Sales

Overview
What is a contract of sale? Who cannot legally enter into contract of sale?
Obligations - Persons with incapacity
• Seller
✓ Deliver and transfer ownership of Types:
determinate thing a. Absolute
• Buyer b. Relative
✓ Pay price certain in money or
equivalent Sales involving minors:

Characteristics 1st: Buyer is minor

(a) Consensual Sale is voidable contract since minor has no capacity
(b) Bilateral to sell
(c) Onerous Contract is binding unless annulled
(d) Principal Guardian may ratify
(e) Nominate Minor is not required to restitution
(f) Generally informal
(g) Generally commutative Sale may be valid if guardian ratifies contract.
If minor purchase necessaries, minor must pay for the
Essential Requisites necessaries if minor received the same.
(1) Consent
(2) Object 2nd: Sale of a minor to a capacitated person
(3) Cause Sale is still voidable
Sale of minor becomes valid if the guardian ratifies
Elements the contract
Natural or Accidental Sale is valid if estoppel applies
• Natural – inherent with the contract
3rd: Both parties are minor
• Accidental – depend upon the stipulation of
Sale is unenforceable
parties
Contract is valid if guardian ratifies (must be both
parties)
Stages of Contract of Sale
(1) Negotiation
Sale involving Husband & Wife
(2) Perfection
(3) Consummation
1st: Wife sells property to Husband, vice versa
Sale of property between H&W is generally void
Types of Contract of Sale
Except if the property sold is part of the independent
(a) Absolute
property of the spouse.
(b) Conditional
Sale is also valid if there was a pre-nuptial agreement
and property sold is part of separate property
Parties to a Contract of Sale
Who can legally enter into a contract of sale?
2nd: Husband sold property to 3rd persons without
(a) Natural persons
spousal consent
- Those persons with capacity to act
Sale may be perfected by the other spouse before the
(b) Juridical persons
offer is withdrawn
There is a continuing offer
3rd: Sale of property to a common law spouse
Sale of community property to a common law spouse
is void since it is contrary to morals and public policy
Art. 1491 disqualifications
Prohibition to buying properties, applies to:
- Direct and indirect purchases
- Sales in legal redemption, compromises, and
renunciation
- Leases of disqualified persons of the property
Guardian buys property of the wards
Sale is void. Art. 1491, provides for the prohibition.
However, it may be ratified in a separate contract.
Prohibition is due to the fiduciary relationship
between guardian and ward.
Agent buys property of the principal
Art. 1491, Agent cannot buy property. As a rule, it is
void but can be ratified in a separate contract.
Disqualified to buy because of the fiduciary
relationship.
Consent will make the sale valid.
Prohibition does not apply to brokers, sale under SPA
given Act. 3135 (power given to creditor to extra-
judicially foreclose the properties)
Executor or administrator buys property of estate
under his administration
Sale is void. Can be ratified in a new contract.
Disqualification is due to the fiduciary relationship.
Executor – one who is named in a will
Administration – if executor refuses, or fails to set a
bond, or will does not mention an executor, or no will
Public officer buys government property
Sale is void. Since public officers are prohibited
government properties under their administration.
Contract cannot be ratified.
Prohibition is based on the principle that public office
is a public trust.
Prohibition is limited to property under
administration of the public officer.
Judge buys property in litigation
Property is subject of litigation, under execution,
property is under jurisdiction of the judge.
Prohibition is to free judges from suspicion
Sale is void and cannot be ratified
Lawyer buys property in litigation
Prohibition is due to the fiduciary relationship
between lawyer and client.
Property is object of the pending litigation
Lawyer represents the client (owner of the property)
If property is part of the contingent fee of the lawyer,
it is not covered by the prohibition.
Non-Philippine citizen buys parcel of land in the
Philippines
Constitutional prohibition
Exception, if the property is received by the alien
through hereditary succession.
If property is subsequently transferred to Filipino,
defect is ratified.
Consent, Object, Consideration
Rules on Consent
- Meeting of offer and acceptance
- Offer must be certain
- Acceptance must be absolute
- Offer may be accepted express or impliedly
- Qualified acceptance is a counter-offer
Classification of Property
Mobility
• Immovable
• Movable
Existence
• Present
• Future
Ownership
• Public property
• Private ownership
Sale involves delivery of a determinate thing
If there is no agreement on the object of the contract,
the sale is void. Object of every contract must be
determinate to its kind. Contract is inexistent since
the intention of the parties cannot be ascertained.
If the object is illicit, the sale shall be void. A thing is
licit if it is not contrary to law. Illicit per norms, and
illicit per customs.
If the object is outside the commerce of man, sale is
void. The thing can be a legally subject of sale if it is
subject of commercial transaction. Things of the
entire community is outside commerce of man. Thing
is outside commerce of man because of legal
prohibition.
Impossible things or service cannot be subject of
contracts.
Object of sale may be existing goods, future goods
(contract of future sale or delivery of goods)
Sale of future good whose acquisition of the seller
depends on an event that may or may not happen is
valid. Sale of an expected thing.
Sale of vain hope is void.
Sale of property in litigation, is generally valid, but it is
rescissible if it is entered into by the defendant
without consent of the parties or any judicial
authority.
Sale of a co-owner in a property is valid. Buyer shall
step into the shoes of the co-owner who sold his
share. Except if personal rights are involved.
Sale of fungible goods there may be a sale of an
undivided mass. Buyer shall be a co-owner of the
undivided mass.
General Requirements on Price
If there is no price agreed upon, there is no cause or
consideration. The sale shall be void. There is a
presumption of sufficient cause or consideration,
unless the debtor proves the contrary. (This is a
disputable presumption under the Rules of Court)
If the price is ascertainable, sale is valid. Price is
certain if the parties agreed on a certain value. Price is
certain if it is ascertainable with another thing which
price may be ascertain.
Price is certain if the determination of the price is left
to the judgment of a third person. Third person acted
in bad faith or mistake, the court may fix price.
Contract is inefficacious if the price cannot be
ascertained.
What is reasonable price is a question of fact, subject
to determination in every case.
Fixing of the price cannot be left to determination of
one of the contracting parties. However, if the fixing
is consented by one of the parties it is valid.
Contract is void when:
Parties did not agree on price
Fixing of price left to a contracting party, unless other
accepts
Contract is inefficacious
Price cannot be determined
Third party unable to fix price
FMV is greater than the Purchase Price
Sale shall still be valid. Gross inadequacy of price
generally would not affect sale. However, gross
inadequacy of price may indicate defect in consent. It
may also reflect that the intention of the parties may
be of donation. Sale may be set aside if the sale would
shock the consciousness. Exception to the exception,
owner has the right of redemption.
Sale is not valid if the parties did not intend that price
will be paid. If the price is simulated, sale is void. But
the act may be shown to be donation or some other
act.
Purchase Price is lower than the True Price agreed
upon. Sale is valid if the price is false. Price is false if
the true price is not reflected in the contract.
However, it may be subject to reformation. Parties
may be bound by the false price through estoppel if
the rights of 3rd parties are affected.
Barter is allowed, but it is not treated as sale. In a sale,
the price must be pecuniary generally representing as
money. If the price is not pecuniary, the transaction
may be a barter or an innominate contract.
When the price of any article is determined by a
statute or by law, any person paying the excess of the
amount set by law. Person paying may recover the
excess amount.
Form of the Contract of Sale
Rule
Generally, may be orally or in writing
Follows the rule that contracts are valid in whatever
form as long as the elements are present in the
contract.
Exception, if the form of contract is required.
Verbal contract of sale is valid. If verbal sale amounts
to 1000 pesos, it is unenforceable covered by the
Statute of Contracts.
Sale of real estate not in writing, the sale is
unenforceable
Statute of frauds require that the contract is written.
(Art. 1403, for the coverage of the Statute of Frauds)
Verbal appointment of an agent to sell a property, the
sale is void. Authority of agent should be in writing
for the sale to be valid otherwise the sale is void.
Sale of real property is not notarized. Sale is still valid
notarization is not affected by non-notarization.
However, contract of sale by registered land will not
bind 3rd parties unless the sale is recorded since the
law requires that it must be done in a public
instrument. Once contract is perfected, parties may
compel another to follow the specific form.
Obligations of the seller
• Principal Obligations of the seller
• Take care of the thing pending delivery
• Pay expenses for execution and registration of the
sale
• Deliver and transfer ownership
• Warrant the thing
Seller has the obligation to take care of the thing
pending delivery. Exercise diligence of good father of
the family (except when there is stipulation for
different diligence)
Seller has the obligation to pay for expenses of the
execution and registration of the sale (including
notarization)
The right to transfer ownership must exist at the time
of delivery to the buyer.
Seller has obligation to deliver the thing with
accession, fruits, etc.
Seller must have intention to deliver. Buyer must have
intention to accept. Seller gives up control and buyer
assumes control.
Delivery may be actual or constructive.
Actual, thing sold is placed at the buyer’s control
Constructive, acts which are not actual control but
constitute as transfer of control.
There is constructive delivery if parties execute a
public instrument.
There is no constructive delivery if the seller is not in
control of the property or thing sold at the time of
sale.
Traditio Symbolica – delivery of keys or symbols
(movable property)
Traditio Longa Manu – delivery is by mere consent or
agreement. If the property cannot be transferred at
time of sale. Eg.
Traditio Brevi Manu – Buyer has possession of the
property before the sale
Traditio Constitutum Possessorium – seller continues
in possession of the property but in some other
capacity
Quasi Traditio – delivery is made in execution of a
public instrument which transfers ownership
Sale Contract is title. Mode means by which
ownership is created, transferred, or destroyer.
Delivery transfers ownership.
Obligation of Seller to Warrant the Thing
Types of Warranty:
Express or Implied
An opinion is not a warranty unless it is made by an
expert and relied upon by the parties.
Implied Warranty of Title
Total or partial eviction of buyer
Eviction by final judgment
Judgment based on right before the sale or imputable
to seller.
Seller summoned and made a co-defendant
Buyer did not waive warranty (As a rule, buyer may
waive warranty. However, waiver is void if seller acted
in bad faith) Presumption is waiver is in “consciente”
Buyer can interrupt running of the period of
prescription
Remedies of Buyer:
Total Eviction - (Art. 1555) V-I-C-E-D
Partial Eviction - (Art. 1555) and Rescission of
Contract (Art. 1556)
Immovable property sold with non-apparent burden.
Elements in Art. 1560
Remedies: Rescission and damages (within 1 year); If
more than 1 year from execution of deed but within 1
year from discovery, damages only
Implied warranty against hidden defects –
(a) Defect must be hidden, serious, existing at
time of sale
(b) Buyer gives notice to seller of the defer
(c) Buyer did not waive warranty
Sale of animals – warranty against hidden defect
applies (but there are exceptions)
Animals sold in pairs – redhibition of one will not
affect the other (except if the buyer would not buy
second animal without the defective one)
Sale of animals (Art. 1575)
(a) Sale of animal with contagious disease
(b) Unfit for use of service stated in contract
Seller is liable if animal died 3 days after sale.
Implied warranty of fitness
Buyer makes particular purpose known to seller
Buyer buys upon reliance on the thing by the seller
Implied warrant that goods of merchantable quality
Buyer purchased goods sale by description
Seller deals in those products
Implied warranty that goods free from defects
rendering them unmerchantable
Buyer purchased goods by sample
Seller is dealer in goods in that kind
Implied warrant of fitness (breach); Remedies:
Redhibitory action, with damages
Obligations of buyer
(a) Pay the price
(b) Accept delivery
As a rule, buyer may not suspend payment of
purchase price. Buyer may suspend if he is disturbed
in possession or ownership of the thing acquired; or
he has fear that there may be disturbance in the
ownership of the thing. Subject to exceptions.
Modes of manifesting acceptance
Express – after delivery buyer intimates to seller of
his acceptance
Implied – after delivery doesn’t act in consistent of
the seller’s ownership
 ➢ Specific performance
Goods delivered do not conform to the contract, ➢ Rescission
buyer can refuse to accept the contract. Buyer’s ➢ Foreclose the chattel mortgage (Art. 1484)
refusal is justified and he is not bound to accept the
same.

Buyer’s refusal to accept is unjustified. Title of the

thing sold automatically transfers to the buyer.

Buyer can demand opportunity to inspect the thing

sold or delivered by the seller. Unless the buyer
previously examined the goods or there is a
stipulation to the contrary.

Buyer waives the right to accept is allowed. It can be

done expressly or impliedly.

Buyer can reject delivery by installments, unless

stipulated.
Actions and remedies for breach of agreement buy
the seller or the buyer

Actions available to seller

(a) Payment of price (Art. 1595)
(b) Damages (Art. 1596)
(c) Rescission (Art. 1597)

Actions available to buyer

(a) Specific performance (Art. 1598)
(b) Breach of Warranty (Art. 1599)

Remedies available to seller

(a) Lien on goods (Art. 1525-1529)
(b) Right of stoppage in transit (Art. 1530-1532)
(c) Right of resale (Art. 1533)
(d) Right of rescission (Art. 1534)
(e) Rescission in case of fear of loss of
immovable and price (Art. 1591)
(f) Rescission in case of sale of immovable
property (Art. 1592)
(g) Rescission in case of sale of movable property
(Art. 1593)
Recto Law
Coverage
➢ Sale of personal property
Remedies