Midterms Notes for Sales

8/3/2019 Midterms Notes for Sales

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Midterms notes for Sales

Basics

1. Obligations created:a. Seller(to give1):

iv. Transfer ownershipv. Deliver possession of the subject matter

b. Buyer(to give2): pay the price2. Elements:

a. Consentiv. Meeting of minds to transfer ownership in

exchange for price

b. Subject Matteriv. Upon perfection: determinable

1. Capable of being made determinatewithout further agreement between the

parties2. Generic-determinable: not subject to

loss.

v. Upon delivery (consummation): determinate1. Which requires physical segregation or

particular designation

c. Price3. Stages in life of sale:

a. Negotiationb. Perfection

iv. Contract to sell: already perfected, but isconditional, with a suspensive condition

c. ConsummationCharacteristics

1. Nominate and Principala. Intent over nomenclatureb. It can stand on its own

1Thus, SPECIFIC PERFORMANCE is a remedy

2Likewise

2. Consensuala. Non-performance does not void a contract; just leads to

remedies

b. Ownership of thing not needed upon perfection of thecontract, only upon consummation

3. Bilateral and Reciprocala. Obligations on both parties, to be performedsimultaneously upon the performance of the other

b. The obligation of one party is the cause of the otherc. Delay of the other begins when one party fulfills his

consideration

d. Power to rescind implied4. Onerous

a. Interpret towards greatest reciprocity of rightsi. Ex. conflict between suspensive term and

suspensive condition favor suspensive term

(more reciprocity)

5. Commutativea. Parties anticipate performance of the other from the startb. Subjective equivalence, rather than objective (if the parties

believe he is getting value, then it is fine)

c. Inadequate price does not invalidate sale, but may onlyindicate possible vitiation of consent

6. Title, not modea. Tradition is the mode to transfer ownershipb. Sale merely creates the obligation to transfer and deliver

Distinctions

1. Donationa. This is gratuitous; sale is onerousb. This is solemn; sale is consensualc. Implication a simulated sale may still be a valid donation

i. A donation with a burden less than the value ofdonation is still a donation

ii. A donation with a burden equal or greater thanthe value of donation is an onerous donation

2. Bartera. This is thing for thing; sale is thing for money


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b. How to determine if sale or barteri. Manifest intention of the partiesii. When intention does not appear:

1. Barter if thing > money2. Sale if thing


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lower price to Arco. There was SALE, not

agency.

c. No personal liability as long as he acts within the scope ofauthority

d. Agent disqualified from getting personal profit fromtransaction (all profit must pertain to the business)

e. Value of distinction:i. Sale has to comply with Statute of Fraudsii. Agency is valid in any form it may be entered to

1. Except for sale of piece of land orinterest by agent must be in writing

5. Dacion en Pagoa. Dation novates the relationship into a SALE

i. REAL contract (there has to be transfer ofownership to creditor)

b. Also, there must be agreement between parties toextinguish the original obligation

i. THERE MUST BE A PRIOR CONTRACTii. Dation already applies to consummation of the

obligation

6. Leasea. Bind self to give another enjoyment or use of a thing for a

period, whether definite or indefinite.

b. Lease with option to buy is actually conditional sale.Parties

GENERAL RULE: any person with capacity to contract may enter intosale contract

o Minors/incapacitated VOIDABLE Only the minor/incapacitated party may allege

minority

Duty to restitute: to extent of benefito Necessaries need PERFECTION and DELIVERY to make it

valid. NOT anymore voidable.

If just PERFECTED, voidable. Spouses

o Spouses can engage in any activity/business Only objection: on valid, serious, and moral grounds

Before objection obligation charged to one spouse After objection obligation charged to conjugal

property

o Lack of one spouses consent VOID (lack of consent)o Spouses cannot sell to each other

Except: CSP JSP

Prohibition on sale between spouses also applies tocommon law spouses.

Except: if there is 3rd person in GF whobought it

Sale includes legal redemption, compromises, andrenunciations

Who can assert: Heirs prejudiced Prior creditors State

o Rationale: Prevent fraud to creditors Prevent dominant spouse from taking advantage of

weaker spouse

Avoid indirect violation of the prohibition againstdonations

Specific Incapacity3o Relationships contemplated

Agentprincipals UNLESS consent of the principal has been

given This is the ONLY relationship where consent

validates it

Does NOT include brokers Guardianwards Executor or administrator of estate under

administration

3Sale includes legal redemption, compromises, and renunciations


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Rodriguez v Mactal:Prohibited only if therewas prior agreement that the third person

would sell to the administrator to circumvent

the prohibition. There was no prior

agreement that Choco would buy for the

benefit of Mactal. (More than 2 years havepassed.)

Philippine Trust v Roldan: There was a shorttime between the sales. Unlike in Rodriguez

v Mactal, where there was 2 years. There is

a higher burden of proof in that case to prove

collusion. BUT even if in this case there was

no clear collusion, equity demands the sale

should be annulled.

o Benefit or disadvantage is of nomatter.

Naval v Enriquez: Questionably excludedhereditary rights from prohibition of purchase

by administrator or executor

o Although technically, it is true thathereditary rights pass directly to the

heirs, and not through the

administrator but these still derive

value from the assets of the estate

Public officers and employees property of State,subdivision, or GOCC

Entrusted to them Officers of the court property and rights in litigation

or levied Before COURT within jurisdiction or territory

they exercise their functions in

Macariola v Asunciondistinguishes:o If it were offered before, it cannot

be ratified after

o But if was offered the first time, thenits valid

Lawyers property and rights as object of litigation Must be the subjection of litigation

Prohibition applies during pendency oflitigation includes certiorari proceedings

CONTINGENT FEES are valido Transfer of property only happens

after favorable judgment

o Also valid, because this is a risk forthe lawyer (equally uncertain)

Also, to benefit pauperlitigants

o But courts may nullify if with undueinfluence this safeguard removes

possibility of vitiation

Otherso Rubias v Batiller all violations of these are VOID as against

public policy

Thus, no ratification per se Does not retroact Valid as long as the specific incapacity does

not exist anymore

Different form of ratification: in the form of a newcontract

Only applies to agent, guardian,executor/administrator

For the public officers, et. al. noratification even when the prohibition does

not exist anymore

o Who has standing: anybody, when juridical effects areasserted against him

Court approval cannot validate violations of theseobligations

Subject Matter

Requisites:

1. Possible subject mattera. Existing


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b. Having potential existencec. A future thingd. Contingente. Subject to resolutory condition

2. Licit3. Determinate or at least determinable

Differentiate:

If there is NO subject matter, there is NO contract.o Neither party may seek for specific performanceo No party may be in breach (because there is no contract

to speak of)

o Mutual restitution If there is a defect in the subject matter, there is a VOID contract.

o 1411 illegality of object or cause arises from criminaloffense:

Innocent one may claim what he has given Not bound to comply with promise If in pari delicto: no action against each other

o 1412 illegal, but not criminal Both at fault neither may recover, and neither

may demand from the other

One at fault cannot recover Innocent party may demand return of

what he has given, with no obligation to

comply

1. Possible Thinga. Need not be the owner of the subject matterb. Just that upon delivery, the seller must have a right to

transfer ownership of the thing sold to the buyer

c. 1409(3)sale whose cause or object did not exist at thetime of the transaction void

i. INTERPRETATION OF THIS PROVISION:whether the subject is of type and nature, taking

into account technology and science, that exists

ii. Contra:impossible things

1. I will sell you for P5,000 a potion ofyouth. For the potion of youth or some

other impossible thing, there is

ostensibly a subject matter. It is not up

to the parties to determine that there is

no subject matter. The court will do it. Itis, therefore, VOID even if there is NO

subject matter.

d. All things not outside the commerce of meni. Hopes or things with potential existence included

e. Emptio Rae Sperataei. Condition: must come into existenceii. Future things determinate

1. Because determinable things technicallyare never lost

f. Emptio Speii. Mere hope or expectance valid

1. VAIN hope or expectancy is VOID2. Situation where commutativity of the

contract is relaxed

g. Subject to resolutory conditioni. When resolutory condition occurs:

1. Extinguish the obligation2. Mutual restitution

ii. Fruits and interests of reciprocal prestationsmutually compensate

2. Licita. Not outside the commerce of menb. All rights not intransmissiblec. Sale of animals with contagious diseased. Animals unfit for stipulated usee. Sale of future inheritance

i. Contra: waiver of hereditary rights valid3. Determinate or at least determinable

a. Distinguish:i. Determinable:

1. Upon perfection of contract, the thingwas capable of being made determinate


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2. Without necessity of a new or furtheragreement between the parties

a. Melliza v City of IloiloDeemed a lot determinate,

when it made reference to the

Arellano plan, which was inexistence when the contract

was perfected

b. Atilano v Atilano Deed of saleis evidence of the agreement.

The intentions of the parties

must be written in the contract.

If the contract is not faithful to

the intents of the parties, then it

can be reformed.

ii. Determinate: particularly designated orphysically segregated from all others of the same

classb. Re: quality and quantity

i. Identity/nature and quality of the subject matter ESSENTIAL for perfection

ii. Re: quantity: Not as important, BUT there is astandard involved: there must be no need to

enter into a new contract.

1. National Grains Authority v IAC: quantitynot needed as long as determinable w/o

new contract and not exceeding 2640

cavans

2. Johannes Schuback v CA: exceptionaldecision; not doctrinal. The SC held

that on Dec 24, when there was no

agreement on the number of parts yet,

and no quota was set, there was already

a perfected contract of sale. BUT, on

December 29, there had to be an extra

agreement on quantity to consummate

the sale. So there must have been NO

perfected contract on the 24th

yet!

a. VOIDif kind and quantitycannot be determined without a

new agreement

iii. Generic things1. Upon perfection: determinable

a. Capable of being madedeterminate without furtheragreement between the parties

b. Generic-determinable: notsubject to loss.

c. Obligation to deliver genericthing:

i. Buyer cannot demandsuperior quality

ii. Seller cannot deliverinferior quality

iii. Courts also havepower to setappropriate quality

2. Upon delivery (consummation):determinate

a. Which requires physicalsegregation or particular

designation

3. If neither determinable or determinate:intention of the parties relative to the

principal object cannot be determined

NOCONTRACT

v. Sale of undivided interest turns into co-ownership

vi. Sale of undivided share in mass (fungible goods)1. Proportional co-ownership over the

mass (not particulars)

2. If mass is less than measure bought,buyer owns the entire mass and seller

bound to make up for the deficiency

3. Gaite v. Fonacier: sale of specificmasswithout weighing the subject matter is

a definite object, where delivery of the


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entire mass is in good faith even with

some minor differences in measure.

4. Compare: public auction in mass ofseparate lots/parcels VALID

a. Unless it can be proven that alarger sum could be realized

b. Or that a sale of less than thewhole can satisfy the debt

Failure to deliver:o Does not affect perfection/validity of the contract

Failure to deliver does not amount to estafa Just civil obligations

o If a person sells what is not his: buyer does not acquirebetter title to the goods, unless the real owner is estopped.

o Nool v CA: wrong ruling Deemed sale of one who is not the owner as void

(when it should be valid)

Deemed failure to deliver as failure to do(impossible service) and that the sale contract is

void

Could have kept it valid, but rescind withdamages which also takes away right to

repurchase

o Noel v CA: this should only pertain to consummationo EXCEPTION to rule that seller must be owner at time of

sale: JUDICIAL SALE

Must be owner at time of perfection Which is why mortgagor needs to be the

absolute owner of the thing mortgaged

o When seller sells to the buyer something he does not own: Getting the title subsequently passes on to the

buyer by operation of law

But there must be physical delivery first Ex. seller sold to the buyer land whose

title is still with the government when

the seller receives the title, it

automatically passes onto the buyer by

operation of law

Legality of sale

o Re: subject matter Even if the thing only has potential existence

valid

There are certain sales contracts that are illegalVOID

Narcotics Wild birds/mammals Rare wild plants Poisonous plants/fruits Dynamited fish Gunpowder and explosives Firearms and ammunitions Sale of realty by non-Christians Sale of friar land without Secretary of

Agricultures approval

Those outside the commerce of mano Sale absolutely simulated

Absolutely simulated sale: NON-EXISTENTcontract

Badges of simulationo If buyers did not take

possession of property sold to

them

o Or if sellers collected rentalsfrom the buyer

Requisites: 1. Outward declaration of will different

from real will of parties

2. False appearance intended by mutualagreement

3. Purpose is to deceive third personso When motive can nullify

GENERALLY: motive is different from cause Cause essential reason for the

contract

Motive particular reason by one partythat does not affect the other


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BUT if illegal motive pre-determined the cause ofthe contract, the sale is VOID

Ex. sale is to illegally frustrate apersons right to inherit

Or to avoid payment of estate tax In the same way, when motive pre-determinesthe cause, then motive becomes the cause

Ex. Uy, where the NHA bought lands forhousing and the lands became

unsuitable

Price

Definition of price:

Ideallysum certain in money or its equivalent

o But there can be a valid sale also, supported by causes otherthan price

o Because sale is a catch-all provision for the transfer ofownership in exchange for consideration

Requisites for valid price:

1. Reala. When price is real

i. Buyer: has every intention to pay, regardless ofsource

ii.

Seller: has every expectation to receiveb. When price is simulatedi. NO PRICE AT ALL: no contract, because there

is lack of cause/consideration

ii. SIMULATED PRICE: May be proven that it isactually a donation or some other contract

iii. Pari delictorule (where neither party canrecover):

1. APPLIES When the cause or purpose ofcontract is ILLEGAL

2. DOES NOT APPLY if just simulated,without being illegal

c. When price is falsei. Real price not declared VALID contractii. But subject to reformation

1.

EXCEPT when the interest of thegovernment or third parties will be

adversely affected by the reformation of

the instrument

d. NO CONSENT or intention to enter into sale no contracte. Adequacy of price

i. Ong v. OngP1 and othervaluableconsiderations

1. No evidence was adduced to prove theconsideration was not paid, thus

presumed to exist

2. There is usual Anglo-Saxon practicethat a nominal amount is indicated butthere is more valuable consideration

given

3. BUT under Philippine jurisdiction, it isnot anyconsideration but valuable

consideration that is needed to make it

valid

ii. Bagnas v. CAP1 and services rendered, beingrendered, and to be rendered

1. Ruled as NO CONTRACT becausethere is no valuable consideration

2. Not because of the stipulation per se(because see Ong v Ong), but the fact

that it was proven by evidence that there

was no real intention to pay any

valuable consideration

f. Effect of non-payment of price:i. Condonation or remission price is still validii. Failure to pay not in perfection but

CONSUMMATION

iii. Remedies available:1. Specific performance


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2. Rescissioniv. Contra:lack of consideration no contract

(different from failure to pay)

g. Accommodation does not make sale void for lack of priceh. Subject matter delivered, even if there is no price:

i.

CONVEYANCE IS INVALID2. Must be in money or equivalent

a. When the consideration consists partly in money andpartly in another thing: can still be a contract of sale when

this is manifest intention of the parties

i. But must have price (money or i ts equivalent) aspart of the consideration

b. Republic v. Phil Resources Development:i. Debtor paid goods belonging to Phil Resources in

lieu of price stipulated

ii. Corporation was held to have the right tointervene, because it would be adversely affected

iii. But this case is NOT authority to say thatequivalent can mean things other than money

or media of exchange

1. This case applies in consummationstage already

2. There can be mutual arrangements ordation after perfection, after all

c. Bottom-line: price is a generic obligation subject tovariations, unlike subject matter where it has to be

determinable/determinate

3. Certain or ascertainable at time of perfectiona. Certain = specifically expressed and agreed upon in terms

of pesos and/or centavos

b. Ascertainable = with reference to another thing certain orjudgment of person/specific persons

i. Price fixed by third party1. Contra: price cannot be left up to the

determination of either party

2. Already perfected, albeit conditional:determination of price by 3

rdperson

3. ONLY instances when court can fixprice:

a. Third party in bad faithb. By mistakec. Contra: third party is unable or

unwilling cannot resort to

courts

i.

Contract isinefficacious

ii. Because failure ofcondition to happen

extinguished the

contract

4. Contra: subject matter cannot fix thesubject matter

a. Because it is a speciesobligation, not a generic

obligation (price)

ii. Price in reference to other things certain1. When price cannot be determined

according to thing certain: contract is

inefficacious

2. Meaning, there was a valid contract atone point

When there is sale even without a price agreed upon:o Requisites:

1. Meeting of minds on sale and purchase ofSUBJECT MATTER

2. Agreement that price would be paid fails to meetthe criteria that it is certain/ascertainabie

3. Delivery by the seller and appropriation by thebuyer

o 1474: 1. Price cannot be determined according to preceding

articles or in any other manner contract is

INEFFICACIOUS

2. But delivered to buyer 3. And appropriated by buyerwho must pay

REASONABLE PRICE

o PRECEDING ARTICLES (1474)


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Applies to Articles 1469 to 1473 1469: formula refers to thing certain

(INEFFICACIOUS)

1470: gross inadequacy still valid, but mayshow vitiated consent

1471: completely simulated, but may besaved as pure liberality (VOID) 1472: price based on securities, grain,

liquids based on trading price

(INEFFICACIOUS)

1473: up to discretion of seller or buyer(VOID)

inefficacious here includes both valid butinefficacious and void contracts

o Basis of doctrine: Unjust enrichment allowing buyer to retain subject

matter even if no price is paid for it

Estoppelo May apply to both:

No contract situation And void contract where defect is price

o APPROPRIATION: Acceptance, and treating the subject matter as ones

own

Even without transformation In this case, cannot ask for return of the thing

unilateral rescission of contract (because the contract

is binding already and there violation of mutuality)

Manner of payment of priceo Part of the prestation of the contract, thus ESSENTIAL

Navarro v. Sugar Producers Corporation: manner ofpayment discussed after acceptance, then the

acceptance did not produce a valid contract of sale

yet

Velasco v. CA: agreed on purchase price but not onmanner of payment, and down-payment was made

still, no valid sale

Leabres v. CA: receipt indicating acknowledgementof sum of P1,000 does not indicate valid sale,

because there is no indication of total purchase price

of the land

o Manner of payment also has to be CERTAIN orASCERTAINABLE

o In the abovementioned cases, there was understandingbetween the parties that the terms of payment were anything

other than immediate payment.

In all other cases: presume that the terms ofpayment = demandable at once.

Another presumption: subsequent paymentsmade in same amount as first

Re: receipts and other documents embodying price:o Leabres v. CA: (see above, re: P1,000 receipt)

HOWEVER, while this case seems to refer to theStatute of Frauds, it cannot apply here because therehas already been partial payment and delivery of the

land not anymore an EXECUTORY contract

o Toyota Shaw v. CA: The authority of Popong Bernardo to bindthe company was put into question, when it is weird, because

all transactions usually happen through sales agents!

BA Finance did not approve the loan, then themanner of payment was unclear. BUT, there was a

portion that Toyota itself admitted that when Luna

Sosa paid for the car in full, they would have delivered

the car already.

Santiagos opinion: that the BA Finance approval wasmerely a suspensive condition, not something that

vitiates manner of payment.

The BA Finance approval simply applies to theconsummation stage.

o Coronel v. CA: The memorandum that would evidence acontract, to remove it from the Statute of Frauds, must evince

all the essential requisites of the contract

Need not be technical or perfect, but present


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But since sale is a consensual contract, this writtenmemorandum is really just for the Statute of Frauds,

which is merely for executory contracts

Inadequacy of price:o Inadequacy of price does NOT affect validity of a contract ofsale

But may evince defect in consent or show intention todonate

o Test of commutativeness not objective, but subjective beliefof parties

o Inadequacy only applicable for execution sale, but NOTvoluntary sale

Threat of eminent domain proceedings notconsidered imminent, serious, and wrongful injury that

vitiates consent

Requisites to avoid a judicial sale: 1. Price is SHOCKING TO THE

CONSCIENCE

2. Can get better price Contra: with right to redeem, this does not apply

because it makes it easier to redeem the property

o Inadequacy of price may rescind a contract of sale by: 1. Guaradian, where the war suffers lesion of more

than 1/4th

value of the thing

2. Representative of absentee, if absentee sufferslesion of more than 1/4

thvalue of the thing

o Sales with right to repurchase: inadequacy raisespresumption of EQUITABLE MORTGAGE

Remedy for seller to reform it into equitablemortgage contract

Remedy for buyer foreclose the equitable mortgage

Formation of Contract of Sale

Preparatory Stage

Policitacion or unaccepted unilateral promise to buy or to sell Offer starts negotiation

o Public advertisements are not offers mere invitations to makeoffers; not binding

Right to contract: with anyone except when there is 1st priority to buy1. Offers

a. Offer may be withdrawn prior to acceptancei. Not even necessary that the offeree learns of the

withdrawal

ii. If with a period, expiration of the period destroysthe offer

1. Of if with a suspensive or resolutorycondition

b. Offeror may fix time, place, and manner of acceptancei. The offeree must comply with all requirementsii. The offeree must accept all the termscant

sever acceptanceiii. Counter-offer is a rejection of the offeriv. When an offer has not been accepted, it cannot

be accepted subsequently

Option Contracts

o 1479 two types Par. 2 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. (Option

contracts) Par. 1 A promise to buy and sell a determinate thing

for a prince certain is reciprocally demandable.

(Contract to sell)

o Both Option Contracts and Contracts to Sell are acceptedoffers valid contracts, but not the contract of sale per se

Both are subjects of specific performanceo Option founded upon a proper consideration: offer may not

withdrawn at any time during the option period

Called a contracted offer


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Elements of a valid option contract: Consentor meeting of the minds Subject matter: option right or accepted

offer to buy or an option right or accepted

unilateral offer to sell

o A determinate objecto For a price certain + manner of

payment

Prestation: consideration separate anddistinct from the purchase price for the

option contract

o Definition of option contract: Privilege existing in oneperson to buy certain merchandise from another person if he

chooses at any time within the agreed period

Securing the privilege to buyAdelfa Properties v CA Sale of a right to purchase

Equatorial Realty In order to be valid andenforceable:

Agreed time Determined price

Other party: obligation not to enter into contract withanother

Preparatory contracto Comparison with Contract of Sale:

Must have a separate consideration to be valid Also a consensual contract like sale

it is consensual need not actually paytheseparation consideration to be perfected:

even promise is enough But option contract not in the Statute of Frauds

Althoughthe resulting sale will be in theambit of the S.O.F.

So this will be very difficult. Unilateral contract because only the optioner is

obliged in the option contract

Effect: if accepted before breach of the option abilateral contract to sell and to buy ensues

Whereas in contract of sale: the relativeobligations and rights of the parties are fixed

no choice to either party to leave or

proceed

o Meaning of separate consideration

ANY UNDERTAKING OF VALUE, need not be cashor its equivalent

Ex. buying the lands in half a property for ahigher price can be separate consideration

for sale of the other half

Ex. can be supported by the sameconsideration that a mortgage or mutuum

o When no separate consideration Sanchez v. Rigos no separate consideration means

its a VALID offer but a VOID contract

Acceptance before withdrawal would giverise to a valid and binding contract of sale

Separate consideration burden of proof iswith party seeking to show it

THIS APPLIES WHEN THERE HAS BEENA PERIOD STIPULATED FOR THE OFFER

o And this option was acceptedo And communicated to the offeror

Yao Ka Sin Trading void option contract and can bewithdrawn even with prior acceptance

THIS APPLIES WHEN THERE HAS BEENNO PERIOD STIPULATED FOR THE

OFFER

oPeriod of exercise of the option

Villamor v CA If no period stipulated TEN YEARSupon written contract of option

o Proper exercise of option Nietes v CA actual exercise of the option is through

MERE ADVISING OF THE OFFEROR of the decision

to buy

No need to actually pay the stipulated priceupon exercise of the option so long that

this is delivered upon performance of the

part of the agent


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Carceller v CAsubstantial compliance with theexercise of an option, and may even justify exercise

of option (reasonable) beyond the original period

As long as there was clear intent within theperiod to purchase the property pursuant to

such option Offeree may use specific performance as

remedy (CONTRARY to Ang Yu Asuncion)

o Not part of renewal of lease under tacita reconduccion(tacitrenewal)

o RULES WHEN PERIOD IS GRANTED TO OFFEREE (AngYu Asuncion v. CA)

If the period is NOT supported by a separateconsideration, the offeror may withdraw the offer

before acceptance or before communication thereof

Right to withdraw must not be whimsical orarbitrary, or offeror is liable under Article 19

of the Civil Code If with a separate consideration, the contract of option

is perfected,

Withdrawal constitutes a breach Problematic: because whether or not there

was separate consideration, if the offeree

withdraws before the optionee exercised the

option, his acceptance does not give rise to

a valid contract of sale.

Option is an independent contract. If optionerwithdraws the offer before acceptance, there can be

no specific performance on the proposed contract (not

yet perfected).

Withdrawal offeror liable for damages Assess: if separate consideration is actually given

as part of the main contract the main contract will be

perfected (like earnest money)

CLVS SUGGESTION: If the option has separation consideration

optionee shall have the right to exercise the

option ANYTIME DURING THE PERIOD

and this will bring about a valid contract of

sale

o Any attempt to withdraw the optionduring the period will be void

If the optioner withdraws AND sells it to athird person:

o If the third party is in bad faith(knew of the option) optionee can

exercise option AND compel

specific performance from third

person

o If the third party is in good faith andfor value optionee can recover

damages from breach of contract of

salenot just option contract

Right of First Refusal

Promise on part of the owner the will sell i t first to the promisee shouldhe decided to sell it in the future

o Guerrero v Ynigo failure to honor RFR leads to damagesonly, no specific performance

o Difference from option contract: no price, manner of payment,etc. yet

ONLY the object is ascertained as of nowo Governed by preparatory juridical relations

Equatorial Realty contract of lease where there is 30-day exclusiveoption to purchase which does NOT provide for a price certain nor the

terms of payment: RFR and notoption contract

o Resulting contract in violation of the RFR is rescissibleo The price offered to the third party must be the price by which

the RFR is exercisable

o Apply only to RFR attached to valid principal contract There must be consideration but NEED NOT BE SEPARATE If the RFR must be in a written contract

o Else, unenforceableo Part of lease contract

Paranaque Kings v CA SAME PRICE must be offered tooo Under same terms and conditions previously offered


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o 3rd party-buyer has standing (because he steps into the shoesof the owner-lessor)


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Formation of K of sale (continued)

Offer = certain, acceptance = absoluteo Yuvienco v Dacuycuy:to negotiate no absolute

acceptance

o Limketkai: acceptance already absolute, but asked for requestfor changes as long as there is compliance regardless, there

is absolute acceptance

o Bormaheco: if the deviations are immaterial, it is not acounter-offer

Acceptance by letter binding upon receipt of offeror Sale by auction perfected upon fall of hammer

o Each lot separate sale Ko Seller may express right to bid: but must give notice, else

unlawful

Or if seller employs another person to bid for himo Seller sets terms of auction binding upon bidders, even those

who didnt know these conditions Earnest money

o Part of purchase priceo Given only when there is already a saleo Buyer boundto pay balance

Not forfeited when there is failure to pay balancemust be returned upon rescission

Place of perfection where meeting of offer and acceptance areo If in letter place where offer was made

Execution, registration of sale and deliverypresumed to be sellersduty

THIS POINT ONWARDS, READ BUNNY NOTES

Form of sales

General rule: any form of sale is valid Dalion v CA: the requirement in 1358 that sale of immovables must be

public document: merely for convenience, and not for perfection

o only right conferred: for one party to compel other party tohave it brought before N.P.

o BUT Secuya v Vda de Selma: unregistered sale does notbind 3

rdpersons

Deed of sale: presumed regularo

But may be controverted with clear and convincing evidenceo D.O.S. = proof of delivery of possessiono Gomez v CA: even without signatures, as long as meeting of

minds exists, there is valid sale

When form of sale is important:o Agents sale of land power must be in writingo Large cattle in writing and municipal treasurer issues

certificate of transfer

o Sale of non-Muslim hill tribe cultural minority w/o NCIPapproval

Statute of FraudsArt.1403(2)o When:

Sale agreement not to be performed within a yearfrom making

Sale of goods, chattels, at price not less than P500 Sale of real property or interest therein

o Unenforceable by action unless: IN WRITING AND SUBSCRIBED TO BY THE PARTY

CHARGED

Yuvienco v Dacuycuy: even manner mustbe included in memorandum

o Except when there has been partialpayment already of installments

Partial consummation Delivery of deed to agent of buyer without

intention to part with title: no partial

performance

In this case, oral proof can be accepted Claudel: HOWEVER, if there is dispute of

sale by 3rd

party, the buyer does not have

written proof to controvert the claim

Ortega v Leonardo: Not just partialpayment, but also other modes

possession, making of improvements,


16/23

rendition of services as long as it puts the

other party in estoppel

Failure to object to presentation of evidence not inwriting

Electronic commerce

ELECTRONIC DOCUMENTSread this later. Tamad.

Performance or consummation

Obligations of sellero Preserve subject matter (GFF)o Deliver subject matter (transfers ownership)o Deliver fruits and accessories (from perfection)

Real right only exists upon deliveryo Warrant object of the sale

Obligations of buyer

o Pay the price Non payment does not prove simulation just gives

seller right to sue for collection or rescind

o Accept delivery of thing sold Must give sufficient time to examine goods Seller still liable for breach for warranties except if

buyer did not give notice of breach in reasonable time

Just giving notice that he wont accept isenough; noneed to re-deliver goods to seller he then becomes

a depositary thereof

Traditiono Equatorial Realty: there is delivery when thing sold is placed

in control and possession of the vendee

o Critical factor: intent to delivero Must be after valid contract of saleo Types:

Actual: control and possession Constructive: any manner signifying transfer of

possession

Symbolic: by delivery of keys of the place ordepository where thing is kept

o Execution of public instrument: both for movables andimmovables equivalent to delivery of the thing, unless

contrary can be inferred

Prior physical delivery or possession not required 3 exceptions:

1. Where there is contrary st ipulation, ex:

o Fixed date of taking possessiono Stipulated that in installments, until

last installment paid, title remains

with seller

o Seller reserves use of property untilgathering pending crops

2. Seller did not control the subject matter atthe time of execution of the public instrument

o moment of sale material deliverycould have been made

o Addison: EXCEPTION TOmoment of sale rule: expressagreement that purchaser will take

necessary steps to obtain material

possession of the thing from a third

person

o PCIC v CA: operative term iscontrol not possession even

with squatters, there can be

constructive delivery

3. Seller did not have control or ability totransfer physical possession for a

reasonable length of time after execution of

public instrument (Pasagui v VIllablanca)

o Modes of constructive delivery: Constitutum Possessorium sold as owner, continue

to possess as lessee

Traditio Brevi Manu buyer bought as lessee thenbecame owner

Traditio Longa Manu delivery by agreemento Delivery of incorporeal property:

Execution of public instrument Placing titles of ownership in possession of buyer


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Use by the buyer of his rights, with sellers consent Delivery through Carrier

o Default rule: delivery to carrier to delivery to buyer If seller fails to contract with carrier with regard to

nature of goods/other circumstances:

Buyer may decline to treat delivery to carrieras to himself

o F.A.S. sales (Free alongside ship) Seller pays all charges Seller bears risk until goods placed alongside the

vessel

o F.O.B. sales (Free on Board) Seller bears all expenses until goods are delivered

FOB

F.O.B. shipping point delivery to carrier isdelivery to buyer

F.O.B. destination only when vessel hasarrived at destination is there deemed to bedelivery to buyer

o C.I.F. sales (Costs, insurance, freight) Buyer pays for costs, insurance, freight Two schools of thought:

1. Seller is mere agent for buyer, who hasalready acquired the goods during shipping

(General Foods v NACOCO)

2. Seller bears risk as it is part of itsresponsibility in picking CIF (Behn Meyer)

BUT, generally, in CIF and FOB these are meredefault rules and they yield to proof of contrary

intention

Ex. General Foods:net landed weightsmeans delivery is upon landing

o Insurance coverage: If shipped in conditions where insurance is usual

seller must inform buyer for buyer to get insurance

Failure to do so: seller must bear risk Completeness of delivery: MOVABLES

o Where seller delivered less goods than what he contracted tosell:

Buyer may reject But if buyer accepts or retains the goods, knowing K

wont be performed in full, must pay at contract rate

If buyer used or disposed the goods before he knowsseller is not going to perform K in full just pay fair

valueo Where seller delivered more goods than what he contracted to

sell:

Buyer may accept goods included in K and reject rest If indivisible subject matter may reject

whole of goods

But if buyer accepts whole of goods, pay for them atcontract rate

o Where seller delivers to buyer goods mixed with goods ofdifferent description:

Buyer may accept goods in accordance with K andreject rest

If indivisible may reject whole of goodso Where delivered to 3rd person not completed unless third

person acknowledges holding the goods in buyers behalf

o Accessories and accessions deliver tooo Sale of specific mass of movables: seeGaiteo Sale by description/sample:

Sales by description orsample: May rescind if bulkof goods do not

correspond with description/sample

Sales by description andsample: Goods must correspond with both

description andsample

o Written proof of delivery: Delivery receipts, etc. Bill of lading NOT a substitute for delivery receipt

(simple evidence of receipt by the carrier)

Factory consignment notice NOT substitute either(just detailed statement of nature, quantity, cost of

thing)

Completeness of delivery: IMMOVABLESo If area stated: seller must deliver all that is stated in contract.

REMEDIES if not complete:


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Proportional reduction of price Rescission of contract (as long lack is more

than 1/10 of area)

Same remedies if qualitynot as specified (also 1/10) BUT if the buyer would not have bought the contract

had he known the smaller area or inferior qualityEVEN if less than 1/10 then he can still rescind

OPTIONS if more than what is stated: Reject excess OR accept all but pay contract rate

Lump sum No change in price even if area is less or

more than in the contract

Santa Ana v Hernandez:Sale of two landsand mentioned areas of each land and

boundaries lump sum

o Absenceof price per unit governsover mention of total area; thus,lump sum

Roble v Arbasa: exception is mention ofthe words more or less which only allows

reasonable excess or deficiency there, 644

m. is NOT reasonable

o Sale of separate parcels in mass will not be set aside, unless: Made to appear larger sum could have been realized

from sale in parcels

Or sale of less than the whole would be sufficient tosatisfy the debt

When delivery does not transfer title:

o On sale or return Buyer has option to return instead of paying price Delivery vests ownership in buyer BUT buyer may

return the goods within time stipulated or reasonable

time

o Sale on acceptance Delivery is transfer only, UNTIL:

Buyer signifies approval

Buyer does not signify approval but retainsgoods without notice of rejection

For bothon sale or return or sale on acceptance:there must be WRITTEN and clear agreement

o When there is reservation of ownershipo

When sale is not valido When seller is not owner

Buyers acceptanceo Not needed to vest ownership upon delivery

Because it is the sellers obligationo If buyer refuses to accept without just cause title passes

when goods placed in his disposal

Double saleso Torrens system priority rules prevailo Where property covered by two different titles:

Earlier prevailso Where property was originally unregistered land:

First buyer bought land under Act 3344, and secondbuyer bought property as registered under Torrens

Title

Torrens prevails buyer can rely on veracity of titleo When first sale is unregistered and second sale is on judicial

sale:

Carumba and RadiowealthFinance: If the land was registered, but first sale was

unregistered, and there was subsequent

judicial sale: second buyer wins

If the land was unregistered: first buyerwins there are no rights to step in to, as

far as the second buyer is concerned

o Under Article 1544 If movable: owner is first person who took possession

in GF

If immovable: To person who first recorded it in ROP in GF If none, to first who possessed in GF If none, to person who presents old title with

GF

For 1544 to apply:


19/23

1. Two valid saleso Ratio: so that the 2nd sale, while not

validated by tradition, can still call

for rescission

2. Exact same subject matter

3. Conflicting interests 4. Bought from same seller

o General rule (but subsidiarily applicable only)primustempore, potior jure

first in time, first in right Cheng v Genato:Applies when one is CTS and one

is COS (because technically, the CTS is not yet a

valid sale per se)

So when there is CTS and CTS buyerfulfilled conditions already, then there was a

subsequent COS, the CTS buyer wins by

virtue of primus tempore, potior jure

Also applies when 1544 does not apply (ex. not sameseller, not exact same subject matter, etc.)

o Purchaser in GF Agricultural and Home Extension v CA:

No notice of other persons right/interest Paid FULL and FAIR price upon

purchase/before notice

If circumstances call forth investigation of flaw in title,he MUST investigate, or else, not in GF

Limketkai: lis pendens buyer not consideredinnocent

Same effect for annotation of adverse claim

There is constructive knowledge by virtue ofrelationship

Carbonell:Second buyer must show continuing GFuntil full ownership vests

But first buyer can simply end thiscontinuing GF by merely registering

Second buyers knowledge of first sale tantamount to registration in favor of first

buyer

Remedies for breach of sale K

Caveat emptor buyer beware (to check title of seller to goods)o Does not apply to Torrens systemo As long as seller did not misrepresent his title

Remedies for movableso Ordinary remedies of seller

Rescission did not receive the thing OR receivedbut did not tender payment

Non payment of price Ownership transferred to buyer

o Specific performance for price Ownership NOT transferred to buyer

o If cannot readily be resold forreasonable price: S can offer to

deliver to B

o If B refuses to receive: S holds thegoods as bailee for B

And ask for specificperformance for price

Price payable on certain dayo Specific performance for price

regardless of delivery

o Defense if S cannot apparentlyperform obligation

Buyer refuses to accept/neglects to accept Damages for non-acceptance. Consider

o Estimated loss directly and naturallyresulting from refusal of buyer to

accept

o In absence of specialcircumstances showing proximate

damage: difference between

contract price and market price of

goods

o If buyer repudiates contract forlabor performed/material expenses

before notice


20/23

o Profits seller would have made ifcontract was performed

o Special remedies of unpaid seller of goods (self help aslong as there is no physical intrusion) [hierarchical]

Possessory lien

Where ownership has transferred to thebuyer:

o Seller has lien on goodso Or right to retain the goods for the

price, while he still possesses them

Where ownership has not transferred to thebuyer:

o Right to withhold delivery co-extensive with his right of lien

Not affected by sale/disposition of goods bythe buyer unless seller assented

o But sellers lien cannot defeatnegotiable instrument of title heldby possessor in GF

When possessory lien of unpaid seller maybe exercised:

o Where goods were sold without anycredit stipulation

o Where goods were sold for creditbut term of credit expired

o Where buyer has become insolvent Loss of possessory lien:

o Seller delivers goods to a carrier orother bailee to transmit to buyer

without reservation of ownership

o Buyer or his agent lawfully obtainspossession of the goods

o Waiver Stoppage in transitu

Right to stop goods in transit may resumepossession of the goods

Not affected by sale/disposition of goods bythe buyer unless seller assented

o But sellers lien cannot defeatnegotiable instrument of title held

by possessor in GF

When goods are in transit:o From carrier/other bailee until buyer

takes delivery of themo Goods rejected by the buyer and

carrier/bailee continues in

possession of the goods

When goods not in transit:o Buyer acquires goods before

destination

o Carrier recognizes goods are beingheld for buyer

o Carrier/bailee wrongfully refuses todeliver goods to the buyer

Exercise of right:o Actual possessiono Giving notice to the carrier

If there is negotiable document of title needto cancel first before carrier can deliver the

goods to the seller again

Special right of resale Requisites:

o Perishable goodso Seller expressly reserves right of

resale in case of buyers default

o Buyer has been in default forunreasonable time

Seller may resell even without rescission oforiginal sale K

Buyer liable for difference, if sale if for lessthan K price and damages for breach

EVEN if buyer is already owner of the goods No need for seller to give notice to the buyer

o If not perishable, need notice to seeif unreasonable time

Seller cannot buy the goods for himself


21/23

Special right to rescind When right may be exercised:

o Reserved right to do soo Default for unreasonable time

Buyer liable for breach

Manifest notice to B for notice to rescindo Technically, no needonly to

determine if default is unreasonable

o Remedies for buyer Failure of seller to deliver

Specific performance Breach of sellers warranty

Accept goods and set up against sellerbreach of warranty through diminution of

price

Accept goods and maintain action againstseller for damages

Refuse to accept goods and maintain actionfor breach of warranty

Rescind contract of sale mutual restitution Suspension of payments in anticipation of breach

If buyer has reasonable fear of disturbance,vindicatory action, foreclosure

o Until seller had caused disturbanceto cease

o Or issues a security for return of theprice

o Or stipulated that buyer must payregardless

Trespassing =/= ground to suspendpayments

o RECTO LAW Options in 1484:

1. Exact fulfillment of obligation, if buyer failsto pay any installment

2. Cancel the sale, if buyer fails to pay 2 ormore installments

3. Foreclose CM on the thing, if buyer fails topay 2 or more installments

o No action to recover unpaidbalance

Levy Hermanos: car sold for two installments only

So there can be no default of 2 or moreinstallments

Can foreclose on CM andrecover deficiency Industrial Finance v Ramirez: Recto law applies to

financing transactions

When seller assigns credit to another person he may avail of the remedies

May only choose one remedy But failure of one: can avail of another

Tanjanlangit v Southern Motors: For specificperformance, there can be levy on CM because

action is on the note

Rescissionusually theres no more return of price tocompensate for deterioration

Stipulation not to return payments = valid aslong as not unconscionable

Nature of rescission: no further recovery Universal Motors: mere securing of possession is

notforeclosure; there has to be actual foreclosure

Cruz v Filipinas Investment: Foreclosure cannotforeclose on the guarantee too

If mortgagee enforces on ADDITIONALSECURITIES he loses lien on the CM

Filipinas Investment v RidadWhen there can berecovery even of attorneys fees or costs: PERVERSE

MORTGAGOR/BUYER

When the defaulting buyer-mortgagorrefuses to surrender to CM to prevent

foreclosure

o Contracts to sell movables no rescission because failure topay is a failure of a suspensive condition

o Lease with option purchase: Recto law applies becauseunderlying contract is really a sale on installments


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Elisco Tool v CA: taking back possession of subjectmovable, treated as a foreclosure and there is barring

effect

Remedies for immovableso Remedies of seller

Anticipatory breach If seller has reasonable fear of loss/breach

may immediately sue for rescission of sale

ELSE, can only rely on substantial breach Failure of buyer to pay price

Does not bar transfer of ownership or nullifythe contract of sale

But can rescind it by judicial/notarial demand Art. 1592: even if it is stipulated that failure to

pay the price leads to rescission, there has

to be demand for rescission first to grant

the buyer every opportunity to comply with

the obligation JM Tuason v Javier: if there is substantial

performance, there can be recovery as if there has

been strict fulfillment, minus damages

o Remedies of buyer Suspension of payment

Reasonable fear of disturbance or danger,unless seller gives security for return or price

Subdivision or condominium projects No forfeiture for failure to develop

condominium/subdivision and stopped

payment

Can ask for refund of what was paid noticeand demand for refund can be simultaneous

P.D. 957 retroactively applieso MACEDA LAW

Applies to COS and CTS First determine if residential, commercial,

etc.

o Excluded: industrial lots,commercial buildings, sales to

tenants under RA 3844 (land

reform)

ALSO must be by installment. Covers financing.

60 days grace period

Then, from notice of cancellation, another 30 daysbefore actual cancellation happens.

Under this period, there is payment for interest Cash surrender value:

At least 2 years refund 50% of paid cash Less than 2 years no return of cash

surrender value

Twin requirements: Notarial act of rescission Cash surrender value THEN you give notice to the buyer of

compliance with the notices.

When you deal with an immovable:

1. Determine if covered by RA 6552; if not, apply civil code 1191 or 1592.2. In both cases, if it involves COS, then judicial rescission or notice of

rescission IS IMPORTANT. It must be a notarial act, else it wont take

effect.

3. For the Maceda law, it doesnt distinguish between CTS and COS.a. Determine: w/n the buyer has paid for more than 2 years or

less than 2 years

b. If less than 2 years: 60 daysi. Within this period, one can pay the balance w/o

interestii. After 60 days period, there can be notice of

cancellation/rescission in both cases, notarized

iii. After 30 day period, FINALiv. McLaughlin: jurisprudence allows additional 30 day

grace period wherein one HAS TO PAY INTEREST

THIS TIME can salvage obligation

c. If more than 2 years:i. Grace period dependent on how many years one has

paid


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ii. 30 days = 1 year paid1. Minimum is still 60 days

iii. After grace period one has to give notice AND cashsurrender value

Rescission in sales Ks covering movables

Distinguish two kinds of rescission:o Art 1381 reparation of damages, when there is lesion

Subsidiary remedy Filed by he with Right to First Refusal which was

violated (rescission for lesion)

Even third persons may fileo Art 1191 reciprocal obligations, and substantial breach

(resolution)

Restitution As though contract was void in its inception BREACH OF FAITH, not failure for condition to arise

Never if there is substantial performance Principal remedy GENERALLY judicial

May only extra-judicially rescind if there isexpress stipulation for it

But there still must be judicial declaration toconfirm propriety

Needs POSITIVE act, never automatic Only injured party may demand for it

CTS v COSo CTS, at perfection, must:

Have stipulation that the SM remains with seller untilfull payment of the price

Specific right granted to seller to EJ rescind/cancelthe contract in case of default

If this is missing, it is a COS ALSO, when there is stipulation that the seller

executes a deed of absolute sale upon completion of

payment of the purchase price by the buyer

o Consummation stage: COS title passes upon delivery

Non payment is a SUBSTANTIAL BREACH CTS not passed to buyer until full payment of

purchase price

Payment of price is a suspensive conditioneven which prevents obligatory force of the K

from coming abouto Remedies:

COS need to rescind to recover ownership there can be forfeiture of payments, as long

as provided and not unconscionable

CTS ownership retained, so contract isautomatically extinguished

Only action: recovery of possession Compare to conditional contract of sale:

failure of condition may still lead to specific

performance, whereas in CTS, failure of

condition NO K

Return payments BUT there can be exercise of equity

jurisdiction, when sufficient payments

have been made

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Midterms Notes for Sales

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