Activity No.

1-Sale of Goods By Description and Sample-Option and Earnest Money-Recto Law and Maceda
Law-Capacity to buy and sell Business Laws and Regulations

Instruction: In complete sentences, please provide the answer to the following set of questions.
Provide the legal basis of your answers.
1. State the special rules where the determination of the price is left by the parties to the
judgement of a specified person or person.
-Under Art 1469, it clearly states that price should be certain, and if not it, the determination
shall be left with specified persons. If that person is unable or unwilling to fix it, the contract
shall be inefficacious, unless the parties subsequently agree upon the price. If the third person or
persons acted in bad faith or by mistake, the courts may fix the price. Where such third person or
persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party
not in fault may have such remedies against the party in fault as are allowed the seller or the
buyer, as the case may be.
- Effects where price is fixed by third persons designated:
 General rule- the price fixed by a third person designated by the parties is binding
upon them.
 Exception to the general rule-
(1) When the third person acts in bad faith or by mistake as when the third person
fixed the price having in mind not the thing which is the object of the sale, but
another analogous or similar thing in which case the court may fix the price. But
mere error in judgment cannot serve as a basis for impugning the price fixed;
(2) When the third person disregards specific instructions or the procedure
marked out by the parties or the data given him, there by fixing an arbitrary price.

2. What is the effect on the sale if the price is simulated?

-Under Art1471. If the price is simulated, the sale is void, but the act may be shown to have
been in reality a donation, or some other act or contract
 If the price is simulated or false such as when the vendor really intended to
transfer the thing gratuitously, then the sale is void but the contract shall be valid
as a donation.
 If the contract is not shown to be a donation or any other act or contract
transferring ownership because the parties do not intend to be bound at all (Art.
1345, ibid.), the ownership of the thing is not transferred. The contract is void and
inexistent. (Art.1409.) The action or defense for the declaration of the inexistence
of a contract does not prescribe.
  Simulation occurs when an apparent contract is a declaration of a fictitious will
deliberately made by agreement of the parties, in order to produce, for the
purpose of deception, the appearance of a juridical act which does not exist or is
different from that which was really executed. Its requisites are (a) an out-ward
declaration of will different from the will of the parties; (b) the false appearance
must have been intended by mutual agreement; and (c) the purpose is to deceive
third persons.
3. What is the effect of gross inadequacy of price upon a contract sale.
Under Art. 1470: Gross inadequacy of price does not affect a contract of sale, except as it
may indicate a defect in the consent, or that the parties really intended a donation or some
other act or contract.
 General rule
-While a contract of sale is commutative, mere inadequacy of the price or alleged
hardness of the bargain generally does not affect its validity when both parties are
in a position to form an independent judgment concerning the trans-action. In
determining whether the price is adequate or not, the price obtaining at the date of
the execution of the contract, not those obtaining a number of years later,
should be considered
-Where low price indicates a defect in the consent. — The inadequacy of price,
however, may indicate a defect in the consent such as when fraud, mistake, or
undue influence is present (Art. 1355.)in which case the contract may be
annulled not because of the in adequacy of the price but because the consent is
vitiated. Con-tracts of sale entered into by guardians or representatives of
absentees are rescissible whenever the wards or absentees whom they represent
suffer lesion by more than 1/4 of the value of the things which are the object
thereof.
-The unsupported claim that the sale of property was made for an inadequate price
is a mere speculation which has no place in our judicial system. Since every claim
must be substantiated by sufficient evidence, such a conjectural pretension cannot
be entertained. Allegation of inadequacy of price must be proven.
-Where price so low as to be “shocking to conscience” While it is true that mere
inadequacy of price is not a sufficient ground for the cancellation of a voluntary
contract of sale, it has been held that where the price is so low that “a man in his
senses and not under a delusion” would not accept it, the sale may be set aside
and declared an equitable mortgage to secure a loan. But where the price paid is
much higher than the assessed value of the property and the sale is effected by a
father to his daughter in which filial love must be taken into ac-count, the price is
not to be construed “as so inadequate to shock the court’s conscience.”
4. When is a contract of sale perfected?
-Under Art 1475: The 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. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law governing the
form of contracts.
 General rule: Contracts are perfected by mere consent. The contract of sale being
consensual, it is perfected at the moment of consent without the necessity of any
other circumstances. From the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price (see Art. 1624.), the
reciprocal obligations of the parties arise even when neither has been delivered.
The essence of consent is the conformity of the parties on the term of the contract,
the acceptance by one of the offer made by the other.
5. When is a sale by auction perfected?
-Under Art. 1476 paragraph (2): A sale by auction is perfected when the auctioneer announces
its perfection by the fall of the hammer, or in other customary manner. Until such announcement
is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale
unless the auction has been announced to be without reserve.
 General rule: In putting up the goods for sale, the seller is merely making an
invitation to those present to make offers which they do by making bids (Art.
1326.), one of which is ultimately accepted. Each bid is an offer and the contract
is perfected only by the fall of the hammer or in other customary manner. It
follows that the bidder may retract his bid and the auctioneer may withdraw the
goods from sale any time before the hammer falls. However, if the sale has been
announced to be without reserve, the auctioneer cannot withdraw the goods from
sale once a bid has been made and the highest bidder has a right to enforce his
bid.
6. What is the effect of an accepted unilateral promise or offer to sell or buy a thing for a price
certain?
-Under Art 1479 Par 2: An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price.
 Effects of an accepted unilateral promise: A unilateral promise to sell or to buy a
determinate thing fora price certain does not bind the promissor even if accepted
and may be withdrawn at any time. It is only if the promise is sup-ported by a
consideration distinct and separate from the price that its acceptance will give rise
to a perfected contract. The optionee (holder of the option), after accepting the
option and before he exercises it, has the right, but not the obligation, to buy or
sell, as the case may be. Once the option is exercised, i.e., offer is accepted before
a breach of the option, a bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their respective undertakings.
It would bea breach of the option for the optioner offer or to withdraw the offer
during the agreed period. If in fact, he withdraws the offer before its acceptance
 (exercise of the option) by the optionee-offeree, the latter may not sue for specific
performance on the proposed con-tract since it has failed to reach its own stage of
perfection. The offer or, however, renders himself liable for damages for breach
of the option.

7. Give the rules with regard to any injury to or benefit from the thing sold after the contract is
perfected but before delivery.
-Under Art 1480: Any injury to or benefit from the thing sold, after the contract has been
perfected, from the moment of the perfection of the contract to the time of delivery, shall be
governed by articles 1163 to 1165,and 1262. This rule shall apply to the sale of fungible things,
made independently and for a single price, or without consideration of their weight, number, or
measure. Should fungible things be sold for a price fixed according to weight, number, or
measure, the risk shall not be imputed to the vendee until they have been weighed, counted, or
measured, and delivered, un-less the latter has incurred in delay.
 Rules with regard to injury of a thing sold-
(1) If the thing is lost before perfection, the seller and not the one who intends
to purchase it bears the loss (see Roman vs.Grimalt, 6 Phil. 96 [1906].) in
accordance with the principle that the thing perishes with the owner (res perit
domino);
(2) If the thing is lost at the time of perfection, the contract is void or inexistent.
(Art. 1409[3].) The legal effect is the same as when the object is lost before the
perfection of the contract of sale (see Art. 1493.);
(3) If the thing is lost after perfection but before its delivery, that is, even before
the ownership is transferred to the buyer, the risk of loss is shifted to the buyer as
an exception to the rule of res perit domino (Arts. 1480, pars. 1 and 2, 1538, 1189,
and 1269.); and
(4) If the thing is lost after delivery, the buyer bears the risk of loss following the
general rule of res perit domino
8. State the rules governing the sale of goods by description and/or by sample.
-Under Art 1481: In the contract of sale of goods by description or by sample, the contract may
be rescinded if the bulk of the goods delivered do not correspond with the description or the
sample, and if the contract be by sample as well as by description, it is not sufficient that the bulk
of goods correspond with the sample if they do not also correspond with the description. The
buyer shall have a reasonable opportunity of comparing the bulk with the description or the
sample.