Contract of sale-is a contract whereby one of the parties called the seller or vendor obligates himself to deliver something to the other called the buyer or purchases or vendee who on his part, binds himself to pay therefor a sum of money or its equivalent known as the price.
Characteristics of a contract of sale: CBOCNP
Essential requisites of a contract of sale:
- Consent or meeting of the minds
- Object or subject matter
- Cause or consideration
Note: There may however be a sale against the will of the owner as in the case of expropriation of property, execution sale to enforce a judgment of a court, and foreclosure sale of mortgage or pledged property.
Note: The cause in sale is as to the seller: the buyer’s promist to pay the price
As to the buyer: the seller’s promise to deliver the thing sold.
Natural and accidental elements:
- Natural elements- are those which are deemed to exist in certain contracts:
- Warranty against eviction
- Warranty against hidden defects
Natural vs. Essential
Natural: if one is not present, there can be a contract of sale
Essentail: Absence of one, no contract of sale
- Accidental elements or those which may be present or absent depending on the stipulation of the parties:
- Time or place of payment
2 kinds of Contract of Sale:
- Resolutory condition
- Suspensive condition
Requisites concerning object:
- Things: a. determinate
- Licit /lawful
- Not be impossible
- Rights: those which are transmissible or personal maybe the object of a contract of sale.
Services: cannot be an object of a contract of sale.
Kinds of illicit things:
- Illicit per se
- Illicit per accidens – because of some provisions of law declaring it to be illegal.
- Lottery ticket
- Prohibited drugs
Right of vendor to transfer ownership:
- One can sell only what he owns
- Sufficient if right exists at the time of delivery.
Art. 1460 and 1461
It is not necessary that the thing sold must be in sight at the time the contract is entered into.
Potential existence – honey harvest, the thing sold must be specific and identified.
Sale of hope or expectancy is valid even if the thing hoped or expected does not come into existence.
Sale of vain hope: void. Ex. sale of falsified sweepstakes is
100 sq. meters
If X deliver only 70, X has no obligation to deliver the 30 and Y has a right to demand fulfillment of the delivery of the balance.
If in excess, co-owner
If subject matter is indeterminate – the contract is VOID. To make it valid, another contract should be executed to make it determinate.
Emptio rei sparati – sale of potential existence that it will certainly come.
Emptio Spei – sale of the hope itself, it may come into existence or not.
In the absence of intention, the court favors Emptio Rei sparati
Goods which may be the object of sale:
- Existing goods
- Future goods – goods to be manufactured, raised or acquired by the seller after the perfection of the contract.
- Acquisition by the seller depends upon a contingency which may or may not happen.
If object has a criminal offense:
- In pari delicto- no cause of action against each other, both are criminally liable. Cannot demand what he give.
- Only one party is guilty – both subject to criminal prosection. Innocent party can demand from the guilty party.
If object is non-criminal:
- In pari delicto – cannot demand the return of what he has given
- Innocent party can demand the return of what he has given.
1463. The sole owner of a thing may sell an undivided interest therein.
Sale of undivided interest in a thing – the effect is to make the buyer a co-owner.
Co-owner can dispose of his share even without the consent of the other co-owners.
Ex. Lot owned by X,Y,Z 300 sq. meters.
Z can sell his interest to S.
Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale.
Resolutory condition defined.
Art. 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 considered.
Contract of agency defined.
Sale vs. Agency to sell
AGENCY TO SELLSeller-agent-buyer
1. Buyer receives the goods as owner
the agent receives the goods as the goods of the principal who retains his ownership over them.
2. Buyer has to pay the price
the agent has simply to account for the proceeds of the sale he may make on the principal’s behalf
3. Buyer cannot return the object sold
The agent can return the object in case he is unable to sell the same to a third person
4. Seller warrants the things sold
The agent makes no warranty for which he assumes personal liability as long as he acts within his authority and in the name of the seller.
5. Buyer can deal with the thing sold as he pleases being the owner.
The agent in dealing with the thing received, must act and is bound according to the instructions of his principal.
CONSIGNMENT – EXAMPLE OF AN AGENCY TO SELL
X_______________Sold Sweepstakes to Y.
This is a contract of sale because booklet is considered sold.
Art. 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 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.
Contract for a piece of work defined.
Contract of sale vs. Contract for a piece of work.
Contract of sale- manufactured for the general market
Contract for a piece of work – specially manufactured for a customer
Contract of Sale
Contract for a piece of Work
a. Thing transferred is one which would have existed
One not in existence and which would never have existed.
b. Risk of loss before delivery is borne by buyer
Risk of loss before delivery is borne by the worker/contractor
c. Within the statute of frauds
Not within the statute of frauds
ART. 1468. IF THE CONSIDERATION OF THE CONTRACT CONSISTS PARTLY IN MONEY AND PARTLY IN ANOTHERR THING, THE TRANSACTION SHALL BE 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.
Contract of Barter – one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing.
Contract of sale – vendor gives a thing in consideration for a price in money.
- Intent is necessary, the manifest intention.
- If intent is not clear, apply that whichever is higher.
No sale if price is not certain or ascertainable.
A price is certain if:
- It is with reference to another thing certain
- Capable of being ascertained in money or its equivalent
- The determination of the price is left to the judgment of a specified person/persons.
Judgment of specified person or persons – the price set is binding upon the parties except: a)bad faith and b) unreasonable
Effect where price is not fixed by 3rd person designated:
- Contract becomes ineffective
- If fault of the seller/buyer, the NOT guilty party may choose:
- Rescission with damages, OR
- Fulfillment with damages – the court shall fix the price.
Contract of sale is perfected when there is :
- Meeting of minds upon the thing which is the object of the contract.
Right of first refusal – in case A will sell the property, he must first offer it to b.
_ it is applied if there is SALE only, NOT APPLIED IF deed of exchange only like lot in exchange of shares of stocks.
A-----------------------B. A leased a lot to B
Gross inadequacy of price is valid, it does not affect the validity of the contract of sale except:
- When consent is vitiated: Mistake, Fraud, Violence, intimidation and undue influence
- When parties intended a different contract
- 1471 – relatively simulated contract and absolutely simulated contract
- When the price is shocking to the conscience of man
Effects or remedy:
- Vitiated – contract is voidable
- Different Contract – reformation, institute a deed of donation
- 1471 : RSC – reformation
: ASC – VOID
- Shocking to the conscience of man – VOID
The price must be a mutual agreement.
Fixing of price by one of the contracting parties are not allowed.
However, where the price fixed by one party is accepted by the other, the contract is deemed perfected because in this case, there exists a true meeting of minds upon the price.
Advertisements – are mere offer to sell
Contract perfected, seller does not deliver, what are the remedies of the buyer:
- Specifiic performance
- Demand damages
Contract perfected, buyer does not pay, what are the remedies of the seller:
- Rescission with or without damages
- Demand for payment/collect/file a case for collection of a sum of money with damages
Note: choose one remedy only bccause rescission and specific performance are alternative remedies and not commutative.
KINDS OF DELIVERY REFER TO PARAS
Note: Non payment of the price, after the thing has been delivered, prevents the transfer of ownership only is such is the stipulation of the parties.
PROMISE TO BUY AND SELL VS. CONTRACT OF SALE