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1CI VI L L AW ( S AL ES)MEMORY AIDATENEO CENTRAL BAR OPERATIONS 2001CHAPTER 1: INTRODUCTIONCONTRACT OF SALE – One of the contracting parties obligates himself to transfer theownership of and to deliver a determinate thing, and the other to pay therefor a pricecertain money or its equivalent. A contract of sale may be absolute or conditional.SALES1. Contract of sale (absolute) real obligation – obligation to give remedies available:a. specific performanceb. rescissionc. damages2. Contract to sell (conditional) personal obligation – obligation to do remedies available:a. resolutionb. damagesESSENTIAL REQUISITES OF A CONTRACT OF SALE1. consent2. subject matter3. priceCHARACTERISTICS OF CONTRACT OF SALE:1. Nominate - law gave it a name2. Principal - can stand on its own; unlike accessory contract3. Bilateral - imposes obligation on both partiesa. obligation of seller – transfer ownership & deliverb. obligation of buyer – pay for priceConsequence: power to rescind is implied in bilateral contracts4. Onerous – with valuable consideration Consequence: all doubts in construing contract to be resolved in greaterreciprocity of interest5. Commutative – equal value is exchanged for equal value Test: subjective – as long as parties in all honesty that he is receiving equalvalue then it complies with test & would not be deemed a donation; but must notbe absurd. Inadequacy of price or aleatory character not sufficient ground to cancel contractof sale; inadequacy can show vitiation of consent & sale may be annulled basedon vice but not on inadequacy6. Consensual – meeting of minds makes a perfect contract of sale but needs deliveryto consummate.7. Title & not a mode – gives rise to an obligation to transfer; it is delivery w/c actuallytransfer ownership; mode which actually transfer ownership.STAGES IN LIFE OF CONTRACT OF SALE:1. negotiation2. perfection – by mere consent; performance may be demanded ( specificperformance )3. consummationDISTINGUISHED FROM OTHER CONTRACTS:1. Donation donation is gratuitous; sale is onerous donation is formal contract; sale is consensual donation is governed by law on donation; sale is governed by law on sales
2CI VI L L AW ( S AL ES)MEMORY AIDATENEO CENTRAL BAR OPERATIONS 20012. Barter in barter, the consideration is the giving of a thing; in sale, it is giving of money aspayment both are governed by law on sales; both are species of the genus sales if consideration consists party in money & partly by thing – look at manifestintention; if intention is not clear (1468 ):a. value of thing is equal or less than amount of money – saleb. value of thing is more than amount of money – barter3. Contract for piece of work test in article 1467:a. contract for delivery of an article which the vendor in the ordinary course ofbusiness manufactures or procures for general market ( whether on hand ornot ) – saleb. goods are to be manufactured specially for a customer and upon specialorder and not for the general market – contract for piece of work. jurisprudence:a. Timing test – under art 1467; Inchausti; whether the thing transferred wouldhave never existed but for the order – contract for piece of work (abandoned)b. Habituality test – enunciated in Celestino v CIR; contract of sale ifmanufacturer engages in activity without need to employ extraordinary skillsand equipment; contract for piece of work is sale of service; contract of sale issale of things.c. Nature of the object test – enunciated in EEI v CIR; each product’s nature ofexecution differs from the others; products are not ordinary products ofmanufacturer. main factor in decision of the SC: essence of why parties enter into it:a. essence is object – contract of saleb. essence is service – contract for piece of work4. Agency to sell in sale, buyer pays for price of object; in agency to sell, agent not obliged to payfor price, merely obliged to deliver price received from buyer. in sale, buyer becomes owner of thing; in agency; principal remains owner evenif object delivered to him in sale, seller warrants; in agency, agent assumes no risk/liability as long aswithin authority given in sale, not unilaterally revocable; in agency, may be revoked unilaterallybecause fiduciary & even w/o ground in sale, seller receives profit; in agency, agent not allowed to profit TEST: essential clauses of whole instrument ( art 1466 – motherhood statement,not good law ) Agency is a personal contract; sale is real contract ( to give ) – rescission notavailable in agency5. Dacion en pago dacion: contract where property is alienated to satisfy/extinguish obligation topay debt in dacion: novates creditor-debtor relationship into seller-buyer in dacion: delivery is required ( real contract )6. Lease in sale: obligation to absolutely transfer ownership of thing; in lease: use of thingis for specified period only with obligation to return in sale: consideration is price; in lease: consideration is rent in sale: seller needs to be owner of thing to transfer ownership; in lease: lessorneed not be owner lease with option to by: really a contract of sale but designated as lease in nameonly; it is a safe by installments
3CI VI L L AW ( S AL ES)MEMORY AIDATENEO CENTRAL BAR OPERATIONS 2001CHAPTER 2: PARTIES TO A CONTRACT OF SALEGENERAL RULE: All parties with capacity to contract can enter into a valid contract of sale1. Natural2. Judicial - corporation/partnership/associations/Cooperatives Status of contract valid Remedies available therefore are:a. specific performanceb. rescissionc. damagesEXCEPTION TO GENERAL RULE:1. Minors status of contract: voidable only, therefor ratifiable remedy is action for annulment (with partial restitution in so far as the minor isbenefited)2. SALE BY & BETWEEN SPOUSESa. Contract with 3rd parties status of contract is validb. Sale between parties Status not provided for by law but VOID according to case law Reason:i. prevent defraudation of creditorsii. avoid situation where dominant spouse take advantage of othersiii. avoid circumvention on prohibition of donation between spouses Exceptioni. separation of property agreed (marriage settlement)ii. judicial separation of propertyc. Common Law Spouses (Paramours) Status of contract: VOID (per case law) Rationale: evil sought to be avoided is present3. OTHERS PER SPECIFIC PROVISIONS OF LAWa. Guardian with regards to property of ward during period of guardianshipb. Agent with regards to property of principalc. Executor/administrator with regards to the estate of the deceasedd. Public officers with regards to the property of the estatee. Officer of court & employee – with regards to property in litigationLEGAL STATUS OF CONTRACT:1. VOID (PER CASE LAW) – guardian/ executor/public officers / officers of the court2. VOIDABLE (PER CIVIL CODE) – agent; and if with consent, VALIDTWO GROUPS OF PROHIBITED PARTIES FROM ENGAGING IN CONTRACT OF SALE:1. Guardian / Agent / Executors – ratifiable in the sense that only private wrong isinvolved2. Public Officials / Officers of Court – not ratifiable in the sense that public wrong isconcernedGUARDIAN/AGENT/ADMINISTRATOR1. Legal status of contract: VOID (case law)2. Direct or indirect3. If mediator – no need to prove collusion; inutile4. Even if court approved sale5. Reason: fiduciary relationship is based on trust
4CI VI L L AW ( S AL ES)MEMORY AIDATENEO CENTRAL BAR OPERATIONS 2001ATTORNEYSREQUISITES:1. Lawyer-client relationship exists2. Subject matter – property in litigation (all types)3. Duration – while in litigation (from filing of complaint to final judgment); may be futurelitigation Reason: due to public policy; ground for mal practicea. Client is at the mercy of the lawyerb. Law is a noble professionc. 2 Masters – 2 interest; one cannot serve 2 masters at the same time Exception: CONTINGENT FEE ARRANGEMENTa. Amount of legal fees is based on a value of propertyb. Property itself is involved Not a sale but service contract I give that you may do (innominate contract) so has to be governed by law onsales but because of public policy, considered VALID Reason why contingent fee is followed:i. constitutional prohibition v impairment of contractii. subject to control of courts (may be reduced if unconscionable or nullified)iii. canons of legal ethicsiv. higher public policy litigantsCHAPTER 3: SUBJECT MATTER OF SALETO BE A VALID & BINDING SUBJECT MATTER, THE FOLLOWING MUST CONCUR:1. Existing, Future & Contingent2. Licit3. Determinate or determinableEXISTING, FUTURE, CONTINGENT Refers to subject matter that are existing & not existing but capable of existence(pursuant to present, technology)1. if this is present, status of contract: VALID2. if absent : NO CONTRACT SITUATION, THEREFORE NO CAUSE OF ACTION3. if mere pipe dream : VOIDa. SALE OF THINGS HAVING POTENTIAL EXISTENCE (Emptio Rei Speratae) Sale of future things; no physical existence yet A resolutory condition that thing will come into existence Non happening of condition: RESULUTORY: EXTINGUISH THE CONTRACT Remedy: can recover what has been paidb. SALE OF HOPE (Emptio Spei) Every sale of future thing is subject to condition that they will come intoexistence If hope does not come true – NO RECOVERY OF PAYMENT/NORESCISSION Aleatory character but validLICIT & VENDOR MUST HAVE A RIGHT TO TRANSFER SUBJECT MATTER1. LICIT – must be within the commerce of men VOID SUBJECT MATTER:a. Contrary to lawb. Simulated/fictitiousc. Did not exist at a time of transactiond. Outside commerce of mene. Impossible servicef. Intention can not be ascertainedg. By provision of law
5CI VI L L AW ( S AL ES)MEMORY AIDATENEO CENTRAL BAR OPERATIONS 20012. SELLER MUST BE OWNER – only at a time of consummation since traditiontransfers ownership but to have a perfected contract of sale, Vendor need not beowner of thing; can be validated/ratified by subsequent acquisition of title by sellerDETERMINATE & DETERMINABLE Absence: VOID; there is subject matter but Intention regarding subject matter cannot be ascertained – VOID Kinds of subject matter:1. Specific - Determinate Particularly designated or segregated from all others of the same class2. Generic - Determinable Test: reach a point of description where both minds concur At the time the contract is entered in to the thing is capable of being madedeterminate without the necessity of a new or further agreement betweenparties Exact quantity not essential Sale of generic things – VALID; still executory There can only be contract of sale when subject is finally chosen for delivery– already segregated or designated; but before designation, valid K of salealready exists3. Undivided interest (BUYER becomes co-owner)4. Undivided share in mass of fungible goods (BUYER becomes co-owner)CHARTER 4: PRICE – signifies the sum stipulated as equivalent of the thing soldCHARACTERISTICS OF VALID PRICE1. Must be real2. Must be in money or its equivalent3. Must be certain or ascertainable at the time of the perfection of the contract4. Manner of payment provided forREAL1. When price stated is one intended by parties If fictitious: no intention with respect to price - VOID If False/simulated: what appears in contract is not the true pricea. VALID if there is true considerationb. VOID but if none (because it is fictitious)2. Valuable When not valuable – VOID When contract is onerous, presumed to have valuable consideration Nominal consideration w/c is common law concept does not apply (P1.00) Gross inadequacy of price in ordinary sale does not render contract void unless itis shocking to conscience of man.Except:a. Judicial sale Shocking to conscience of man Higher price can be obtained at re-saleb. Rescissible contracts due to lesionc. Sales with right to repurchase (raises presumption of equitable mortgage) –Remedy is reformationCERTAIN OR ASCERTAINABLECERTAIN1. Sufficient that it is fixed with reference to another thing certain That thing will have on a definite day, or in a particular exchange or market, orwhen an amount is fixed above or below the price on such day, or in suchexchange or market provided said amount be certain
6CI VI L L AW ( S AL ES)MEMORY AIDATENEO CENTRAL BAR OPERATIONS 20012. Determination be left to judgment of specified person/s If contract states that price is to be determined by 3rd party, contract is alreadyperfected (there is just a suspensive condition – actual fixing of price) 3rd party fixes price in bad faith or mistake – court remedy can be made 3rd party is unable or unwilling to fix price – parties have no cause of action Reason:a. suspensive condition does not happen yet – courts have no jurisdictionb. enforceable contract have not yet arisen – court with no jurisdiction to createcontract between parties Result: INEFFICACIOUS When price can not be determined in accordance with any of the preceding rules,contract of sale in INEFFICACIOUS However, when SM delivered, BUYER must pay reasonable rice therefore –court can fix priceMANNER OF PAYMENT MUST BE AGREED UPON Deemed to be an essential requisite because it is part of the presentation of thecontract Integral part of concept of price If there is failure to meet minds as regards term of payment: CASH BASIS Must be certain or at least ascertainable Effect is absent: NO CONTRACT SITUATIONCHAPTER 5: FORMATION OF CONTRACT OF SALE3 STAGES IN LIFE OF A CONTRACT OF SALE1. Policitacion/negotiation Stage – offer is floated, acceptance is floated but they do notmeet; time parties indicate their interest but no concurrence of offer & acceptance2. Perfection – concurrence of all requisites; meeting of the minds3. Consummation – parties perform their respective undertakingsPOLITIACION1. offer is floated but not absolute2. acceptance is likewise floated but conditionalRULES:1. offer is floated – prior to acceptance, may be withdrawn at will by offeror2. offer floated with a period – without acceptance, extinguished when period hasended & maybe withdrawn at will
1 CIVIL LAW (SALES) MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 CHAPTER 1: INTRODUCTION CONTRACT OF SALE – One of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a priceFile Size: 332KBPage Count: 25
