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SALES Midterms Reviewer

SALES Midterms Reviewer

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SALES Midterms | Karichi Santos Page
1
of 
25
 
I. General Concepts
 A
.
 
D
efinition of Sales
 Article 1458, Civil Code
By the contract of sale, one of the contracting parties (seller) obligates himself to (1)
transfer the ownership
of and (2) to
deliver
a determinate thing and the other (buyer) to pay therefor a price certain in money or its equivalent.A contract of sale may be
absolute
or
conditional
.
COMMERCIAL SALE
y
 
I
s the sale of personal property for the
purpose of resale
, either in the same form or in a different form, with the intention of derivingprofit in the resale
y
 
Prior sales law distinguished between commercial sales and civil sales
o
 
e.g. in terms of risk of loss and deterioration and hidden defects
y
 
Such distinction has been abrogated by the provisions of the Code of Commerce on Sales
B
.
 
N
ature of obligations created
 
R
eciprocal obligations (contract of purchase and sale)
 Article 1458
, Civil Code  refer above
 Article 1165, Civil Code
When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Art 1170(damages for breach of obligation), may compel the debtor to make the delivery (specific performance).
I
f the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor (substitutedperformance)
C.
 
Sales distinguished from other transactions
a. Contract for a piece of work
 Article 1713, Civil Code
By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, inconsideration of a certain price or compensation. The contractor may either employ only his
labor or skill
O
R
 
also furnish the material
.
 Article 1467, Civil Code
 
CONTRACT OF 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
 
CONTRACT FOR A PIECE OF WORK 
if the goods are to be manufactured
specially for the customer
AND
upon his special order
 
, and notfor the general market
Celestino Co. & Co. v. Collector 9
2
Phil 84
1
(
1
9
56)
 Although windows and doors were made only when customers placed their orders, it does notalter the nature of the establishment which accepts orders as called for the employment of materials which it manufactures ordinarily andhabitually, it is a contract of sale.
I
f it accepts a job that requires extraordinary or additional equipment or involves services not generallyperformed by it, it is a contract for a piece of work.
I
MPO
R
TANCE OF D
I
ST
I
NCT
I
ON
y
 
Difference in the rules governing both contracts (e.g. tax rates and other charges are lower for contractors) and application of SoF
y
 
In
chausti v Cromwell -
SC adopted Massachusetts rule that the test whether the thing transferred is one not in existence and which neverwould have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been subject of sale tosome other person, even if the order had not been given.
y
 
rue test of a Co
n
tractor 
 he renders service in the course of an independent occupation,
representing the will of his employer
only asto the
result of his work
 
, and
not as to the means
by which it is accomplished (
L
uzo
n
Stevedori 
ng
Co v 
ri 
n
idad 
and
L
a Carlota Su
g
ar Ce
n
tral v 
ri 
n
idad 
).
y
 
M
ore examples of CON
TR
 AC 
OF SA
LE 
:
 
o
 
future sale of articles which he is habitually making although at the time not made or finished
 
o
 
article ordered is exactly such as plaintiff makes and keeps on hand for sale to anyone and no change or modification of it ismade at defendants request although made after and in consequence of, defendants order for it
 
 
SALES Midterms | Karichi Santos Page
2
of 
25
 
b. Lease of things
 Article 1643, Civil Code
I
n the lease of things, one of the parties binds himself to give to another, the
enjoyment or use
of a thing
for aprice certain
 
, and for a period which may be definite or indefinite. However, no lease for more than 99 years shall be valid.
 Article 1484, Civil Code
V
endors alternative remedies in a
 
contract of sale of personal property price of which is payable in installments1.
 
Exact fulfillment of obligation in case of failure to pay (specific performance)2.
 
Cancel sale in case of failure to pay two or more installments3.
 
Foreclose the chattel mortgage
 Article 1485, Civil Code
Art 1484 also applicable to
contracts purporting to be leases of personal property with option to buy
 
, when
lessor has deprived lessee of the possession or enjoyment of thing
.
y
 
So-called rents must be regarded as payment of prince in installments since due payment of the agreed amount results in thetransfer of title to the lessee
J
ose v. Barrueco,
67
Phil
7
4
7
(
1
939
)
 
  The total rents being equal to the value of the thing leased, the SC considered the transaction as one of sale.c. Agency to buy or sell
 Article 1868, Civil Code
By a contract of agency, a person binds himself to
render some service
or to
do something in representation oron behalf of another
 
, with the consent or authority of the latter.
 Article 1466, Civil Code
 
I
n construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell,
essential clauses of the whole instrument
shall be considered.CONT
R
ACT OF AGENCY TO SELL
y
 
Agent receives the thing to be sold and
does not pay for its price
 
, but delivers to the principal the price he obtains form the sale of thething to a third person, and if he does not succeed in selling it, he
returns the thing
. (
Q
uiro
g
a v Parso
n
s Hardware Co
)
y
 
Agent is exempted from all liability in the discharge of his commission, provided he acts in accordance with the instructions received fromhis principals, and the latter (principal) must indemnify the agent for all the damages which he may incur in carrying out the agencywithout fault on his part.
y
 
I
R
R
amcar  
Distributor obliged to accept delivery per month and pay price on delivery at wholesale price, without discount, rebate orother deduction; SC held that it was a contract of sale, not agency
 
SALE CONTRACT OF AGENCY TO SELL
Buyer pays the price Agent does not payBuyer acquires ownership over the object of thecontractAgent does not acquire ownershipSeller warrants Agent does not warrant, unless he agreesEssence of sale
:
transfer of title or agreement totransfer it for the price paid or promisedEssence of agency
:
delivery to the agent of the goods not as the agents propertybut of the principal who remains the owner and has the right to control the salesby the agent, fix the price and terms, demand and receive the proceeds of thesales less the agents commission
Ker & Co., Ltd v. Lingad, 38 SCRA
52
4 (
1
9
71)
 
  Agent designated as exclusive dealer of manufacturer within prescribed territory, with stipulationthat (1) title to goods remain with manufacturer until paid in cash or acceptable security, that (2) price, discounts and terms of sale shall be thoseestablished by the manufacturer and that (3) proceeds of the sale shall be held in trust for the manufacturer.
R
elationship between agent andmanufacturer is agencyd. Barter or exchange
 Article 1638, Civil Code
By a contract of barter or exchange, one of the parties binds himself to
give one thing
in
consideration
of the
others promise to give another thing
.
 Article 1468, Civil Code
if the consideration of the contract consists partly in money and partly in another thing, the transaction shall becharacterized by the manifest intention of the parties.
I
f such intention does not clearly appear, it shall be considered a
:
 BA
R
TE
R:
if value of the thing given as part of the consideration > amount of the money or its equivalent
y
 
Because the true cause of the contract for the other party is the thing transferred and not the money.SALE
:
if 
 
value of thing < amount of money or its equivalent
 
value of thing = value of money
 
SALES Midterms | Karichi Santos Page
3
of 
25
 
 
M
a
n
ifest i 
n
te
n
tio
n 
 judged by the parties contemporaneous and subsequent acts
 
 xceeds the amou
n
t of mo
n
ey 
 
 
  CC does not provide to what extent the value of the thing given as a consideration should exceed the amount of money given for the contract to be considered as a bartere. Dacion en Pago
 Article 1245, Civil Code
Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall begoverned by the law of sales.
y
 
There is a novation of the contract of loan into a contract of sale when creditor agrees to accept a thing in payment of the debt.
y
 
I
f thing given in payment turns out to belong to another, creditors remedy governed by law on sales not on loan.
SALE DACION EN PAGO
No pre-existing credit Pre-existing creditGives rise to obligations Extinguishes obligationsCause or consideration is the price from the viewpointof the seller; or the obtaining of the object, from theviewpointCause or consideration from the viewpoint of the person offeringthe dation in payment is the extinguishment of his debt; from theviewpoint of the creditor is the acquisition of the object offered inlieu of the original creditGreater freedom in the determination of the price Less freedom in determining the priceGiving of the price may generally end the obligation of the buyerGiving of the object in lieu of the credit may extinguish completelyor partially the credit (depending on the agreement)
Sonny Lo v. K
J
S Eco-Formwork System Phil., Inc., G.R. No.
1
494
20
(
200
3
)
 
-f. Chattel Mortgage
Sectio
n
3, Chattel 
M
ort 
g
a
g
e
L
aw 
Chattel mortgage is a
conditional sale of personal property
as security for payment of debt or theperformance of some other obligation specified therein.
y
 
Condition sale shall be void upon seller paying to purchaser a sum of money or doing some other act named. Performance of saidcondition renders the sale immediately void and mortgagee is divested of his title.
 Article 2140, Civil Code
By a chattel mortgage, personal property is
recorded in the Chattel Mortgage Register
as a
security for theperformance of an obligation
.
I
f the movable, instead of being recorded is delivered to the creditor or a third person, the contract ispledge and not a chattel mortgage.g. Donation
 Article 725, Civil Code
Donation is an
act of liberality
whereby a person
disposes gratuitously
of a thing or right in favor of another, who
accepts
it.
 Article 726, Civil Code
There is also a donation when
:
 1.
 
a person gives to another a thing or right on account of 
:
 a.
 
latters meritsb.
 
services rendered by him to the donor, provided they do not constitute a demandable debt2.
 
gift imposes upon the done a burden which is less than the value of the thing given
 Article 745, Civil Code
the done must accept the donation
:
 1.
 
personally2.
 
through an authorized person with a
:
 a.
 
special power for the purposeb.
 
general and sufficient powerOtherwise, the donation shall be void
 Article 746, Civil Code
Acceptance must be made during the lifetime of the
donor
and of the
donee
 
 Article 747, Civil Code
Persons who accept donations
in representation of others
who may not do so by themselves shall be obliged tomake the notification and notation of which Art 740 speaks.

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