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Northern CPAR: Business Laws – Law of Sales

NORTHERN CPA REVIEW

Rm. 412 Pelizloy Building, Lower Session Rd., Baguio City Contact Numbers: 09294891758; 09272128204 E-mail: ncpar@yahoo.com

BUSINESS LAW Law on Sales

Sale

ATTY. ANDRIX DOMINGO, CPA

→ one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain or is equivalent.

Elements of a contract of sale

  • 1. Essential elements/requisites

    • a. Consent or meeting of minds –

    • b. Object of subject matter –

    • c. Cause –

  • 2. Natural elements

    • a. Warranty against eviction

    • b. Warranty against hidden defects

  • 3. Accidental elements

  • As to the presence or absence of conditions, what are the two kinds of contract of sale? (1) Absolute (2) Conditional

    Characteristics of a contract of sale

    • 1. Consensual

    • 2. Principal

    • 3. Bilateral

    • 4. Onerous

    • 5. Commutative

    • 6. Nominate

    Sale distinguished from contract for a piece of work Sale distinguished from barter Sale distinguished from contract to sell Sale distinguished from agency to sell

    Requisites of object if a contract of sale

    • a. The thing must be within the commerce of men.

    • b. The thing must be licit

    • c. The thing must be determinate

    Emptio rei sperati is the sale of a future thing; emptio spei deals with a present thing – the hope or expectancy.

    Fungible goods are goods of which any unit, from its nature or by commercial usage, is regarded as the equivalent of any other unit

    Price

    is the sum stipulated as the equivalent of the thing sold

    The price of the thing sold must be certain

    Effect if price cannot be determined

    →The sale shall be inefficacious

    Gross inadequacy of price does not affect a contract of sale

    If the price is simulated, the sale is void

    When a contract of sale is perfected

    A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

    What is the form required by law for a contract of sale?

    No particular form is required.

    Promise to buy and/or sell

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    • 1. Bilateral promise – this takes place when one party promises to buy and the other party promises to sell a determinate thing at an agreed price.

    • 2. Unilateral promise – the promise to buy or to sell a determinate thing at a certain price made by only one of the parties.

    What is the effect of an unaccepted promise or offer to sell or to buy a thing for a price certain?

    It creates no juridical effect or legal bond. Such an unaccepted offer is called policitation.

    • a. If accepted by the promissee, the promise is binding upon the promissor if it is supported by a consideration distinct from the price.

    Sale by sample; description; and sample and description

    • 1. Sale by sample The parties contract solely with reference to the sample.

    • 2. Sale by description The parties contract solely with reference to the description

    • 3. Sale by sample and description If the goods delivered do not correspond with the sample, description, or sample and description, as case may be the buyer may ask for the rescission of the sale.

    Remedies of vendor in installment sales of personal property (Recto Law) (Art.

    1484), and contracts purporting to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing

    • 1. Exact fulfillment of the obligation should the vendee fail to pay.

    • 2. If the vendee’s failure to pay cover two or more installments, he may, at his option, avail himself of the first remedy, or do either of the following:

      • a. Cancel the sale

      • b. Foreclose the chattel mortgage on the thing sold, if one has been constituted.

    Who may enter into a contract of sale?

    • a. General Rule – All persons, whether natural or juridical, who are authorized by the Civil Code to oblige themselves may enter into a contract of sale.

    • b. Exceptions – they refer to those cases where the law determines that a party suffers from either:

    (1) Absolute incapacity – It exists in the case of persons who cannot bind themselves; or (2) Relative incapacity – It exists only with reference to certain persons or a certain class of persons.

    OBLIGATIONS OF THE VENDOR

    Enumerate the principal obligations of the vendor.

    • a. to transfer the ownership of the determinate thing sold;

    • b. to deliver the thing;

    • c. to warrant against eviction and against hidden defects;

    • d. to take of the thing pending delivery with proper diligence; and

    • e. to pay for the expenses of the deed of sale, unless there is a stipulation to the

    contrary.

    Delivery or tradition

    It is a mode of acquiring ownership whereby the object of the contract is placed in the control and possession of the vendee, either actually or constructively.

    Kinds of delivery or tradition

    • 1. Actual or real delivery – delivery by physically placing the thing sold in the hands of the vendee (in case of movables) or physically placing it in his possession and control (in case of immovables)

    • 2. Constructive or legal delivery

      • a. By legal formalities – when the sale is made through a public instrument

      • b. Symbolic delivery (traditio simbolica) – this is delivery that takes place by delivering the keys of the place of depository where the movable is stored or kept.

      • c. Traditio longa manu – it takes place by the mere consent or agreement of the contracting parties as when the vendor merely points to the thing sold which shall thereafter be at the control and disposal of the vendee

      • d. Traditio brevi manu – It takes place by the mere consent or agreement of the parties if the vendee is already is possession of the thing sold by virtue of another title as when the lessor sells the thing leased to the lessee

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    e. Traditio constitutum possessorium – Delivery that takes place when the vendor continues in possession of the thing sold after the sale but in another capacity such as that of a lessee or depositary.

    • 3. Delivery of incorporeal property

    a.

    By constructive tradition – delivery of incorporeal property by the execution of a public document.

    b.

    Placing the titles of ownership in the possession of the vendee

    c.

    Use by the vendee of his rights with the consent of the vendor.

    d.

    “Sale or return” and “sale on approval”

    • 1. Sale or return The ownership of the goods is transferred to the buyer on delivery

    • 2. Sale on approval Ownership of the goods remains with the seller despite delivery

    Transfer of ownership by delivery of specific goods to carrier or other bailee

    General Rule – Delivery of goods to a carrier or other bailee for the purpose of transmission to the buyer transfers ownership to the buyer. Exceptions: i.e. ownership of specific goods is retained by the seller despite delivery to carrier or other bailee in the following cases:

    • 1. When there is a stipulation to that effect.

    • 2. When by the terms of the bill of lading, the goods are to be delivered to the seller, or his agent or to the order of the seller or his agent.

    • 3. When by the terms of the bill of lading, the goods are to be delivered to the order of the buyer or his agent, but the bill of lading is retained by the seller or his agent.

    • 4. When the seller draws on the buyer a bill of exchange for the price of the goods and transmits the bill of exchange and the bill of lading to the buyer to secure acceptance or payment of the bill of exchange, but the buyer dishonors such bill of exchange.

    When seller’s title to the goods is voidable

    If the seller’s title is voidable but the same has not been avoided at the time of the sale, the

    buyer acquires a good title to the goods provided; he buys them in good faith, for value, and without notice to seller’s defect of title.

    What is the nature of documents of title?

    Documents of title refer to goods and not to money.

    What is the function of documents of title?

    A document of title is a symbol of the goods covered by it serving as evidence of (1) transfer

    of title and (2) transfer of possession. It also serves as an evidence of the (3) contract between parties who are bound by its terms. So far as concerns the transfer of property between the parties, their intention would be effectual without the document, but where third parties rights are involved, the form of the document becomes important.

    Classes of documents of title

    • 1. Negotiable documents of title A negotiable document of title is one in which it stated that the goods will be delivered

    to bearer, or to order of any persons named in such document.

    • 2. Non-negotiable documents of title A non-negotiable document of title is one in which it is stated that the goods are to be

    delivered to a specified person.

    Time and Place of delivery of thing sold

     
    • 1. Place of delivery

    a.

    Place stipulated

    b.

    If there is no stipulation, place fixed by usage or trade

    c.

    In the absence of both, the seller’s place of business if he has one; If none, the seller’s place of residence.

    • 2. Time for delivery of goods

    a.

    Time stipulated

    b.

    If there is no stipulation, delivery must be made within a reasonable time from the execution of the contract.

    Goods in the possession of a third person

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    The seller has not fulfilled his obligation to deliver the goods unless such third persons acknowledges to the buyer that he holds the goods on the buyer’s behalf.

    Demand or tender of delivery

    It must be made at a reasonable hour to be effectual.

    Expenses of delivery

    The seller bears the expenses of and incidental to putting the goods into a deliverable state, unless otherwise stipulated.

    Rights of the buyer when quantity or quality of goods delivered is different from that which the seller contracted to sell.

    • 1. When the quantity delivered is less than that which the parties had agreed upon, the buyer may:

      • a. Reject the goods

      • b. Accept the goods

  • 2. When the quantity delivered is more than that which the parties agreed upon, the buyer may:

    • a. Accept the goods agreed upon and reject the rest.

    • b. Accept the whole of the goods delivered and pay for them at the contract rate.

    • c. Reject the whole of the goods if they are indivisible

  • 3. When the seller delivers the goods agreed upon but are mixed with goods of different description, the buyer may:

    • a. Accept the goods agreed upon and reject the rest, if the sale is divisible.

    • b. Reject the whole of the goods, if the sale is indivisible.

  • Unpaid Seller

    → is one who has not been paid or tendered the whole of the price

    What are the rights of the unpaid seller?

    Even if the ownership in the goods has already passed to the buyer, they are:

    • a. A lien of the goods or right to retain them for the price while in his possession;

    • b. A right of stopping the goods in transitu in case of insolvency of the buyer;

    • c. A right of resale; and

    • d. A right to rescind the sale.

    Sale of real estate with a statement of its area at the rate of a certain price per unit

    of measure or number

    • 1. If the actual area is less than that stated in the contract.– the buyer may:

      • a. Ask for a proportionate reduction in the price if the lack in area is less than one-tenth of that stated in the contract, unless the vendee would not have bought the thing had he known of its smaller area, in which case, he may opt to rescind the sale.

      • b. Rescind the sale if the lack in area is not less than one-tenth of that stated.

  • 2. If the actual area is more than that stated in the contract– The buyer may:

    • a. Accept the area stated in the contract and reject the rest.

    • b. Accept the whole area and pay for them at the contract rate.

  • 3. If the area is the same but a part of the immovable is not of the quality specified in the contract– the buyer may:

    • a. Ask for a proportionate reduction of the price if the inferior value of the thing does not exceed one-tenth of the price agreed upon, unless the buyer would not have bought the thing had he known of its inferior quality, in which case, he may opt to rescind the sale.

    • b. Rescind the sale if the inferior value of the thing exceeds one-tenth of the price agreed upon.

  • Sale of real estate for a lump sum and not at the rate of a certain sum for a unit of measure or number

    → The vendor is bound to deliver all that is included within the boundaries stated in the contract although there be greater or less area or number than that stated in the contract.

    Rules or preference in case of double sale

    • 1. Movable property Ownership shall be transferred to the person who first took possession of the property in

    good faith.

    • 2. Immovable property

      • a. Ownership shall belong to the person who in good faith first registered the sale in the Registry of Property

      • b. It there was no registration, ownership shall belong to the person who first took possession thereof in good faith

      • c. In the absence of both registration and possession, ownership shall belong to the person who presents the oldest title in good faith.

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    CONDITIONS AND WARRANTIES Conditions in a contract of sale

    If not fulfilled, the other party may choose to do any of the following:

    • a. Refuse to proceed with the contract.

    • b. Waiving the performance of the condition.

    Kinds of Warranties

    • 1. Express warranty

    • 2. Implied warranties → Warranty against eviction – this refers to the implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing.

    → Warranty against hidden defects – this refers to the implied warranty that the thing shall be free from any hidden faults or defects or any charge or encumbrance not declared or known to the buyer.

    Warranty in Case of Eviction

    Eviction

    is the deprivation of the whole or part of the thing purchased by virtue of a final judgment based on a right prior to the sale or an act imputable to the vendor.

    Other instances when seller is liable for breach of warranty against eviction

    • a. Sale of the property for non-payment of taxes

    • b. Judicial sales

    Vendor’s liability in case of eviction

    • a. If there is a stipulation exempting the vendor from the obligation to answer for eviction. 1) Vendor acted in bad faith

      • a) Value of the thing

      • b) Income or fruits

      • c) Costs of the suit

      • d) Expenses of the contract

      • e) Damages and interests

    2) Vendor acted in good faith

    • a) If vendee made the waiver without knowledge of the risks of eviction, he shall pay only the value of the thing sold at the time of eviction.

    • b) If vendee made the waiver with knowledge of the risks of eviction and assumed the consequences, the vendor shall not be liable.

    • b. Where no warranty has been agreed upon or there was no stipulation exempting the vendor from liability 1) Vendor acted in bad faith – vendor’s liability shall be the same as items above (VICED) 2) Vendor acted in good faith – vendor’s liability shall be the same as items above except that there is no liability for damages and interest.

    What are the kinds of waiver of eviction?

    • a. consciente – The waiver is voluntarily made by the vendee without the knowledge and assumption of the risks of eviction. The vendor shall only pay the value which the thing sold had at the time of eviction; and

    • b. intencionada – The waiver is made by the vendee with knowledge of the risks of eviction and assumption of its consequences. The vendor is not liable for eviction if he acted in good faith.

    Warranty as to fitness or merchantability – The seller guarantees that the thing sold is reasonably fit for the known particular purpose for which it was acquired by the buyer, or, where it was bought by description, that it is of merchantable quality.

    Warranty Against Hidden Defects of or encumbrance upon the thing sold What is redhibition?

    Northern CPAR : Business Laws – Law of Sales CONDITIONS AND WARRANTIES Conditions in a contract

    the avoidance of a sale on account of some vice or effect in the thing sold, which renders its use impossible, or so inconvenient and imperfect that it must be supposed that the buyer would not have purchased it had he known of the vice.

    Distinguish warranty of merchantability and warranty of fitness.

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    A warranty of merchantability is a warranty that goods are reasonably fit for the general purpose for which they are sold, while warranty of fitness is a warranty that the goods are suitable for the special purpose of the buyer which will not be satisfied by mere fitness for general purposes.

    •Responsibility for hidden defects General Rule:

    The vendor shall be liable to the vendee for any hidden faults or defects in the thing sold even

    though he was not aware thereof.

    Exception:

    The vendor shall not be liable if there is a stipulation exempting him from such defects and he was not aware thereof. •Remedies of vendee in case of breach. The buyer may choose between:

    • a. Withdrawing from the contract or rescission (accion redhibitoria), and

    • b. Demanding a proportionate reduction in the price (accion quanti minors)

    Period of filing action

    The action to withdraw from the contract (accion redhibitoria) or reduction of the price with damages (accion quanti minoris); and all other actions to enforce the seller’s liability for hidden defects when the thing is lost and in judicial sales is six (6) months from the delivery of the thing sold.

    Rules in sale of animals with defects or disease

    Redhibitory defect

    is a defect of such nature that expert knowledge, even after a professional inspection has been made, is not sufficient to discover it.

    When must redhibitory action be filed

    The redhibitory defect must be filed within forty (40) days from the date of delivery to the vendee.

    When sale of animals is void

    a.

    When the animals are suffering from contagious diseases.

    b.

    When the animals are found to be unfit for the use or service for which they were acquired as stated in the contract.

    Vendor’s liability in case the animal sold dies of disease

    a.

    The disease existed at the time of sale;

    b.

    The disease is the cause of death of the animal; and

    c.

    The animal dies within three (3) days from time of purchase.

    Sale without warranty against hidden defects of animals

    There is no warranty against hidden defects of animals sold at the fairs or at public auctions or of livestock sold as condemned.

     

    OBLIGATIONS OF THE VENDEE

    Obligations of the vendee

    • 1. To accept the delivery of the thing sold

     

    Effect of acceptance of goods on seller’s liability for breach of warranty

     

    General Rule

     

    The seller is not discharged from liability in damages or other remedy for breach of

    warranty by the acceptance of goods.

     

    Exception

     

    the seller is discharged from such liability in the following cases 1) If there is an agreement whether express or implied; 2) if the buyer fails to give notice to the seller of any breach of warranty within a

     

    reasonable time after the buyer knows or ought to know such breach.

    • 2. To pay the price of the thing

     

    a.

    Time and place of payment of the price

     

    1)

    At the time and place stipulated.

    2)

    Time and place of delivery of the thing, in the absence of stipulation.

     

    b.

    When interest will be paid on the price The buyer shall pay interest for the period between the delivery of the thing and the

    payment of the price, in the following cases:

    1) If there is a stipulation 2) If the things sold produces fruits or income

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    3) If he is in default, from the time of judicial or extra judicial demand for the payment of the price.

    • c. Suspension of payment of the price by vendee 1) Grounds

      • a) Disturbance in the vendee’s possession or ownership of the thing purchased.

    2) Reasonable ground to fear such disturbance 3) When right to suspend payment not available

    • a) if the vendor gives security for the return of the price.

    • b) if it has been stipulated that the vendee shall pay the price notwithstanding the existence of the aforementioned disturbance or danger.

    • c) If the disturbance is a mere act of trespass.

    EXTINGUISHMENTOF SALE

    • 1. The same causes as all other obligations

    • 2. The various causes of extinguishment in Sales:

      • a. Cancellation of sale or personal property payable in installments

      • b. Resale of goods by the unpaid seller.

      • c. Rescission of the sale by the unpaid seller.

      • d. Rescission by the buyer in case of partial eviction.

      • e. Rescission by the buyer in case of breach of warranty against hidden defects

      • f. Rescission by the buyer of the sale of animals with redhibitory defects.

  • 3. Redemption, whether conventional or legal

  • Conventional Redemption

    takes place when the vendor reserved the right to repurchase the thing sold with the obligation.

    • a. To return to the vendee 1) The price of sale 2) The expenses of the contract and any other legitimate payments made by reason of the sale, and 3) The necessary and useful expenses made on the thing sold;

    • b. To comply with other stipulations which may have been agreed upon.

    • 1. Period of redemption

      • a. If no period is stated in the agreement – the right may be exercised within four (4) years from the date of the contract.

      • b. If a period is stated in the agreement – the period cannot exceed ten (10) years

  • 2. Against whom right of repurchase available

    • a. The vendee a retro (original vendee)

  • 3. Who may avail themselves of the right to repurchase

    • a. Vendor a retro 1) Co-owners of an undivided immovable which is essentially indivisible who sells his share with a right to repurchase to a third person who subsequently acquires the whole thereof, may be compelled by the latter to redeem the whole property, if the former wishes to make use of the right of redemption. 2) If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them, may exercise this right for more than his respective share. If the person who sold an immovable alone has left several heirs, each heir may redeem only the part which he may have acquired. The vendee may demand that the co-owners or co-heirs come to an agreement upon the repurchase of the whole thing, and if they fail to do so, the vendee cannot be compelled to consent to a partial redemption. 3) Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as regards his own share and the vendee cannot compel him to redeem the whole property.

    • b. Creditors of the vendor

  • Legal redemption

    → is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by

    any other transaction whereby ownership is transmitted by onerous title.

    Instances of legal redemption

    • a. Redemption by a co-owner

    • b. Legal Redemption by an adjoining owner of rural land Rule if two or more adjoining owners desire to exercise the right of redemption:

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    (1) The owner of the adjoining smaller area shall be preferred.

    (2) If both lands have the same area, the one who first requested the redemption, shall be preferred.

    • c. Legal Redemption by an adjoining owner of urban land Right of pre-emption by adjoining owner

    If such small piece of urban land is about to be resold, the adjoining owner shall have the right of pre emption at a reasonable price

    Rule if two or more adjoining owners wish to exercise the right of redemption or pre emption

    Preference shall be given to the owner whose intended use of the land in question appears best justified.

    Period of pre emption or redemption

    • a. Pre emption – within 30 days from written notice by prospective vendor

    • b. Redemption – within 30 days from written notice by vendor

    Equitable mortgage

    → is one which, though lacking in formalities of a mortgage, nevertheless, shows the real intention of the parties to create a specific property to secure the performance of an obligation.

    Contracts presumed to be an equitable mortgage

    A contract of sale with a right to repurchase and other contracts purporting to be an absolute sale, shall be presumed to be an equitable mortgage in any of the following cases:

    • a. When the price of a sale with a right to repurchase is unusually inadequate

    • b. When the vendor remains in possession as lessee or otherwise

    • c. When the period for the exercise of the right to repurchase is extended.

    • d. When the purchaser retains for himself a part of the purchase price

    • e. When the vendor bind himself to pay the taxes on the thing sold

    • f. When the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

    Warranty of person selling an existing or present inheritance

     

    He shall only be answerable for his character as heir but not of the things composing the inheritance, unless such things were enumerated.

    QUIZZER:

     
    • 1. A form

    of delivery

    which

    takes

    place

    after the seller

    of

    the property

    continues in

    possession of said property no longer as owner but as mere possessor.

    • a. Traditio constitutum possessorium

    • b. Traditio Calvis

    • c. Traditio brevi-manu

    • d. Quasi-traditio

    • 2. When goods are delivered to the buyer on “sale or return” the ownership passes to the buyer

      • a. upon delivery of the goods

      • b. upon the expiration of the period agreed upon

      • c. upon acceptance of the buyer of the seller’s offer

      • d. upon perfection of the sale

  • 3. When things are delivered to the buyer on approval, trial, or satisfaction, the ownership passes to the buyer:

    • a. upon delivery of the things

    • b. upon meeting of minds

    • c. upon conception of the sale

    • d. upon return of the things to the seller

  • 4. P orally appointed A as his agent to sell the former’s land. On January 3, 2001, A sold the land to B who forthwith took possession thereof. It turned out however, that on January 1,

  • 2001, P, without informing A, had already sold the same to land to C, who up to now was taken possession of the same land. Neither of the sales was registered. Whose contract shall prevail?

    • a. The sale to B for he was the first in possession in good faith.

    • b. The sale to C for the land was first sold to him by the owner.

    • c. The sale to B for the agent was duly authorized to sell the land

    • d. The sale to C because the sale to B was void, A was not duly authorized by P.

    • 5. S sold to A in a memorandum of agreement of sale his parcel of land. After a week, S sold the same land to B in a formal deed of sale. Upon buying the land, B who was aware of the sale to A, immediately took possession thereof and registered the sale in his favor. When informed of the second sale, A subsequently registered an adverse claim with the Registry of Deeds. The parcel of land shall belong to:

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    • a. A, because he has the older title.

    • b. B, because the sale to him was in a formal deed of sale.

    • c. B, because he first registered the sale in his favor.

    • d. B, because he was the first possessor of the land.

    • 6. In case of redemption, which of the following will not be paid by the seller to the buyer?

      • a. Expenses incidental to the sale paid by the buyer

      • b. Necessary expenses made on the thing sold

      • c. The consideration of the sale paid by the buyer

      • d. The interest on the purchase price.

  • 7. Dacion en pago as distinguished from sale

    • a. The

    object is

    always existing and

     
    • c. There is no pre-existing obligation

    specific

    • d. The cause is the price.

    • b. There is greater freedom in fixing the price.

     
    • 8. S

    sold his

    car. There

    was

    no fixed

    date

    for the performance of

    their respective

    obligations. The obligation of S as vendor is:

    • a. To wait for the buyer to pay the price before he delivers.

    • b. To deliver the immediately since the sale has been perfected.

    • c. To deliver the car after the buyer demands delivery.

    • d. Rescind the contract for time if performance not fixed.

    • 9. A, B and C are co-owners of a parcel of land pro-indiviso. A sold his share to B in an absolute deed of sale. Which is correct?

      • a. The deed of sale between A and B is void since it was made not in favor of a third person.

      • b. C may exercise his right of redemption on the interest of A sold to B.

      • c. C may redeem only ½ of the share sold by A to B.

      • d. C cannot exercise the right of redemption since the sale was made to a co-owner.

    • 10. If the same thing was sold to different buyers, the ownership shall pertain to the one who has taken possession thereof in good faith if movables.

    The seller is liable to the buyer for any hidden defect of the thing sold only if he was aware thereof.

    • a. first statement is true, second is false

    • b. both are false

    • c. both are true

    • d. first is false, second is true

    • 11. The buyer has a right to the fruits of the things:

      • a. from the time the fruits have been delivered

      • b. from the time the obligation to deliver the thing bought arises

      • c. from the time of perfection of the contract

      • d. from the time the thing bought is delivered

  • 12. S sold his cat to B for P2, 000.00. No payment has been made and the sales document does not provide for the date of delivery. Before delivery and payment, the cat gave birth to a kitten.

    • a. B is entitled to the kitten which was born after the perfection of the sale,

    • b. S is entitled to the fruit as B has not yet paid the price

    • c. S in entitled to the fruit because it was born before his obligation to deliver the cat.

    • d. B should pay an additional amount for the kitten to be entitled to it.

  • 13. Three of the following are option money. Which one is the exception?

    • a. Given when the contract of sale is perfected

    • b. Given when there is no contract of sale, but as a consideration.

    • c. Given to bind the offeror in a unilateral promise to buy or sell.

    • d. Given as a consideration distinct from the price.

  • 14. In a sale, this is actual delivery:

    • a. Execution and signing of the deed of sale.

    • b. Goods sold are placed in the control and possession of the vendee.

    • c. Delivery by the vendor of the keys to the place where the goods are kept or stored.

    • d. The vendee is already in possession of the goods even before the sale.

  • 15. A and B entered into a contract of lease with option to buy the car of the former for a term of two years. For three months B failed to pay the rentals and by reason thereof, A repossessed the car. Hence,

    • a. A can collect the unpaid rentals for three months

    • b. A can collect the unpaid rentals for the duration of the term of the lease of two years.

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    • c. When A deprived B the possession of the leased car, he has no further action against the latter for any unpaid rentals.

    • d. A shall return the rentals without deductions to B by virtue of the rescission of the contract of lease with option to buy.

    • 16. A offered in writing to sell his house and lot for Php 1M to B on January 20, 2001. B requested to give him one month to raise the amount. On January 25, 2001, A informed B that he has raised the price to Php 1.5M. Can B compel A to accept the payment to Php 1M for the sale of the house and lot?

      • a. Yes, because A is already estopped by his written offer of Php 1M.

      • b. Yes, because the one month option period has not yet expired.

      • c. No, because there is as yet no perfected sale.

      • d. No, because the seller has the sole discretion in fixing the price with or without the concurrence of the buyer.

  • 17. Which of the following may not be the object of a contract of sale?

    • a. Things, having potential existence

    • b. Things, the acquisition of which depends upon a contingency which may or may not happen.

    • c. Vain hope or expectancy

    • d. Things subject to a resolutory condition.

  • 18. When the delivery takes place by mere consent or agreement of the parties as when the vendor merely points to the thing sold which shall thereafter be at the disposal of the vendee if the thing sold cannot be transferred to the possession of the vendee upon the sale?

    • a. traditio symbolica

    • b. traditio brevi manu

    • c. traditio longa manu

    • d. traditio constitutum possessorium

  • 19. A placed an order with B for one hundred pieced of T-shirts which were then not available but manufactured by B and consigned to its sales outlets regularly. The contract between A and B is:

    • a. contract for a piece of work

    • b. contract or lease of service

    • c. contract of sale

    • d. remuneratory contract

  • 20. A sold a parcel of land to B. Thereafter, A sold the same land to C who immediately took possession of the land in good faith. In this case, the proper remedy of B is:

    • a. ask for the annulment of the sale

    • b. file an action in court against C to recover the land

    • c. institute an action for damages against A for breach of contract

    • d. file an action for rescission of the sale to C due to damage suffered by him

  • 21. A seller sold to a buyer a piece of jewelry at a price of Php 1M. The contract provides that the buyer will pay the seller cash Php .4 M and deliver the buyer’s car worth Php .6M. The contract is:

    • a. barter

    • c. partly sale partly barter

    • b. sale

    • d. commodatum

    • 22. A delivers B his parcel of land worth Php 1M in exchange for the car of B worth Php .5M and cash in the amount of Php .5M. The contract is:

    • a. barter

    • c. partly barter partly sale

    • b. sale

    • d. innominate contract

    • 23. On January 2, 2001 A sold to B his car with the payment to be made on January 10, 2001. However, on January 6, 2001, A sold the same car to C who immediately took possession thereof. Decide:

      • a. B must wait for January 10, 2001 and sue A for damages.

      • b. B may recover the car from C because the former was first buyer.

      • c. B may claim damages from A for breach of contract of sale.

      • d. B can file an action to annul the sale to C even if C is in good faith in buying the

    car.

    • 24. •In case of double sale of real property, the possessor in good faith shall be preferred to the registrant, possessor in bad faith. • In all cases of double sale, priority is given to the buyer in good faith, that is, whether

    registrant, possessor or with the oldest title.

    • a. first

    statement

    is

    false,

    • c. both are false

    second is true

    • d. both are true

    • b. first is true, second is false

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    • 25. A sold his land to B who began to possess it. Later, C, a stranger sold the same land to D, who in good faith registered the sale and thus obtained the title in his name. The owner is:

      • a. D is the owner for he was the first to register in good faith.

      • b. A remains to be the owner because C had no authority to sell.

      • c. A is still the owner because B did not register the sale.

      • d. B is the owner because the owner is his seller and he has taken possession of the land.

  • 26. S sold his land to B. Then S became B’s tenant on the land. Subsequently, S sold the same land to C. Neither sale was registered. Who should be the owner?

    • a. S remains to be the owner because neither of the contracts of sale was registered.

    • b. C is the owner because the possession of the land was not transferred to B as buyer thereof.

    • c. B is the owner since he bought the land from S as owner thereof and has possession of the same.

    • d. S retains the ownership of the land because he still has possession.

  • 27. A sold his land to B. Later, A sold the same land to C. B in turn, sold the same land to D, who took possession of the land in good faith. C, a purchaser in good faith, registered the sale in his favor. Decide.

    • a. B is the owner of the land because he was the first buyer.

    • b. C is the owner of the land having registered the sale in good faith.

    • c. D is the owner of land being the transferee of the rights of B and who is in possession in good faith.

    • d. D is the owner because after A sold the and to B, A had no more right to transfer ownership to C, the second buyer.

  • 28. A husband and his wife were living together under a conjugal partnership of gains. Later, because of a quarrel, the wife left the husband without judicial approval. They have thus

  • been living apart for more than ten years. The wife later sold her land to the said husband. Is the sale valid?

    • a. The sale is valid because the spouses have been separated for more than ten

    years.

    • b. The sale is valid because after separation there is already a separation of properties between the spouses.

    • c. The sale is void because of the absence of separation of properties between spouses.

    • d. The sale is void because the spouses are living apart.

    • 29. A sold to B in a private instrument a parcel of land for Php 5, 000.00. B now wants A to place the contract in a public instrument so that B could register the sale with the Registry of Deeds and secure the Transfer Certificate of Title in his name. Decide:

      • a. A may not be forced or compelled to execute the public instrument since the sale is unenforceable being in private instrument only.

      • b. A cannot be required to place the contract in a notarized deed of sale because the contract is void not being in public instrument.

      • c. A can be required to execute the public instrument only if B has paid the purchase price.

      • d. A has the obligation to execute the public instrument because the contract of sale is enforceable.

  • 30. A sold to B orally a parcel of land for P.5M. Delivery and payment were made four months later. When the said date arrived, A refused to deliver the land. Can B compel A to deliver?

    • a. Yes, because the sale has been perfected already and obligations of the parties are reciprocally demandable.

    • b. Yes, because there was an agreement to deliver after four months and that should be respected by the parties.

    • c. No, because the sale although valid is unenforceable.

    • d. No, because the sale is void, being orally entered into.

  • 31. A buys from B a piece of land supposed to contain 1, 000 sq. m. at the rate of P10, 000.00 per sq.m. But the land actually contains 1, 500 sq.m. Which of the following is not included in the rights of A?

    • a. A may demand the delivery of the entire land with proportionate increase of the

  • price.

    • b. A may reject the excess of 500 sq.m. and accept only the 1, 000 sq.m.

    • c. A may rescind the contract of sale because what was delivered is not in accordance with the contract.

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    • d. None of the above.

    • 32. A buys a land from B at the lump sum of P1M. In the contract, the area is stated to be 1, 000 sq. m. The boundaries were mentioned in the contract. It was discovered, however, that the land within the boundaries really contains 1,500 sq.m. Which of the following is not a right of A?

      • a. A may demand the delivery of all the 1,500 sq.m. without any price increase.

      • b. If B refuses to deliver all the 1, 500 sq m. A may demand proportionate reduction of the price.

      • c. A may rescind the contract of sale if B does not deliver all that is included in the boundaries.

      • d. A may treat the contract as void ab initio because the object is not determinate as to its kind.

  • 33. A bought a pair of shoes from a shoe store and repair shop. It was later discovered,

  • however, that the shoes did not belong to the store but a customer who had left the same for repair. Did A acquire good title to the shoes?

    • a. No, because it was sold by the store which is not the owner thereof.

    • b. No, because it is the fault of A in not exercising diligence in buying the shoes as to its real ownership.

    • c. Yes, because it was bought from a store in good faith and for value.

    • d. Yes, because the owner of the shoes was precluded from setting up want of authority of the store in selling the shoes.

    • 34. A, B and C are co-owners in equal shares of one hectare rural land, the adjoining owners to which are D and E, the latter owning the smaller area. A donated his share of the land

    owned in common to X who is a rural landowner. Upon the proper notice of the sale, B, C, D and E sought to exercise the right of legal redemption over the shares sold. Who shall have the right to do so?

    • a. A and B are preferred to D and E to redeem because co-owners have preference to adjoining owners.

    • b. E shall have the right to redeem because he has smaller area of land than D.

    • c. The first one between A and B to request redemption shall be preferred in case both demand.

    • d. None of them has the right to redeem because the land alienated was not by onerous title.

    • 35. In the sale of goods, if the seller delivers more than the quantity agreed upon, the buyer may rescind the contract of sale.

    The seller shall have the right of legal redemption only if this right has been agreed upon between the seller and the buyer.

    • a. both statements are false

    • b. both are true

    • c. first is false, second is true

    • d. first is true, second is false

    • 36. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share.

    Each one of the co-owners of an individual immovable, who may have sold his share separately, may independently exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property.

    • a. both statements are true

    • b. both are false

    • c. first is true, second is false

    • d. second is true, first is false

    • 37. B in good faith purchased a diamond ring from C, a friend of his. C gave B a bill of sale. Later on, O identified the ring as the one she had lost about a year before. There is no question as to the truth of O’s allegation. In this case:

      • a. O cannot recover the ring from B because the latter was in good faith when he bought the ring from C.

      • b. O cannot recover the ring from B because it was lost by him (O) and found by C, therefore, C, as finder will be keeper and owner who could transfer ownership to B, an innocent purchaser for value.

      • c. C is the one liable to O for damages while B becomes owner who could not be disposed being an innocent purchaser for value.

      • d. O can recover the ring from B even if he is an innocent purchaser for value because C did not have title to convey to B.

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    • 38. X the owner of a certain jewelry though same to Y, “on sale or return” upon a specified period of time. Y sold the said jewelry to Z, but retains the price. Can X recover the jewelry from Z?

      • a. X can recover the jewelry from Z being an unpaid seller whose ownership was not transferred to Y upon delivery to him.

      • b. X can recover the jewelry from Z but after reimbursement of the price paid.

      • c. X cannot recover the jewelry from Z because his seller (Y) has transferred ownership to him.

      • d. X cannot recover the jewelry from Z because it was sold by his agent, Y to Z his only recourse is to go after Y for his failure to remit the payment to him.

  • 39. A sold a piano to B, who immediately paid the price. Because the piano was at the repair

  • shop at the time of the sale, no delivery was made. While at the said place, C, who has filed a suit against him, attached the piano, May B oppose the attachment?

    • a. B may oppose the attachment on the ground that he already was the owner of the same after he immediately paid the price.

    • b. B may oppose the attachment because there was already constructive delivery to him of the piano and therefore, he is the owner of the same.

    • c. B may not oppose the attachment because, although he is not yet the owner of the piano, he has already paid the price and has preference over the thing than C.

    • d. B may not oppose the attachment because he is not yet the owner despite payment of the price as there is no delivery yet.

    • 40. P authorized A to sell the former’s car. A sold the car to X. Without knowledge of the sale to X, P sold the same car to Z. Which of the two buyers shall be preferred?

    • a. X, being the buyer authorized agent.

    of

    a duly

    • c. X, the first registrant in good faith of the sale.

    • b. Z,

    being

    the

    buyer

    of

    the

    • d. The first possessor in good

    principal himself.

     

    faith of the car.

    • 41. S sold to B his parcel of land valued at P1M only for a measly sum of P.5M because of his poor judgment on the real value of the land and the ability of B to bargain for a low price. The sale therefore is:

      • a. Voidable due to inadequacy of the price.

      • b. Rescissible because S suffered lesion or damage.

      • c. Presumed equitable mortgage due to the unusually inadequate price.

      • d. Valid although may be annulled because of vitiated consent of S.

  • 42. In payment of his debt to X, A ceded to his one half (1/2) share in a parcel of land he co- owned with B. B therefore:

    • a. Has the right of pre-emption as co-owner.

    • b. Has the right of redemption as co-owner.

    • c. Has neither right of redemption nor pre-emption since the transfer was not of

  • d.

    sale.

    Has

    the right

    to

    compel X

    ownership between X and himself.

    to buy his ½ share of the land to prevent co-

    • 43. In case of doubt, a sale with a right to repurchase or without a right to repurchase shall be construed as an equitable mortgage. The seller therefore:

      • a. May ask for the reformation of the instrument.

      • b. May ask for the annulment of the contract.

      • c. Mays ask the court for the declaration of nullity of the contract.

      • d. Shall be bound to perform his obligation as seller.

  • 44. A sold to X his ½ share of the parcel of land he co-owns with B. C owns the parcel of land adjoining that of A and B. Both B and C want to redeem the share of A which the latter sold to X.

    • a. C shall be preferred to B in the redemption from X.

    • b. B’s right as co-owner excludes that of C, the latter being only an adjoining

  • owner.

    • c. C has a better right to the redemption as an adjoining owner.

    • d. B and C equally redeem the share of A.

    • 45. In a contract to sell of a parcel of land, it was stipulated that upon failure to pay the price at the time agreed upon for payment, the sale is automatically rescinded. Hence, if the buyer fails to pay as agreed upon:

      • a. The sale shall not be rescinded as a matter of right and the buyer may still pay as long as there is no demand for rescission.

      • b. The rescission of the contract of sale shall of right take place.

      • c. The rescission of the contract to sell shall of right take place.

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    • d. Contract to sell and of contract of sale, rescission of the sale shall of right take

    place.

    • 46. S sold to B his dog which he knew was afflicted with a disease. The parties agreed that there is no warranty against hidden defect. After delivery, the dog was struck by lightning and thus died.

      • a. S is not liable to pay B any amount because the dog was lost due to fortuitous

    event.

    • b. S is not liable because of the waiver agreed upon between B and himself.

    • c. S is liable to return the price paid by B because the waiver is void.

    • d. S is liable for the price less the value of the dog at the time of loss.

    • 47. On July 5, 2006, A sold for P2M her house and lot to B. It was agreed that delivery of the house and lot, and the payment therefore would be made on August 1, 2006. Unfortunately, C, negligently set the house on fire on July 26, 2006 and the house was completely destroyed. Which is correct?

      • a. B is not required to P2M since the contract had no subject matter.

      • b. A must still deliver the lot but is excused from delivering the house, while B must still pay the P2M.

      • c. A must still deliver the lot while B should pay only the amount equivalent to the value of the lot.

      • d. A need not deliver the lot while B need not pay the P2M.

  • 48. If immovable property should have been sold to different vendees, the ownership shall be transferred to the person

    • a. who have first taken possession in good faith

    • b. who presents the oldest title in good faith.

    • c. who in good faith first recorded it in the Registry of Property

    • d. who have paid in good faith the purchase price in full.

  • 49. Using the preceding number, if movable property, it shall belong to the person

    • a. who have paid in good faith the purchase price in full

    • b. who have in good faith first recorded it in the Registry of Property

    • c. who presents the oldest title in good faith

    • d. who have first taken possession in good faith.

    • 50. Action by the vendee against the vendor to nullify the sale due to some vices or defects which render the object of sale unfit for the use intended or knowledge to which, the vendee would not have bought the thing.

    • a. accion quanti minoris

    c.

    accion pauliana

    • b. accion reinvindicatoria

    d.

    redhibitory action

    • 51. Action to seek a corresponding reduction in price by reason of some vices or defects in the thing purchased.

    • a. accion quanti minoris

    c.

    accion pauliana

    • b. accion reinvindicatoria

    d.

    redhibitory action

    • 52. The redhibitory action based on the faults or defects of animals must be brought within

    • a. 30 days from delivery to the vendee

    c.

    45 days from delivery to the vendee

    • b. 40 days from delivery to the vendee

    d.

    6 months from delivery to the vendee

    • 53. In contract of sale, if the price is absolutely simulated, the sale is

      • a. voidable

    unenforcea

    • b. rescissible

    d.

    ble

    • c. void

    • 54. In a contract of sale of personal property, the price which is payable in installments, the vendor may exercise any of the following remedies, except:

    • a. Exact fulfillment of the obligation, should the vendee fail to pay any installment.

    • b. Cancel the sale, should the vendee’s failure to pay cover two or more installment.

    • c. Foreclose the chattel mortgage on the thing sold, if one has been constituted should the vendee’s failure to pay cover two or more installments.

    • d. Rescind the sale should the vendee fail to pay any installment.

    • 55. The right of the seller to stop goods in transit, upon discovering that the buyer does not have the funds to pay for the goods.

    • a. pre-emptive right

    c.

    voting right

    • b. appraisal right

    d.

    right of stoppage in transitu

    • 56. A sold to B a parcel of land for P3.8M. The sale is evidenced by a memorandum of agreement of sale. One week later, A sold the same parcel of land to C for P4M. This is

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    evidenced by a formal deed of sale. Upon buying the property, C was aware of the first sale, immediately took possession of the lot. When informed of the second sale, B subsequently registered an adverse claim property. Later, C registered the deed of sale in her favor. The parcel of land shall belong to

    • a. B because he has got an older title.

    • b. C because he is the first to register

    • c. C because he is first to take possession

    • d. No one as both sales are void.

    • 57. A contract of sale whereby the seller acquires the right to redeem or repurchase the object of the sale from the buyer within a certain period agreed upon.

      • a. equitable mortgage

      • b. absolute sale

      • c. on sale or return

      • d. pacto de retro sale

  • 58. A sold to B his car and promised to deliver ten days later. The next day, after the sale to B, A sold the same car to C and immediately effected delivery to C. On the day agreed upon, A did not deliver the car to B. Which is correct?

    • a. B can cancel the contract between A and C, because the contract between A and B was perfected ahead of the contract between A and C.

    • b. B should make a demand to make A in default.

    • c. A is liable to B for the value of the car plus damages after B makes a demand.

    • d. A is liable to B for damages and is in default without need for any demand.

  • 59. A sold to B her GUAPO guitar. It was agreed that A would fix the price a week later. At the agreed time, A named the price P10, 000. B agreed. Was the sale perfected?

    • a. No, because the price was left to the discretion of one of the contracting parties.

    • b. No, because at the time of sale, the price was not fixed.

    • c. Yes, because the price fixed by one of the parties was accepted by the other.

    • d. Yes, because there was agreement that A would fix the price.

  • 60. Not an implied warranty in a contract of sale:

    • a. right to sell the thing at the time of perfection of the contract

    • b. reasonably fit for the purpose for which they are acquired

    • c. merchantable in quality

    • d. free from charges or encumbrances not declared or known to the buyer

  • 61. After the death of C, A, C’s son, sold his inheritance though its amount has not yet been determined to B for a consideration of P1, 000, 000. Which is correct?

    • a. The contract is valid if the value of inheritance is at least equal to P1, 000, 000.

    • b. The contract is valid even though the inheritance to be turned over to B is less than P1M.

    • c. The contract is void as future inheritance cannot be the object of sale.

    • d. The contract is unenforceable

  • 62. A stole a fountain pen from P and sold it to B Merchandise, a “store for pens” which

  • paid for it in good faith, not knowing it was stolen. The “store” then sold it to C, a reviewee. Which is correct?

    • a. C cannot be considered as the owner because the original seller (A) is not the real owner.

    • b. P may recover the fountain pen from C without reimbursement because he is the legal owner.

    • c. C became the owner because he purchased the pen from a merchant store.

    • d. C became the owner regardless whether the seller is a store for pens or not, because C bought it in good faith.

    • 63. When goods are delivered to the buyer on “sale or return” for period of seven days, ownership of the goods passes to the buyer:

      • a. upon perfection of the contract

      • b. upon acceptance by the buyer of the offer of the seller

      • c. upon expiration of seven days

      • d. upon delivery of the goods

  • 64. Quasi- traditio is equivalent to:

    • a. traditio longa- manu

    • b. traditio brevi- manu

    • c. traditio constitutum possessorium

    • d. buyer has the title of ownership

  • 65. B imported radios from Japan and asked for 220 volts capacity. The radios arrived clearly labeled 220 volts and B sold them to the public as such. Later, a customer complained that the radios have been mislabeled by the manufacturer and that they were good only for 110 volts.

    • a. B is liable to the vendees for any hidden defects even though he is not aware.

    • b. B is not liable because he is in good faith.

    • c. B is not liable under the principle of “caveat emptor” or buyer beware

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    • d. The vendees may hold the manufacturer liable but not B because B specifically asked for 220 volts.

    • 66. If redemption is to be made by the seller, one of the following need not be given to the buyer.

    • a. expenses of the contract

    c.

    necessary expenses on the thing sold

    • b. interest on the price of the sale

    d.

    price of the sale

    • 67. Not an element of the seller’s right of stoppage in transitu

    • a. the goods must be in transit

    c.

    the seller must be in possession of the

    • b. the buyer must be insolvent

    goods

     

    d.

    the seller must be unpaid

    • 68. A sold his only car to B for P300, 000 to be paid as follows. P150, 000 upon delivery of the car to B and the balance at P10, 000 per month until full payment of the purchase price. Later, the car gets burned in the possession of B through fortuitous event before full payment of the balance. Is B obliged to pay the balance?

    • a. No, because the car was lost through fortuitous event and without B’s fault, hence B’s obligation is extinguished.

    • b. No, because the loss should be borne by the seller as this is an installment sale so until the buyer pays the full amount of the price of the sale, A remains to be the owner.

    • c. Yes, but A must give another car to B because of the principle “genus non quam peruit” or generic thing never perishes.

    • d. Yes, because of the principle that “res perit domino” or the thing perishes with the owner.

    • 69. A, B and C are co-owners of an undivided parcel of land. A sold his 1/3 interest to B absolutely. Which is correct?

    • a. may exercise his right to redemption on the interest sold by A to B.

    C

    • b. can not exercise the right of redemption because the sale was made in favor of a co-

    C

    owner.

    • c. The sale made by A to B is void because it was not made in favor of a stranger.

    • d. may redeem only ½ of the interest sold by A to B.

    C

     
    • 70. Using the preceding number, suppose, instead of selling his interest to B, A sold it to D, who can exercise the right of redemption?

    • a. both B and

    • b. A, B and C

    B but not C

    d.

    C

    • c. C but not B

    • 71. Which of the following cannot be an object of a contract of sale?

    • a. incorporeal property

    • b. young animal not yet conceived at the time of perfection

    • c. land which the seller expects to buy

    • d. object outside the commerce of man.

    • 72. A offered for sale to B 20 cavans of wigwag rice and fixed the price per cavan at P10 over the price offered at Y’s store in Quinta Market. The price is:

    • a. not certain because the price at Quinta Market is not stated.

    • b. Certain because it has got reference to another thing which is certain.

    • c. Certain because there is a price ceiling for price of rice.

    • d. Not certain so the court may fix the price.

    • 73. A offers to B 100 electric fans for P80, 000 payable in 60 days with 12% interest per annum. B accepted the offer by telegram provided that interest is reduced to 6%. If there is no further communication between A and B relating to the terms:

    • a. The contract is perfected because of the acceptance by B.

    • b. There is no contract yet between A and B because B made a counter offer.

    • c. The contract is perfected under the terms of A

     
    • d. There is no contract yet unless B gives earnest money.

    • 74. A owns 50 mango trees bearing fruits, ready to harvest. She sold all the fruits of all

    trees to B who paid P100, 000. A told B that he can harvest her fruits anytime he likes and pointing at the mango trees. For legal purposes, A has fulfilled her obligation to deliver the mango fruits to B by:

    • a. traditio brevi-manu

    c.

    traditio longa manu

    • b. traditio symbolica

    d.

    traditio constitutum possessorium

    • 75. A sold her specific car to B for P200, 000 payable in 5 equal installments. A delivered the car to B but a mortgage was constituted on the car to answer for the unpaid installments. B paid the first 2 installments but failed to pay the last 3 installments. A foreclosed the mortgaged property and sold it at public auction for P100, 000. Which is correct?

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    BL – 6 th

    Northern CPAR: Business Laws – Law of Sales

    • a. A can recover from B the balance of P20, 000 even if there is no stipulation to that effect.

    • b. A can recover from B the balance of P20, 000 if there is stipulation to that effect.

    • c. A cannot recover the deficiency except if there is stipulation to that effect.

    • d. A cannot recover the deficiency even if there is stipulation to the contrary.

    • 76. Ownership of the thing sold is

      • a. retained by the seller in “sale or return”

      • b. transferred to the buyer upon constructive or actual delivery of the thing sold

      • c. acquired by the buyer upon perfection of the contract

      • d. transferred to the buyer upon acceptance of the price.

  • 77. Y sold his horse to Z for P50, 000. No payment has yet been made and the sales document does not provide the date of delivery. Before delivery and payment, the horse gave birth to a colt. Which is correct?

    • a. Z is entitled to the colt which was born after the perfection of the contract.

    • b. Y is entitled to the fruit (colt) as Z has not paid the price yet.

    • c. Y is entitled to the fruit (colt) because it was born before his obligation to deliver arises

    • d. Z should pay additional amount for the colt to be entitled to it.

  • 78. A contract of sale is in stage of conception when

    • a. There is meeting of the minds.

    • b. Negotiations are in progress.

    • c. The parties come to an agreement.

    • d. The contract is perfected.

  • 79. A seller sold to a buyer a piece of jewelry at a price of P20, 000. The contract provides that the buyer will pay the seller cash – P15, 000 and for the balance, the buyer will give the seller a micro oven worth P5, 000. What is the nature of the contract?

    • a. sale

    • c. barter

    • b. partly sale and partly barter

    • d. commodatum

    • 80. A, guardian of B, sold B’s house and lot worth P480, 000 for P 240, 000.

      • a. The contract can be rescinded because of inadequacy of price.

      • b. The contract cannot be rescinded because there is no fraud, mistake or undue influence.

      • c. The contract cannot be rescinded because all the element of the contract are present.

      • d. The contract can be rescinded by A.

  • 81. The buyer is obliged to pay interest on the price from the time of delivery of the thing sold up to the time of payment in three of the following instances, except:

    • a. should it have been stipulated

    • b. should the thing produce fruits or income

    • c. should the vendee be in default in the payment of the price

    • d. should the vendee be insolvent

  • 82. S sold to B a water pump with brand name “higopka”. After delivery, it was discovered that the pump does not function well prompting B to complain. Therefore:

    • a. B does not have the right to complain for breach of warranty against hidden defect because the right has a brand name when sold.

    • b. B has the right to complain for breach of warranty against hidden defect despite the thing being sold under a patent name or trade name.

    • c. S is not liable for hidden defect even if the thing sold is unfit for the particular purpose for which it is sold.

    • d. S is liable for hidden defect only if it was stipulated.

  • 83. In contract to sell,. The buyer becomes owner upon delivery of the thing sold. In contract of sale, the buyer becomes owner upon payment of the price.

    • a. both statements are true

    • b. both are false

    • c. first statement is false, second is true

    • d. first is true, second is false

  • 84. D deposited his goods in the warehouse of W who issued to D a warehouse receipt stating that the goods are to be delivered to bearer. Thereafter, A obtained possession of

  • the warehouse receipt from D in exchange for what he claimed to be a bar of gold, which, however, was discovered by D to be fake. D demanded the return of the warehouse receipt from A but the same had already been negotiated by A to H, who purchased the document for value, in good faith and without notice that D was deprived of possession thereof by fraud. The negotiation by A to H is:

    a. voidable

    b.

    valid

    c.

    void

    d. rescissible

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    BL – 6 th

    Northern CPAR: Business Laws – Law of Sales

    • 85. S sold shares of stock of San Manuel Corporation to B at P50.00 per share. The

    transfer of the ownership of the shares of stock may be made through any of the following means, except:

    • a. Execution of the sale in a public instrument.

    • b. The giving by S to B of the power to vote in the stockholder’s meeting of San Manuel Corporation and the actual exercise thereof by B.

    • c. The endorsement by S of the stock certificate covering the 500 shares of stock and its placing it in the possession of B.

    • d. The issuance by S of the official receipt for the full payment of the purchase of the shares by B.

    • 86. A contract whereby one of the contracting parties obligates himself to transfer the

    ownership of and to deliver a determinate thing and the other to pay therefore a price certain in money or its equivalent is a contract of:

     
    • a. barter

    c.

    dacion en

    • d. mortgage

    b.

    sale

    pago

    • 87. The following are the essential elements of a contract of sale, except:

      • a. consent of the contracting parties

      • b. subject matter which should be determinate

      • c. price which is certain in money or its equivalent

      • d. warranty against eviction and against hidden defects

  • 88. The following are the characteristics of a contract of sale, except:

    • a. Principal, which means that a contract of sale can exist by itself

    • b. Real, which requires the delivery of the object of the contract of sale for its perfection.

    • c. Onerous, where rights are acquired in exchange of a valuable consideration.

    • d. Bilateral, which means that both parties are bound reciprocally to each other.

  • 89. One of the following characteristics of dacion en pago is a characteristic of a contract of sale. Which is it?

    • a. There is pre-existing credit.

    • b. Obligations are extinguished.

    • c. There is less freedom in fixing the price.

    • d. Ownership of the object is transferred to the other party.

  • 90. The following are characteristics of a contract of sale except one which refers to the payment by cession.

    • a. There is no pre-existing credit.

    • b. The cause or consideration is the price.

    • c. There is more freedom in fixing the price.

    • d. Assignee of the property acquires the right to sell the thing but not the ownership thereof.

  • 91. Which of the following is not a requisite of the object of a contract of sale?

    • a. It must be within the commerce of men.

    • b. It must be licit.

    • c. It must be determinate thing.

    • d. Vendor must have the right to transfer the ownership of the thing at the time of sale.

  • 92. S sells to B at P50 per liter 300 liters of gasoline stored in his truck tank, which is unknown to the parties contains 500 liters. What is the status of the contract of sale between S and B?

    • a. The sale is void because the quantity available is more than the quantity sold.

    • b. The sale is valid up to 500 liters of gasoline. B must pay for the additional 200 liters.

    • c. The sale is valid up to 300 liters of gasoline. B becomes the owner of 3/5 of the whole stock, while S becomes the owner of 2/5 thereof.

    • d. The sale is rescissible because S will suffer lesion of more than ¼ of the value of the whole stock.

  • 93. The seller must be the owner of the property he sells because he must transfer the ownership thereof to the buyer. The delivery of the thing sold may be by mere agreement of the parties.

    • a. both statements are true

    • b. only the first is true

    • c. both are false

    • d. only the second is true

  • 94. S and B entered into a contract whereby S transferred to B a specific car for the price of P200, 000.00, while B gave to S P90, 000.00 cash and a diamond ring worth P110, 000.00. The heading of the written contract reads, “Contract of Sale”

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    BL – 6 th

    Northern CPAR: Business Laws – Law of Sales

    • a. The contract is void because the intention of the parties is void since the value of the diamond ring is more than the monetary consideration given.

    • b. The contract is a valid contract of sale as intended by the parties regardless of whether the monetary consideration is more or less than the value of the property consideration.

    • c. The contract is a valid contract of barter since the value of the property is more than the monetary consideration. The intention of the parties is immaterial.

    • d. The contract is partly a contract of barter and partly a contract of sale.

    • 95. The price in a contract of sale is certain except:

      • a. When the parties have fixed or agreed upon a definite amount.

      • b. If the price is certain with reference to another thing certain.

      • c. If the fixing of the price is left to the discretion of one of the contracting parties.

      • d. If the price fixed is that which the thing sold would have on a definite day or in a particular exchange or market.

  • 96. On January 1, S orally sold to B a specific ring for P450.00. The parties agreed that S

  • shall deliver the ring to B on January 5, while B will pay the price on January 7.

    • a. The contract is perfected on January 5, when the ring is delivered by S to B.

    • b. The contract is perfected on January 1, when the parties had a meeting of minds on the object and price.

    • c. The contract is perfected on January 7, when the price is paid, since both parties would then have performed their obligations in the contract.

    • d. There is no perfected contract because the sale was made orally.

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    BL – 6 th