SALES MIDTERMS

Question 1

Article 725. Donation is an act of liberality whereby a person

Answer 1

disposes gratuitously of a thing or right in favor of another, who accepts it.

Question 2

Article 1461. Things having a potential existence may be the

Answer 2

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)

Question 3

Article 1462. The goods which form the subject of a contract of sale may be either

Answer 3

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)

Question 4

Article 1465. Things subject to a resolutory condition may be the

Answer 4

object of the contract of sale.

Question 5

Article 1503. When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus

Answer 5

reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.

Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller’s property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract.

Where goods are shipped, and by the bill of lading the goods are deliverable to order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer.

Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful. (n)

Question 6

Article 1471. If the price is simulated, the sale is

Answer 6

void, but the act may be shown to have been in reality a donation, or some other act or contract.

Question 7

Article 1638. By the contract of barter or exchange one of the parties binds himself to

Answer 7

give one thing in consideration of the other’s promise to give another thing.

Question 8

1468, 1638-1641)

Question 9

Article 1640. One who loses by eviction the thing received in barter may recover that which he gave in exchange with a right to damages, or he may only

Answer 9

demand an indemnity for damages. However, he can only make use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third person.

Question 10

Article 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be

Answer 10

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.

Question 11

Article 1639. If one of the contracting parties, having received the thing promised him in barter, should prove that it

Answer 11

did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages.

Question 12

Article 1641. As to all matters not specifically provided for in this Title, barter shall be

Answer 12

governed by the provisions of the preceding Title relating to sales

Question 13

Article 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

Answer 13

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.

Question 14

Article 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver

Answer 14

the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale.

Question 15

Article 1713. By the contract for a piece of work the contractor binds himself to

Answer 15

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

Question 16

Article 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contract fails or refuses to comply with this obligation, the employer may have

Answer 16

the defect removed or another work executed, at the contractor’s cost.

Question 17

Article 1479. A promise to buy and sell a determinate thing for a price certain

Answer 17

is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.

Question 18

Article 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

Answer 18

considered.

Question 19

Article 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the

Answer 19

consent or authority of the latter.

Question 20

Article 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be

Answer 20

governed by the law of sales.

Question 21

Article 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

Answer 21

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(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)

Question 22

Article 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has

Answer 22

deprived the lessee of the possession or enjoyment of the thing.

Question 23

ARTICLE 1643. In the lease of things, one of the parties binds himself to

Answer 23

give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine years shall be valid.

Question 24

Article 2140. By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to

Answer 24

the creditor or a third person, the contract is a pledge and not a chattel mortgage.

Question 25

Article 1458. By the contract of sale one of the contracting parties obligates himself to

Answer 25

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)

Question 26

Article 1459. The thing must be licit and the vendor must have

Answer 26

a right to transfer the ownership thereof at the time it is delivered. (n)

Question 27

Article 1460. A thing is determinate when it is particularly designated or physical segregated from all others 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

Answer 27

capable of being made determinate without the necessity of a new or further agreement between the parties.

Question 28

Article 1461. Things having a potential existence may be the object of

Answer 28

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.

Question 29

Article 1462. The goods which form the subject of a contract of sale may be either

Answer 29

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)

Question 30

Article 1463. The sole owner of a thing may sell an

Answer 30

undivided interest therein.

Question 31

Article 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, 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

Answer 31

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)

Question 32

Article 1465. Things subject to a resolutory condition may be

Answer 32

the object of the contract of sale.

Question 33

Article 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

Answer 33

considered.

Question 34

Article 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

Answer 34

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.

Question 35

Article 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the

Answer 35

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.

Question 36

Article 1469. In order that the price may be considered certain, it shall be sufficient that it be so

Answer 36

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.

Question 37

Article 1470. Gross inadequacy of price does not affect a contract of sale, except as it may

Answer 37

indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.

Question 38

Article 1471. If the price is simulated, the sale is

Answer 38

void, but the act may be shown to have been in reality a donation, or some other act or contract.

Question 39

Article 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the

Answer 39

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)

Question 40

Article 1473. The fixing of the price can never be left to

Answer 40

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.

Question 41

Article 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is

Answer 41

inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the 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.

Question 42

Article 1475. The contract of sale is perfected at the moment there is a

Answer 42

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 43

Article 1476. In the case of a sale by auction:

(1) Where goods are put up for sale by auction in lots, each lot is

Answer 43

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)

Question 44

Article 1477. The ownership of the thing sold shall be transferred to the

Answer 44

vendee upon the actual or constructive delivery thereof.

Question 45

Article 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has

Answer 45

fully paid the price. (n)

Question 46

Article 1479. A promise to buy and sell a determinate thing for a price certain is

Answer 46

reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.

Question 47

Article 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

Answer 47

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.

Question 48

Article 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

Answer 48

reasonable opportunity of comparing the bulk with the description or the sample.

Question 49

Article 1482. Whenever earnest money is given in a contract of sale, it shall be considered as

Answer 49

part of the price and as proof of the perfection of the contract. (1454a)

Question 50

Article 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be

Answer 50

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.

Question 51

Article 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:

Answer 51

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(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)

Question 52

Article 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has

Answer 52

deprived the lessee of the possession or enjoyment of the thing.

Question 53

Article 1486. In the case referred to in the two preceding articles, a stipulation that the installments or rents paid shall not be

Answer 53

returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (n)

Question 54

Article 1487. The expenses for the execution and registration of the sale shall be

Answer 54

borne by the vendor, unless there is a stipulation to the contrary.

Question 55

Article 1488. The expropriation of property for public use is

Answer 55

governed by special laws

Question 56

Article 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to

Answer 56

give something or to render some service.

Question 57

Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not

Answer 57

contrary to law, morals, good customs, public order, or public policy

Question 58

Article 1318. There is no contract unless the following requisites concur:

Answer 58

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established. (1261)

Question 59

Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is

Answer 59

absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.

Question 60

A. Governing law

Answer 60

Old → Code of Commerce
Civil Code → Book IV, Title VI, Arts. 1458-1637

Question 61

Sources of law on Sales

Answer 61

Admixture of civil law and common law principles
“The Title on ‘Sales’ has been enriched by the addition of new provisions based on the opinions of commentators and on judicial decisions and of new rules adopted with modifications to suit the philosophy and framework of Philippine Law, from the Uniform Sales Act of the United States.

Question 62

Contract of Sale VS
Contract to Sell

Answer 62

CoS -
Title over the property passes to the buyer upon delivery unless there is a contrary agreement.
CtS -
Ownership is retained by the seller whether or not there is delivery. Ownership passes to the buyer only upon full payment of the price (e.g. Rent to own)
CoS -
Non-payment of the purchase price is a negative resolutory condition, meaning the sale becomes ineffective upon the happening of such condition
(if you did not pay, extinguished yung obligation to deliver)

Remedy: Exact fulfillment or to rescind the contract

CtS -
The payment in full is a positive suspensive condition, meaning, if the purchase price is not paid, the obligation to deliver and to transfer ownership on the part of the seller does not become effective (obligation will arise to transfer ownership)

Remedy: Cancellation or specific performance

CoS -
Cannot be rescinded for breach of contract because no obligation yet arose via a suspensive condition.
After delivery of the objective, the seller loses ownership over it. Unless the contract is set aside, he cannot recover the object.

CtS -
Whether there is delivery or not, the seller retains the ownership of the object. If the seller, due to non-payment of the price is ousting the buyer from the property, he (seller) is not rescinding the contract of sale but is precisely enforcing it.

Question 63

A stipulation in a contract providing for automatic rescission upon non-payment of the purchase price within the stipulated period is

Answer 63

VALID.

Question 64

Contract to Sell VS
Conditional sale
(Contract of Sale)

Answer 64

CtS- if the suspensive condition is fulfilled (full payment of the purchase price), ownership will not automatically transfer to the buyer although the property may have been previously delivered to him

CS (CoS)-
The first element of consent is present although it is conditioned upon the happening of a contingent event which may or may not occur.
If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated
if the suspensive condition is fulfilled, the contract of sale is thereby perfected.

CtS-There being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property.

CS (CoS)- Upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller’s title thereto.

CtS- Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the intending buyer

Question 65

Other cases of contract to sell.

Answer 65

Where the subject matter is not determinate or the price is not certain, the agreement is merely a contract to sell.
A sale of future goods even though the contract is in the form of a present sale operates as a contract to sell the goods.
Where the stipulation of the parties is that the deed of sale and corresponding certificate of sale would be issued only after full payment of the purchase price, the contract entered into is a contract to sell and not a contract of sale.

Question 66

Contract to sell vs. Conditional sale

Answer 66

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price.

Question 67

B. Characteristics (BCC-PON)

Answer 67

Consensual – perfected by mere consent without any further act
Bilateral – both the contracting parties are bound to fulfill correlative obligations towards each other — the seller, to deliver and transfer ownership of the thing sold and the buyer, to pay the price;
Onerous – the thing sold is conveyed in consideration of the price and vice versa
Commutative – the thing sold is considered the equivalent of the price paid and vice versa. However, the contract may be aleatory as in the case of the sale of a hope (e.g., sweepstakes ticket);
Nominate – it is given a special name or designation in the Civil Code, namely, “sale”; and
Principal – its existence and validity does not depend upon another contract.

Question 68

Effect of absence of price/non-payment of price.
1. Can there be sale without a price?
2. Non-payment of the purchase price is a

Answer 68

1. No.
2. resolutory condition for which the remedy is either rescission or specific performance under Article 1191 of the Civil Code.

But the failure to pay the price in full within a fixed period does not, by itself, dissolve a contract of sale in the absence of any agreement that payment on time is essential or make it null and void for lack of consideration, but results at most in default on the part of the vendee for which the vendor may exercise his legal remedies.

Question 69

D. Natural and accidental elements

Answer 69

Natural Elements – those which are inherent in the contract and are deemed to exist in the contract of sale in the absence of clear contrary agreement
Warrant against eviction
Warranty against hidden defects

Accidental Elements – May or may not exist depending on the stipulations of the parties like conditions, payment of interest, place and time of payment

Question 70

Is sale a mode?

Answer 70

No, title. Tradition/Delivery → Mode of Acquiring Ownership
Sale → Mode

A mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership.

Title is understood as referring to every juridical act, right or condition which gives a means to the acquisition of ownership and other real rights but which in itself is insufficient to produce them.

Question 71

F. Stages of a Contract of Sale

Answer 71

1. Negotiation
   Preparation, conception or generation – the period of negotiation and bargaining, ending at the moment of agreement of the parties
2. Perfection
   Perfection or Birth of the Contract; meeting of the minds
3. Consummation
   Consummation or death – which is the fulfillment or performance of the terms agreed upon

Question 72

G. Kinds of Contract of Sale

Answer 72

Absolute
Where the sale is not subject to any condition whatsoever and where title passes to the buyer upon delivery of the thing sold.

Conditional
Where the sale contemplates a contingency and in general, where the contract is subject to certain conditions

Question 73

Sale vs Donation

Answer 73

1. Cause
   Sale: Essentially Onerous Donation: Generally Gratuitous (why generally? See Art. 726)
2. Perfection
   Sale: Consensual, perfected by mere consent
   Donation: Solemn contract, requires formalities for perfection (Refer to Art. 745-749)
3. Succession
   Sale: Does NOT cause diminution of the seller’s estate, but merely substitution of values, with the property sold
   replaced by the equivalent monetary consideration. Therefore, it cannot have the legal effect of depriving the
   compulsory heirs of their legitime
   Donation: Causes diminution of the seller’s estate and may prejudice the legitimes of the heirs (inofficious). As such, it
   can be subject to rescission.

Question 75

what is Barter or exchange

Answer 75

one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing.

Question 76

What is sale

Answer 76

the vendor gives a thing in consideration for a price in money.

Question 77

Sale vs Barter

Answer 77

Rules to differentiate a Sale from a Barter
GENERAL RULE: Look at the MANIFEST INTENTION of the parties
If the intention of the parties is that there is an apparent (buyer-seller) relationship where a buyer offers to buy the
thing from the seller even in consideration of another thing, it is a sale.
* Means there is a concept of “buying”
If the intention of the parties is more like a “trade” it is barter

Question 78

If general rule NOT APPLICABLE (When the intention does not clearly appear and the consideration consists
partly in money and partly in another thing):

Answer 78

BARTER: If the value of the thing given as a part of the consideration exceeds the amount of the money or its
equivalent
SALE: If the value of the thing given as a part of the consideration is equal to or less the amount of the money or
its equivalent

Question 79

what is Contract for a piece of work

Answer 79

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 his labor or skill, or also furnish the material.

Question 80

Why is Contract for Piece-of-Work similar with a Contract of Sale?

Answer 80

In both contracts, a transfer of ownership is involved and a party necessarily walks away with an object
In both, the provisions on warrant of title against hidden defects applies

Question 81

Rules to differentiate a Sale from a Contract for Piece-of-Work

Answer 81

1. HABITUALITY TEST (Art. 1467)
   * 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
2. Manufactured in the ordinary course of business
3. For the general market
   * Contract for 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
4. Manufactured upon special order of customers
   * Means it is based on the ability of the manufacturer to manufacture the goods without waiting for specific
   orders
5. Not for the general market
6. The test of “Special Orders” is NOT one of timing but is determined by the Nature of the Work which must be
   characterised as “special”
   * The products must NOT be ordinary products of the manufacturer, they should require special skills or equipment
7. Test of the INTENTION OF THE PARTIES
   * Question is, is the buyer after the service or the product?
   * If the buyer is after the process which the product would have to undergo, then it is a contract for piece-of-work
   * This is supported by Tolentino:
   * According to him, the distinction depends on the INTENTION OF THE PARTIES. If the parties intended that at
   some future date an object has to be delivered, without considering the work or labor of the party bound to
   deliver, it is a SALE; but if one of the parties accepts the undertaking on the basis of some plan, taking into
   account the work he will employ personally or through another, is is a CONTRACT FOR PIECE-OF-WORK

Question 82

Importance of the distinction

Answer 82

Tax provisions
* Remedy in case of non-performance
* In a Sale (Real Obligation), action for specific performance is applicable since what is involved is the obligation to give
a determinate thing
* In a Contract for Piece-of-Work (Personal Obligation), an action for specific performance is NOT applicable since what
is involved is the obligation to do

Question 83

Is Form important for validity of a Sale? What is the rule? (VEG)

Answer 83

No.

General Rule: Sale, being a consensual contract, NO particular form is required for its validity
* BUT, Form may be required for a contract’s:
1. Validity
2. Enforceability
3. Greater Efficacy (to bind third persons)

Question 84

What is an option contract ?

Answer 84

a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale.

Question 85

What is an option?

Answer 85

a privilege existing in one person for which he has paid a consideration which gives him the right to buy/sell, for example, certain merchandise or certain specified property, from/to another person, if he chooses, at any time within the agreed period at a fixed price, or under, or in compliance with certain terms and conditions.

Question 86

3 kinds of promise:

Answer 86

An accepted unilateral promise to sell in which the promisee (acceptor) elects to buy;
An accepted unilateral promise to buy in which the promisee (acceptor) elects to sell; and
A bilateral promise to buy and sell reciprocally accepted in which either of the parties chooses to exact fulfillment.

Question 87

Effect of unaccepted unilateral promise.

Answer 87

A unilateral promise or offer to sell or to buy a thing which is not accepted creates no juridical effect or legal bond.

Question 88

Does an optionee have the obligation to buy?

Answer 88

No. Right only.

Question 90

Sale vs Agency to Sell

Answer 90

1. Revocation
   Sale: Not unilaterally revocable
   Agency: Essentially revocable by principal (Exception to mutuality of contracts under Art. 1308 where the contracts cannot be left to the will of one of the parties)
2. Payment of the Price
   Sale: Buyer himself pays for the subject-matter which is his main obligation
   Agency: Agent not obliged to pay the price, he is merely obliged to deliver the price which he may received from the buyer/principal
3. Ownership
   Sale: Buyer becomes owner of subject-matter after delivery
   Agency: Agent never becomes owner
4. Liability
   Sale: Seller warrants
   Agency: Agent assumes no personal liability as long as he acts within the authority and in the name of the principal
5. Profit from the transfer of the thing
   Sale: Seller receives personal profit from the sale
   Agency: Agent does not receive profit from the sale, only commissions arising out of it

Question 91

• What is Dacion en Pago?

Answer 91

• It is a special mode of payment under the chapter of Payments under the chapter on extinguishment of obligations
• It is a transaction that takes place when property is alienated to the creditor in full satisfaction of a debt in money
• Debt in money refers to a simple loan or mutuum under Art. 1934
• It involves the delivery and trasmission of ownership of a thing as an accepted equivalent of the performance of the
  obligation to pay money
• There is no Dacion en Pago where there is NO transfer of ownership in the creditor’s favour, as when the
  possession of the thing is merely given to the creditor by way of security
• For Dacion en Pago to arise, there must be ACTUAL DELIVERY of the property to the creditor by way of
  extinguishment of the pre-existing debt
• Its concept is objective novation, where the thing offered as an accepted equivalent if the performance of an obligation
  is considered as the object of the contract of sale, while the debt is considered as the purchase price or consideration
• Although it is a form of novation, it is NOT governed by the law on novation but the Law on Sales (Art. 1245)
• This is because it is as if the creditor bought the thing offered by the debtor who owes money
• It exists in the stage of consummation
• It must extinguish the monetary debt

Question 92

Article 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts.

No contract may be entered into upon

Answer 92

future inheritance except in cases expressly authorized by law.

All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract.

Question 93

Article 1461. Things having a potential existence may be the object

Answer 93

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.

Question 94

Article 1462. The goods which form the subject of a contract of sale may be either

Answer 94

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.

Question 95

Article 1409. The following contracts are inexistent and void from the beginning:
Xxx (3) Those whose cause or object

Answer 95

did not exist at the time of the transaction

Question 95

Article 1462. The goods which form the subject of a contract of sale may be either

Answer 95

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.

Question 96

Existing goods

Answer 96

goods owned or possessed by the seller

Question 97

Future goods

Answer 97

goods to be manufactured, raised, or acquired

Question 98

Manufactured

Answer 98

The sale of milk bottles to be manufactured with the name of the buyer pressed in the glass

Question 99

Raised

Answer 99

the sale of the future harvest of palay from a ricefield

Question 100

Acquired

Answer 100

the sale of a definite parcel of land the seller expects to buy

Question 101

A sale of future goods, even though the contract is in the form of a present sale, is valid only as an

Answer 101

executory contract to be fulfilled by the acquisition and delivery of the goods specified.

Question 102

A future thing, as the object of the contract, may work in two different ways:

Answer 102

1. its coming into existence is a condition for the effectivity of the contract; and
2. the contract is effective and the buyer has to pay the purchase price whether or not the thing comes into existence

Question 103

Emptio rei speratae (sale of thing expected)

Answer 103

The sale of a thing NOT YET in existence subject to the condition that the thing will exist

If the thing does not come into existence, the contract of sale will not be effective – buyer will have no obligation to pay the price.
Ex: Young of an animal
Ex: Sale of a future thing

Question 103

Emptio spei

Answer 103

the sale of the HOPE itself that the thing will come into existence
The buyer will pay the price even if the thing does not actually exist
Ex: Lotto Ticket

Question 104

“THE SALE OF A VAIN HOPE OR EXPECTANCY IS VOID.”
MEANING

Answer 104

the thing WILL NEVER come into existence
Ex: Sale of losing lotto ticket

Question 105

Article 1381. The following contracts are rescissible:
xxx
(4) Those which refer to things under litigation if they have been entered into by the defendant without the

Answer 105

knowledge and approval of the litigants or of competent judicial authority;

Question 106

Article 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their

Answer 106

fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore.

Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. (3P = GF = No rescission)

In this case, indemnity for damages may be demanded from the person causing the loss.

Question 106

GR: Sale of things under litigation is rescissible if entered into by the

Answer 106

defendant, without the approval of the litigants or the court.

Question 107

Article 1463. The sole owner of a thing may sell an

Answer 107

undivided interest therein.

Question 107

XPN: No rescission is allowed where the thing is

Answer 107

legally in the possession of a 3rd person who did not act in BF.

Question 108

The owner of a mass of goods may sell only an undivided share thereof, provided the mass is

Answer 108

specific or capable of being made determinate.

Question 108

Article 493. Each co-owner shall have

Answer 108

the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.

Question 108

Article 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, and though the number, weight or measure of the goods in the mass is undetermined.

By such a sale the buyer becomes

Answer 108

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.

Question 109

Article 1465. Things subject to a resolutory condition may be

Answer 109

the object of the contract of sale.