Professional Documents
Culture Documents
Table of Contents
Course Outline Policy Page iii
Big Picture Week 1-3 Page 1
Unit Learning Outcome 1a & 1b
Let’s Check – Activity 1 Page 7
Let’s Analyze – Activity 1 Page 10
In a Nutshell – Activity 1 Page 11
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
Penalties for Late Assignments/Assessments The score for an assessment item submitted
after the designated time on the due date,
without an approved extension of time, will be
reduced by 5% of the possible maximum score
for that assessment item for each day or part day
that the assessment item is late. However, if the
late submission of assessment paper has a valid
reason, a letter of explanation should be
submitted and approved by the course
coordinator. If necessary, the student will also be
required to present/attach evidences.
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
Re-marking of Assessment Papers and Appeal The student should request in writing addressed
to the course coordinator the intention to appeal
or contest the score given to an assessment
task. The letter should explicitly explain the
reasons/points to contest the grade. The course
coordinator shall communicate with the student
on the approval and disapproval of the request.
If disapproved by the course coordinator, the
student can elevate the case to the program
head or the dean with the original letter of
request. The final decision will come from the
dean of the college.
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
For BSAT/BSIA/BSAIS:
Devzon U. Porras, CPA, MSA
0915-210-2083
devzonp@gmail.com
Students with Special Needs Students with special needs shall communicate
with the course coordinator about the nature of
his or her special needs. Depending on the
nature of the need, the course coordinator with
the approval of the program coordinator may
provide alternative assessment tasks or
extension of the deadline of submission of
assessment tasks. However, the alternative
assessment tasks should still be in the service of
achieving the desired course learning outcomes.
Course Facilitator’s (CF) Voice: Welcome _________ (y/n) to this course, ACC 312 –
Regulatory Framework and Legal Issues in Business. This is a self-instructional manual
that will help you in your self-directed learning. I will be your guide as you go through this
module, and let you work at your own pace. Of course, there will be deadlines and
submissions to be made. Feel free to ask questions and let us help one another so that
everything will run smooth according to your self-directed learning.
Course Outcome (CO): Before we begin, the secret to excel in this subject is to read. When
you read with comprehension, you will be familiar with the provisions in the law. You will be
able to explain the different legal terminologies used in this course – law on sales,
credit transactions and negotiable instruments (CO 1). Eventually, you will be using
your knowledge from this course and apply it to solve business-related problems with
legal basis (CO 2).
This module is designed in accordance with the updated syllabi for CPA Licensure
Examination. You are encouraged to read from the different sources suggested by the course
facilitator. This module only highlights the very important topics every student should know in
preparation for the licensure examination. By the end of this course, you are reasonably
expected to meet the aforementioned course outcomes.
Let us start!
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
Big Picture
Week 1-3: Unit Learning Outcomes (ULO) 1: At the end of the unit, you are expected to:
Metalanguage
In this section, essential terms relevant to understanding the nature of the contract of sale
are introduced first with their definitions. This will help you establish a foundation in
internalizing the concepts found in this unit.
1. Agency to sell – a contract in which a person renders service to sell a thing with
authority in behalf of another
2. Barter – one person binds himself to give one thing in consideration of other person’s
another thing
6. Earnest money – a partial payment by the vendee to the vendor of the purchase
price to show that he is willing to bind the bargain
7. Option money – a consideration paid to hold a person to his promise to buy or sell a
determinate thing, which is distinct from the purchase price
8. Statute of Frauds – (Art. 1483) a law which requires certain executory contracts to
be in writing.
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
9. Sale – a contract in which the vendor obligates himself to deliver the thing sold to the
vendee who in turn, pay a certain amount of money
Essential Knowledge
(2) Bilateral, because both the contracting parties has an obligation to each other
(3) Onerous, because the thing sold is conveyed in consideration of the price
and vice versa;
(4) Commutative, because the thing sold is considered the equivalent of the
price paid and vice versa.
(6) Principal, because this contract can stand on its own, meaning it is
independent from any other contracts
2. Natural elements – already inherent in a contract of sale; deemed to exist even without
stipulation
a. Warranty against eviction
b. Warranty against hidden defects and encumbrances
3. Accidental elements – particular stipulations of the parties such as terms, place and
time of payment, and other conditions agreed upon.
b. Conditional – the sale is subject to certain conditions either in the part of the
vendor or vendee
c. Other kinds - as to the nature of the subject matter (real or personal, tangible
or intangible), as to manner of payment of the price (cash or installment), as
to its validity (valid, rescissible, unenforceable, void), etc.
2. Rights - All rights that are transmissible may also be an object of the contract of sale,
like the right of usufruct, the right of conventional redemption, credit, etc.
Sale of things having potential existence (Emptio rei speratae) (Art. 1461)
Even a future thing, not existing at the time of the contract, may be the object of sale
provided it has a potential or possible existence. It must be reasonably certain to come into
existence as the usual incident of something in existence already belonging to the vendor,
and the title will only vest to the vendee the moment the thing comes into existence. For
example, the sale of the offspring of animals, or the agricultural produce harvested from a
farm.
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
4. In a sale, the seller warrants the thing sold, while in an agency to sell, the agent makes
no warranty for which he assumes personal liability as long as he acts within his
authority and in the name of the seller; and
5. In a sale, the buyer can deal with the thing sold as he pleases being the owner; while
in an agency to sell, the agent in dealing with the thing received, must act according
only to the instructions of his principal.
1. In a contract for a piece of work, the risk of loss before delivery is borne by the worker
or contractor, not by the employer (the person who ordered). A contract is for a piece
of work if services dominate that contract even though there is a sale of goods
involved thereafter. On the other hand, a contract of sale of a manufactured item is a
sale of goods even though the goods are manufactured by labor, because in this case
the primary objective is the sale of the item, not the services.
2. Another important distinction of a contract for a piece of work from sale is that the
former is not bound with the Statute of Frauds as stated in Art. 1483.
debt, from the viewpoint of the debtor, or the object acquired in lieu of the credit, from
the viewpoint of the creditor;
4. In sale, there is more freedom in fixing the price than in dation in payment.
4. Notarized deed of sale against verbal claims – When a seller verbally argues that the
sale of a thing was not perfected because the buyer is in default, the seller’s claim
cannot defeat the evidence of a notarized deed of sale, where it is expressly stated
therein that the thing was “sold, transferred and conveyed” to the purchaser for
consideration. To overcome a public document solemnly executed before a notary
public, the evidence to the contrary must be clear, strong, and convincing.
5. Non-fulfillment of one party by his obligation - In case one of the parties did not comply
to his obligation, the injured party may sue for fulfillment or rescission of the contract,
with payment for damages in either case. This right is predicated on the violation of
the reciprocity between the parties brought about by a breach of obligation by one of
them.
2. Under the Statute of Frauds, the sale involving the following must be in writing to be
enforceable:
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
4. If the authority of the agent is in a public instrument and the sale was:
1) Entered into orally – the sale is unenforceable.
2) In a private instrument – the sale is valid.
3) In a public instrument – the sale is valid.
Note: In order, however, that the sale may be recorded in the Register of Deeds, both the
authority of the agent and the sale must be in a public instrument. (See Art. 1358)
Example
Facts: Received from Ling the sum of P40,000 as earnest money with option to purchase
a parcel of land owned by Harry located at Juan Luna St. with an area of 350 square meters.
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
Answer: Option money. — Although, the consideration of P40,000.00 paid by Ling was
referred to as “earnest money”, a careful examination of the words used indicates that the
money is not earnest money but option money.
Another example
Facts: Bright is interested in buying the car of Sarawat for P1,000,000 payable within 60
days from the date of sale. To show that he is really in earnest, Bright gives Sarawat P10,000
upon the execution of their agreement, which amount Sarawat accepts. Accordingly, on the
due date for the payment of the price, Bright will have to pay Sarawat the amount of P990,000
only.
Answer: The mere acceptance of Sarawat of the earnest money does not mean that he
consented to the sale of his car. It must always be noted that in every sale there must be
acceptance of the offer by the buyer, or meeting of the minds.
Domingo, A.D. (2017). Regulatory Framework for Business Transactions MCQ CPA Reviewer. Benguet,
Philippines: Coaching for Results Publishing
Soriano, F.R. (2016). Notes in Business Law (For Accountancy Students and CPA Reviewees). Manila,
Philippines: GIC Enterprises & Co.
De Leon, Hector S. (2013). The Law on Sales, Agency and Credit Transactions. Manila: Rex Book Store
Let’s Check
Activity 1. Now that you are familiar with the legal terminologies and basic concepts of the
contract of sale, let us check your understanding by answering the following questions.
Choose the letter of your answer.
1. One of the contracting parties obligates himself to transfer the ownership of, and to
deliver, a determinate thing, and the other to pay therefor a price certain in money or
its equivalent.
a. Barter
b. Sales
c. Partnership
d. Agency
3. S sold his only cat to B. Before delivery and payment, the cat gave birth to a kitten.
a. B should pay the fair market value of the kitten.
b. S is entitled to the fruit as he is the owner.
c. B is entitled to the kitten which was born after the perfection of the sale.
d. S is entitled to the fruit because it was born before delivery.
5. Statement I. Sale by itself does not transfer or affect ownership; the most that sale
does is to create the obligation to transfer ownership.
Statement II. The perfection of a contract of sale should not, however, be confused
with its consummation. In relation to the acquisition and transfer of ownership, it should
be nted that sale is not a mode, but merely a title.
a. Only Statement I is true.
b. Only Statement II is true.
c. Both statements are true.
d. Both statements are false.
7. Is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the agreement.
a. Determinate subject matter.
b. Consent
c. Policitacion
d. Price certain in money or its equivalent
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
Statement II. The fact that the quantity in contract of sale is not determinate shall not
be an obstacle to the existence of the contract, provided it is possible to determine the
same, without the need of a new contract between the parties.
a. Only Statement I is true.
b. Only Statement II is true.
c. Both statements are true.
d. Both statements are false.
9. Statement I. In general, the object is the why of the contract or the essential reason
which moves the contracting parties to enter into the contract.
Statement II. For the cause to be valid, it must be lawful such that it is not contrary to
law, morals, good customs, public order or public policy.
a. Only Statement I is true.
b. Only Statement II is true.
c. Both statements are true.
d. Both statements are false.
13. It shall be considered as part of the price and as proof of the perfection of the contract.
a. Option money
b. Initial payment
c. Downpayment
d. Earnest money
14. It constitutes an advance payment and must, therefore, be deducted from the total
price.
a. Option money
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
b. Initial payment
c. Downpayment
d. Earnest money
15. A special mode of payment where the debtor offers another thing to the creditor who
accepts it as equivalent of payment of an outstanding debt.
a. Application of payment
b. Cession in payment
c. Dation in payment
d. Tender of payment and consignation
Let’s Analyze
Activity 1. To further test your understanding, in this task, you are required to apply your
critical thinking skills in answering the following cases and support your claims with legal
basis.
Case 1
S offered in writing to sell his house and lot for P1,000,000 to B on January 20, 2017. B
requested to give him one month to raise the amount. On January 25, 2017, S informed B
that he has raised the price to P1,200,000. Can B compel S to accept the payment of
P1,000,000 for the sale of the house and lot?
Case 2
A sold to B orally a parcel of land for P300,000. Delivery and payment were to be made
after six months. When the said date arrived, A refused to deliver the land. Can B compel A
to deliver?
Case 3
Santiago sells to Bermejo 500 sacks of rice at P1,000 per sack from the stock then stored
in the warehouse of Santiago. Unknown to the parties, the warehouse contains only 480
sacks of rice. What is the status of the contract between Santiago and Bermejo?
Case 4
S and B entered into a contract whereby S transferred to B a specific car for the price of
P200,000, while B gave to S P90,000 in cash and a diamond ring worth P110,000. The
heading of the written contract signed by the parties reads “Contract of Sale”. Is the contract
between S and B valid?
Case 5
S orally offered to sell a certain diamond ring to B for P50,000. B accepted the offer and
to prove that he was in earnest, he gave S P1,000. The parties agreed that the delivery of
the ring and the payment of the price would be made 30 days later. On due date, how much
S can collect from B?
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
(Note: The questions on Let’s Check – A1 and Let’s Analyze – A1 are adapted from the
references provided by the facilitator.)
In a Nutshell
Activity 1. To help you remember the gist of the lesson, this task requires you to complete
the tables below by determining the unique characteristics of the contract of sale as compared
to other kinds of contracts.
Table 1
Sale Agency to sell
Table 2
Sale Barter
Table 3
Sale Contract for a piece of work
Table 4
Sale Dation in payment
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
Bonus table
Earnest money Option money
Q&A LIST
Do you have any questions for clarification?
Questions/Issues Answers
1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
Keyword Index
Course Schedule
This section calendars all the activities and exercises, including readings and lectures, as
well as time for making assignments and doing other requirements.
MARLON A. JABLA,II
Author
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College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
Approved by:
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