Law on Sales and Credit Transactions

Question 1

Article 1458

Answer 1

By the contract of sale one of the contracting parties (SELLER) obligates himself to (a) transfer the ownership and to (b) deliver a determinate (specific only) thing, and the other (BUYER) to pay therefor a price certain in money or its equivalent.

Question 2

Obligations of the SELLER [5]

Answer 2

1. Transfer ownership
2. Deliver the thing
3. Warrant against eviction and hidden defects (natural)
4. Observe DGFF (default)
5. Pay for expenses

first two cannot be waived

Question 3

Obligations of BUYER [2]

Answer 3

1. Accept delivery

• if refusal is unjust - liable for damages, automatically owner

2. Pay the price

Question 4

Elements of Contract

Answer 4

1. Essential

• Common - COC / COPrice
• Special (e.g. - delivery in real contracts)
• Extraordinary (e.g. - price in a sale)

2. Accidental - may or may not be present
3. Natural - automatic part of the contract

Question 5

Characteristics of sale [7]

Answer 5

1. Consensual v. Real
2. Bilateral v. Unilateral
3. Reciprocal v. Non-reciprocal
4. Onerous v. Gratuitous
5. Commutative v. Aleatory [OR]
6. Nominate v. Innominate
7. Principal v. Accessory

Question 6

Stages of Sale

Answer 6

(1) Preparation / Bargaining / Negotiation
(2) Perfection / Creation / Birth
(3)Termination / Consummation

Question 7

Is delivery required to create the contract of sale?

Answer 7

No, it is a consensual contract. Delivery is required at the time of termination/consummation

Question 8

When is ownership required?

Answer 8

At the time of delivery, which is required at the time of termination.

Question 9

Art 1475

Answer 9

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)

Question 10

Perfection of Sale (1475)

Answer 10

GR - No form is required
Exceptions

1. If covered by Statute of Frauds (For
   ENFORCEABILITY)

• Sale of personal property 500 or more
  - IN WRITING, otherwise - UNENFORCEABLE
• Sale of Real Property, regardless of value
  - IN WRITING

2. Auction Sales (1476)

Form in Donation is for VALIDITY
If donation of PP more than 5000, should be in writing, otherwise void

Question 11

Auction Sales (1476)

When is sale perfected?
Can bidder withdraw?
Can auctioneer withdraw? GR / E Can seller bid? GR / E Can seller employ by-bidders or puffers?
Sale of separate lots by auction are separate sales

Answer 11

When is sale perfected?
upon the fall of the hammer, or any customary manner

Can bidder withdraw?
Yes, before the fall of the hammer

Can auctioneer withdraw?
GR: Yes, before the fall of the hammer
XPN: Announces without reserve

Can seller bid?
GR: No
XPN: If the seller bids

Can seller employ by-bidders or puffers?
No, void.

Sale of separate lots by auction are separate sales
Each lot is a separate sale, contract

Question 12

Theories of perfection of contract [4]

Answer 12

Manifestation - declares acceptance
Expedition - acceptance is sent
Reception - acceptance is received
Cognition- knowledge of acceptance

Question 13

Requisites of Objects in Sale

Answer 13

- determinate
- licit / lawful
- not impossible
- right to transfer ownership at the time the object is delivered

Question 14

What could be the object of sale? [HE SCUUP?]

Answer 14

HE SCUUP

• Hope or expectancy [emptio spei]
• Existing [owned, possessed] or future goods [manufactured, raised, acquired]
• Subject to resolutory condition - pacto de retro
• Contingency / subj to suspensive condition
• Undivided interest in a thing
• Undivided interest in a mass
• Potential existence [emptio res speratae]

Question 15

When is the price certain?

Answer 15

1. fixed by parties
2. fixed by TP - with mutual consent
   - if fixed by TP - VALID
   - if not fixed by TP - VOID
   When is the decision of TP not valid [2 instances]
   - disregarded a specific procedure
   - BF or mistake on part of TP
   If prevented by one of the parties [2 remedies]
   - cancel / rescind
   - demand for damages
3. Fixed by court [2 instances]
   - bad faith
   - thing has been delivered or appropriated (1474)
4. Price on a given day at a particular market
5. With reference to another thing which is certain

Question 16

Effects of Price on contract of sale

1. No cause / absence of cause
2. Illegal cause
3. False cause
4. Failure of cause
5. Inadequate / Insufficient cause

Answer 16

1. No cause / absence of cause = VOID
2. Illegal cause = VOID
3. False cause = VOID
4. Failure of cause = VALID
5. Inadequate / Insufficient cause = VALID

Question 17

Effect of gross inadequacy of the price
GR
XPN

Answer 17

GR Sale is VALID
XPN
Rescissible - lesion of at least 1/4 [1380], if guardian is unauthorized = unenforceable
Voidable - 1330, MIVUF
Void - no intention to be bound / simulated

1470 - parties intended a donation - comply with form of donation
- PP exceeding 5k - in writing

1471 if the price is simulated = VOID. Follow form if it is a donation

Effect of gross inadequacy in involuntary sale/execution sale
- Sale is VALID, unless shocking to the conscience of men

Question 18

Option money v Earnest money

Answer 18

Earnest money

• part of purchase price
• given where there is already a sale
• buyer is bound to pay the balance

Question 19

Contract of sale v Contract of agency to sell

Answer 19

Contract of sale

• buyer is owner
• buyer has to pay price
• buyer acquires ownership after delivery
• the seller warrants
• buyer, as GR, cannot return object sold

Contract to sell

• agent receives goods as goods of principal
• agent is not owner
• agent does not warrant unless there is agreement of authority
• agent can return object if unable to sell to TP

Question 20

Contract for a piece of work

Answer 20

• special order by a party desiring it
• borne by the worker or contractor
• formalities under certain circumstances

Question 21

Schools of thought on sale [3]

Answer 21

Massachusetts Rule - specifically done

New York Rule - if thing already exists, sale

English Rule - if material is more valuable, sale

What then is the rule?
Sale if ordered in the ordinary course of business
Piece of work - if manufactured SPECIALLY for the customer and upon his special order and not for the market

Question 22

Barter

Answer 22

First rule = intention of the parties

If intent does not clearly appear

• Barter - if thing is more valuable than money
• Sale - if 50-50 or if thing is less valuable than money

Question 23

Deliver - Actual or constructive

Answer 23

GR = Delivery transfers ownership

XPN - PACTUM RESERVATI DOMINII (Only pactum that is valid)
1. Express reservation
2. Implied reservation

Question 24

Sale or return v sale on trial

Answer 24

Sale or return
- resolutory
- Will of buyer
- Ownership is transferred upon delivery
- Option to RETURN instead of paying

Sale on trial/approval/satisfaction
- suspensive
- quality of goods
- seller retains ownership
- ownership passes when buyer signifies (3)

Question 25

Promise to buy or sell

Answer 25

Art. 1479. A (mutual) 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) dapat both promises are mutual to have a contract of sale

Question 26

res perit domino - thing perishes with owner

Answer 26

1. Lost before perfection - void - seller bears loss 2. Lost at the time of perfection - sale is void - seller bears loss 3. Lost after perfection and BEFORE delivery - buyer bears loss, but in 1504 it is seller 4. Lost after perfection and AFTER delivery - buyer bears loss *What is the status of the contract? Who bears the loss?*

Question 27

1480 v 1504

Answer 27

After perfection and BEFORE delivery - BUYER bears loss _XPN_ 1. 1480, 3rd par - fungible things sold for price fixed accdg to weight, number, or measure 2. to secure performance by buyer 3. party at fault

Question 28

Sale by sample / description

Answer 28

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) Remedy: Rescission

Question 29

Prohibition between Spouses

Answer 29

_GR_= H&W cannot sell properties to each otehr _XPN_ 1. Marriage settlement executed prior to the marriage 2. Judicial separation of property during marriage **Not allowed** to donate properties to each other or enter into universal partnership

Question 30

Incapacity by reason of relation to property 1491

Answer 30

Voidable 1. Guardian 2. Agents 3. Executors / administrators Void 4. Public officers and employees 5. justices, judges, prosecutors 6. Other persons specially disqualified - aliens - unpaid seller - officer conducting execution sale

Question 31

Effect of total and partial loss at time of perfection 1493

Answer 31

Entirely lost - INEFFECTIVE Partially lost - remedies 1. Withdrawal 2. Specific performance 1494 In case of specific goods 1. withdraw 2. proportionate reduction

Question 32

Ways of effecting deliver

Answer 32

1. Actual or real delivery - covers personal property 2. Constructive or legal delivery - legal formalities - symbolical or traditio symbolica / clavium - only to movable - tradition longa manu - only to movable - tradition brevi manu - short hand - traditio constitutom possessorium - opposite of brevi manu 3. Quasi-traditio delivery - incorporeal things 1. public instrument 2. placing of titles of ownership 3. allowing vendee to use rights as new owner with consent of vendor