Law on Sales Chapter 1-3 Reviewer

CHAPTER 1 – Nature and Form of the Contract

Contract of sale

Characteristics:

1. Consensual – by mere consent
2. Bilateral – both are bound
3. Onerous – there is price
4. Commutative - equivalent
5. Nominate – “sale”
6. Principal – independent contract

Essential requisites:

1. Consent/meeting of minds
2. Object
3. Cause/consideration

Kinds of contract of sale:

1. Absolute – no condition
2. Condition – contingent

Requisites concerning Object:

1. Things – licit and not impossible; illicit = null & void
2. Rights

Kinds of illicit things:

1. Per se (of its nature)
2. Per accidens (provisions of law)

Right of vendor to transfer ownership:

1. One can sell only what he owns
2. Sufficient if right exists at time of delivery

Subject matter must be determinate

    Not determinate = null & void

Sale of things having potential existence

    May be an object of sale

Sale of a mere hope or expectancy

    Valid; Void if vain

Goods which may be the object of sale:

1. Existing goods
2. Future goods

Sale of future goods

       Valid as executory contract

Sale of undivided interest in a thing:

1. By sale owner
2. By co-owner

Sale of an undivided share of a specific mass:

      Fungible goods – any unit is equivalent of any other unit

Sale of thing subject to a res. condition may be an object of sale

      Happening extinguishes obligation

Sale vs. Agency to sell:

1. Sale – buyer receives goods as owner

Agency – receives goods of principal

1. Sale – buyer pay price

Agency – agent accounts for proceeds

1. Sale – buyer cannot return object sold

Agency – can return if unable to sell

1. Sale – seller warrants thing sold

Agency – agent makes no warranty

1. Sale – buyer can deal with thing sold as owner

Agency – bound to principal’s instructions

Sale vs. Contract of Piece of Work

      CPW – never would have existed but for the order of buyer;

                    -risk of loss to contractor; not with Statute of Frauds

     CS – thing exists even without order; risk of loss to buyer

Sale vs. Barter

       Barter – both give things

       Sale – give a thing and receive price in money

When price considered certain:

       No sale if price not certain or ascertainable

       If price not fixed by 3rd person – contract is ineffective

       If 3rd person is prevented, IP may resist or ask for fulfillment

Gross inadequacy in price:

        Defect – may be annulled because consent is vitiated

Effect where price is simulated:

1. Void; valid as donation (intended)
2. Ownership not transferred (not intended)

Price on a given day at particular market:

    Must be certain

Fixing of price by one of contracting parties not allowed

    To be just

If price cannot be fixed,

     Contract is inefficacious

Effect of failure to determine price:

     Executory – no effect; no obligation

     Delivered – pay reasonable price

Stages of Contract of Sale:

1. Negotiation
2. Perfection
3. Consummation

Perfection

     If one does not comply, injured party may sue for fulfillment or

     rescission with payment of damages.

Right of Owner to Fix his Own Price

    Reasonable or unreasonable

Effect of failure to pay price/absence of price:

1. Price Stipulated

- demand performance, rescission, cancellation

1.  No price

- sale is void/non-existent; no contract of sale

Rules Governing Auction Sales:

1. Sale of separate lots by auction are separate sales
2. Sale perfected by the fall of the hammer
3. Right of seller to bid in the auction

1. No notice given – unlawful; to avoid puffing
2. Notice given – expressly reserved

Ownership of things transferred by delivery

     Actual or constructive

     Note: nonpayment prevents transfer of ownership

Kinds of promise treated in Article 1479:

1. Accepted unilateral promise to sell (promisee elects to buy)
2. Accepted unilateral promise to sell (promisee elects to sell)
3. Bilateral promise to buy & sell reciprocally accepted

Effect of Unaccepted Unilateral Promise

        No juridical effect or legal bond; policitation

Option

privilege existing in one person for which he has paid a consideration which gives him the right to buy/sell 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; exercised when sale may be perfected

Effect of Accepted Unilateral Promise

           May be withdrawn;

             It is only if the promise is supported by a consideration    

               distinct and separate from the price that its acceptance will  

               give rise to a perfected contract.

Effect of Bilateral Promise to Buy and Sell

           Perfected sale

Risk of Loss or Deterioration

1. Lost before perfection – seller bears loss (res perit domino)
2. Lost at time of perfection – contract void/inexistent
3. Lost after perfection but before delivery – buyer bears loss
4. Lost after delivery – buyer bears loss

Article  1480

      Non-fungible goods:

        If the risk ought to belong to the buyer before delivery, the

                    benefit ought to belong to him who has the risk.