?
A builder must build something in a good and workmanlike manner.