oF BUSINESS LAW ‘4 [BSSENTIALS dace amin a pkg re etenert areme ironies tho contracts lees by, rey hanaiv Agrarian Reform Pon and ened sentiment of PROT inside a ubigs vos the contact i illegals the act constitutes er ater ama nots partis are ty (in par delicto, they shall tn a eth pci 2 doth shal Bo Ponce aoa ai because iis prohibited and both parties are inp, ont agave no cio agaist oah ther. They, dete, they a ei only one party is guilty O fault ana ther ie iamocentor incapacitated. When se contrat ot ign er bu is erly rg ec fan) and to prohibition s designed fr the pric alate policy is thereby enhanced. ‘in case of a divisible contract, if the illegal terms cant separated from the legal ones, the latter may be enforced. ‘The action oF defense for the declaration of the inexistencedi contract does not prescribe. a C. SALES I. DEFINITIONICONCEPT By the contract of sale, one ofthe contracting parties (seer) obligates himself to transfer the ownership of and to deliver a eterminate thing, and the other (buyer) to pay therefor a price certain in money oF its equivalent. Only things and rights may be the objects of a contract of sale ‘because ownership of services cannot be transferred from one person to another. The equivalent of money, referred to in the above Gefinition, refers to negotiable instruments such as promissory notes, bills of exchange and checks, Hl. CHARACTERISTICS OF THE CONTRACT OF SALE 8) Consensual — perfected by mere consent; b) Bilateral — both parties have obligations to perform; ©) Cuminutative — values exchanged are generally ‘equivalent to each other; "Principal — its existence does not depend upon another contract; ©) Onerous — it requires an exchange of valuable consi-de- ration; 9 Naminate—ithaes nase roid rit Cl Cote 2) Generally reciprocal — the performance ofthe obligation by one party is dependent upon the performance of the other's obligation « Scanned with CamScannerESSENTIALS OF BUSINESS LAW « {IL STAGES OF THE CONTRACT OF SALE ual contracts, the 0828 ofthe cn Like ltr cosens wrfecton or scat seperation or const 0 ol ton rtorminton or ath I HE CONTRACT op qv, ESSENTIAL ELEMENTS OF 7! clements ofthe contract of sale, lke any g ‘The essential eerie nd cause or consideration,“ contrac, are consent, objec, at) Consent isthe meeting of the minds between thes andthe bayer roarding the thing oF Fight tbe sold and the pri price tobe paid by the bayer ‘To be valid, the consent between the buyer and the seller my be fees voluntarily and intelligently given. Ineapacitated prs pe drce he minors, insane or demented persons and deaf-mutes donot know how to write, cannot validly enter into a contract of for lack of intelligence. Therefore, if the buyer or the seller {neapacitated, the sale is voidable, excopt when the objet oft Contract involves necessaries which are indispensable for sustens Gwelling, clothing, medical attendance and educational expen Likewise, i the consent of one of the contracting partes is obs through mistake, violence, intimidation, fraud or undue infos the sale is voidable because consent is not freely and volun given b) Object refers to the determinate thing or the subject matter af the contract of sale. ‘The object of the contract of sale must be lieit or lait otherwise, the sale s void, Future or potential thing may be the object of the conte? sale, This potential thing may be classified into: 1. expected thing fmptio rei sperati; and 2 mere hope or expectancy (emptio spd ‘The sale of mere hope or expectancy (emptio spei) i8 subject! the condition thatthe thing may come into existence Bees aloof avin hope or expectancy i oud ‘The seller must be the owner of the thing sold becaus6 % requires the transfer of ownership to the buyer. This requir’™ it whic Parr a {LAW OW BUSINESS TRANSACTIONS CisaLes must be present not atthe time ofthe perfection ofthe contract of sale put atthe time of delivery, S is ©) Cause’ or consideration refers to the purchase price agreed upon tobe paid by the buyer. ‘The eause in acontract of sle, insofar as the seller is concerned, is the price certain in money or its equivalent. Ifthe consideration for the thing or right is not money or negotiable instrument, the contract is not a sale. On the pert of the buyer, the cause or consideration isthe transfer of ownership and delivery ofthe object ofsale. ‘The price must be certain but even ifthe amauat has not been ‘agreed upon, the pric is still certain: 1, _ ifitbe certain in reference to another thing certain; 2. if the determination ofthe price i left to the judgment of a third person or persons; and 3, sft isthe price which the abject would have on a definite aay: Gross inadequacy ofthe price (lesion) will not affect the validity of the contract of sale as long as it has been validly agreed upon by ‘the buyer and the seller. V._ IMPORTANT DISTINCTIONS 8) _ Sale from dation in payment 1, Insale, there is no pre-existing ereit; while in dation in paymont, there is a preexisting credit; 2. For the seller the cause of sale is the price; forthe debtor in dacion en pago, the cause is the ‘extinguishment of his ebligation in money; 8, In sale, obligations are created while in dacion en _pago, the obligation is extinguished; and 4. Insale, there is greater freodom in the determination of the price of the thing sold; while in dation in payment, there is les freedom in determining the price ofthe thing delivered, Scanned with CamScannerpUSINESS LAW a BSGENTIALS OF » Sate rom contract fora lees of wort ‘ie very ata certain price of an tile ostinato crest tees net geeneingat the Sine fe a ig seen of work, te goods are t0 be Mantfactang ca Fp a i the goneral market. © Sale from barter Taal, the consideration for the transfer of ownership ofa sama meer neta struments) while aan, the consideration i another thing what is pidfor an objet consists partly of money and some ether objet the transaction may be determined based on: 1) the intention ofthe parties; of 2) fn the absence ofa clear intontion between the parti, the fellowing rules shal be observed: a) Ifthe value ofthe object is greater than cas, it's barter, 1b) Ieash is greater than the value of the objet iti sale; and ©) Tfeash and objet have the same value, itis sale. Examples: 1. Ssold his car toB for Phip80,000.00 plus a dia- ‘mond rng worth Pkp70,000.00. The contract beeen the ‘Seale because thats her intention. 2. For and in consideration of the amount of Pho 90,000.00 plus a diamond ring worth Php70,000.00, S agreed to transfer the ownership of his ear to B. Their gtlract is barter because the value of the ring i eater 3. For and in consider in consideration ofthe amount of Php 7.009 plus diamond ring worth Php80;000.00, § ery raster the canership of his car to B. The : use cash is greater than the value Of Parr ” {LAW oN BUSINESS TRANSACTIONS SALES 44. For and in consideration of the amount of Php 450,000.00 plus a diamond ring worth Php60,000.00, $ ‘agreed to transfer the ownership of his ear to B. Their ‘contrac is sale Because the amount of money and the value “ofthe ring are equal. @ Sale or return from sale on trial, approval or satisfaction In sale or return, ownership of the thing old is transferred to the buyer upon delivery, but the vendee is given the option to return By In sale on trial, eatisfaction er approval, the ownership is| retained by the seller notwithstanding the dolivery ofthe thing to the buyer. Examples: 1. S delivered a refrigerator to B onsale or return {for the amount of Php10,000.00. Four hours after delivery, the house of B was burned without his fault and the refrigerator was lot Who shall bear the loss ofthe refrigerator? Because hes already the owner of the refrigerator. 2, Sold and delivered television set to Bon trial, satisfaction or approval. Four hours after delivery, the house of B was burned without his fault and the TV set twas lost, Who shall bear the loss ofthe TV set? ‘because ownership ofthe TV set is retained by him notwithstanding delivery to B. ©) Pactode retro sale from mortgage 1. In pacto de retro sale, there is no foreclosure (unless eclared an equitable mortgage); while in mortgage, the thing ‘mortgage shall be foreclosed ifthe abligation is not paid and 2, Inpacto de retro sale, there is no pre-existing obligation; while a mortgage fs just an accessory obligation to secure the Performance of an existing obligation, Scanned with CamScannerESSENTIALS OF BUSINESS LAW a a tee dt nn En hw he DPT era oes cer item ced pect pr he pe ce ‘VL. FORM OF THE CONTRACT OF SALE Generally a contract of sale may be orally executed and aslo ‘as the three essential elements of the contract are present the sa, is valid. However, there are contracts of sale which must be in wrtg tobe'valid and enforceable Ifitis in writing the document may bes private or public instrument, ‘The contracts of sale which must be in writing to be enforoable between the parties, pursuant to the Statute of fraud, are: a) "sale of real property regardless of the amount; 'b) sale of personal property ifthe price is Php600,00 or mae and | ©) sale which must be performed or executed only after mae ‘than a year from the time ofthe agreement, ‘The foregoing provisions under the Statute of Fraud apply et topurely executory contracts. Hence, the contract of sale is enforceable although oral’ ‘established, iit has boen partially or totally executed. VIL. OBLIGATIONS OF THE SELLER 1. Todeliver the thing sold; 2 ‘Totransfer its ownership; 3. To warrant the thing sold; 4 5. ‘Totake care of it pending delivery; and ‘To pay forthe expenses ofthe deed of sale. Part a LAW ON BUSINESS TRANSACTIONS. ‘CSALES ‘Among these abligations, the duty to transfer the ownership of the thing eeld eannot be waived by the buyer. ‘ill, KINDS OF DELIVERY a) Actual or real delivery — the thing is place in the possession and control ofthe bayer. 5 b) Constructive delivery, such as: 1, Execution ofa publie document legal formalities); 2, Symbolie delivery (delivery of the key); 3, Tradito longa manu (by mere pointing at the object 4. Traditio breei manu (buyer is already in poss 0 no need to deliver); and 5, Traditio constitutum possesorium (no delivery because seller will continue in possession not as an owner but in a diferent eapacity); ©) Quasi-delivery — tho object is intangible or incorporeal (placing ofthe ttl of ownership in the name ofthe buyer or allowing the buyer to exercise the right) ‘Remember: Ownership is transferred only by delivery. 1X. WARRANTIES ‘The seller ofa thing warrants that the buyer will not be evieted from or deprived of the property sold (warranty against eviction); ‘and that the property sold is free from any hidden faults or defects (warranty against hidden defects), uietion is the judicial process whereby the buyer is deprived, totally or partially, of the ownership ofthe thing purchased because ofthe sellers fault, Exampl sold his land to B and then sold it again to X, who first registered itn good faith. B who lost the land in favor of the second buyer has the right to demand for damages ‘against S forthe violation ofthe warranty against eviction. ‘The damages that can be demanded by B shall be based Scanned with CamScannernsgeNTIALS OF BUSINESS AWE ‘at the time the evition took an the value ofthe Preto or teser than the Purchaye Sat which maybe ree oF ay rca often t warranty oat iden fit, be or oe aeeebench ot areaeind the contract of vale (arg? ea amet Pl 8) there must really be an important defect; and by the defect must be really hidden or could not have bey known. : X_ RIGHTS OF THE UNPAID SELLER ‘The unpaid seller has the following rights: 1 specifie performance or right to demand payment ofthe rice; ight to rescind or cancel the ight of possesory lien; ‘ight of stoppage in ransitu; and ight to resel, 1. Right fo demand payment of the price ‘The seller may make extrajudicial o judicial demand toebisia the price ofthe eject sold rom te buyer plus damages or interes, ‘in case there is already delay, oe oe 2 Right to rescind or cancel the sale ‘The unpaid seller may unilaterally rescind or cance the sale the shies af the ‘sale a Personal property and it is still in his Fewest alent ese In a sale of real Property, a disti t we f ee to ete ‘OF 8 contract to sell with the right af meuane ‘contract st Property with a stipulation that ti = at ety tin ‘aw on Bus scr to pay the price, the buyer is allowed to pay the price after the expiration ofthe period to pay as long asthe seller has not yet asked fora judicial or notarial rescission ofthe contract. TIn-a contract to sell real property with a stipulation that the contract shall automatically be rescinded or cancelled upon failure te pay the price or any installment, euch stipulation is considered valid. 3. Right of possessory lien ‘The seller has the right to retain the goods until payment of ‘the price, This Fight ean anly be exercised for as long as the property is sll inthe possession of the seller, Once the object ‘delivered to the buyer, the right of possessory lin is lost but his ‘on the price remains, This means that although the property is already in the possession of the buyer, the soller is considered a preferred creditor relative to the price of the thing sold, which preference is subordinate only tothe government's claim to specific taxes on the thing eld 4. Right of stoppage in transitu ‘This i the sellers right to stop the delivery of the goods in transit to the buyer when the buyer becomes insolvent. The seller ‘an get back the goods and exercise his possessory lien on the samme. If the property is already inthe possession ofthe buyer, who is insolvent, the teller has the fellowing remedies: 8) to demand forthe return ofthe property: D) task forthe attachment of the buyer's other properties; ‘© to ask forthe rostssion of the contracts entered into by ‘the buyer to defraud him (accion pauliana); or @) to be subrogated in place of the buyer. (accion ‘subrogatoria). : 5. Right toreselt ‘The seller, who is stil in possession of the property sold to a Duyer, may sell t again to another inthe following eares 1) when there a stipulation granting him this right in ease ofthe buyer’ failure to pay: 1) when the goods are of perishable nature; and Scanned with CamScanner6 ESSENTIALS OF BUSINESS LAW stated in the contract my In eale by unit the total aréa the contract ma delivered to the buyer. Failure on the pert f ‘oto see serie eins cen ee reper tno ve ecmecettin kn se et yg conanaintcac Tai conn ges tat cio a san ttn Notas tae Mat ast toe ae Siete cae oe 2 eprctenonm Teck Sf lb onthe Netae or emyiel pac emem sonia came eget donee ae ee ne anise ret unstable ns toe ° > a ar » proportionate eduction of the price. XV. SALE OF ANIMALS ‘The fllowing are the important rules in case of sale of anima 1, The sale of animals sufering from contagious disease void; 2 If the ise or service for which the animale have bet acuired had been stated inthe contract and the * found tobe une therfore, the clef Vo 3. If the animals should die within three days after bursa the sel shal bebe, the dicate 2 caused the death already existed at the time of contract; a ns 4 Ie oF more animals are ead = sao sold together fra lu sr fora separate price foreach trem, the hide {pment give rte to cancellation a the sale uslets can be proved thatthe buyer 99 Berepurchased the sound animal or animale without a Parr a {LAW OW BUSINESS TRANSACTIONS CsALES ‘he invisibility ofthe sale shall be presumed when & sam, pair or st is brought, even ifa separate price has ‘ben fixed foreach ono ofthe animals composing the same; and ‘There is no warranty against hidden defects of animals sold at fairs or at public auctions or of livestock sold as condemned. XVI. DOUBLE OR MULTIPLE SALES In case of double or multiple sales, the rules on the preference cofownership depend on whether the property sold sa real or personal property. 1. Real property Ifa real property has been sold to two or more buyers, the rules on preference of ownership shall be: the buyer who first registers, n good faith, the Registry of Deeds; le inthe ®) b) in the absence of registration, the buyer who first ‘possesses, in good faith, the property purchased; and ‘© in the absence of registration and possession, the buyer who has the oldest title in good faith, or he who first bought the property in god faith 2, Personal Property ‘The rules on preference of ownership incase a personal property ‘has been sold to two or more buyers shall be: ) the buyer who first possesses the property purchased in ood faith; and 1) in the absence of possession, the buyer who has the oldest title in good faith or he who frst Bought it in good faith XVII. CONVENTIONAL REDEMPTION {tis the process whereby a seller, by virtue ofa stipulation in the contract of sal, is allowed to get back oF redeem the property ‘sold, within the period of time fxed in the contractor declared by law, provided he returns the price and some other things at the time Scanned with CamScannerESSENTIALS OF BUSINESS LAW sf opurchac, Thi kindof an alo calld sale With righ purchase or pacto de retro sale. ep re i roe dua ale OU ae te at te aon Trac i tle sooth em dt oe rt depend onthe agreement or ong, ease hall it exceed ton Examples ee 1, S sold his house and lot to B with a right to ‘repurchase within sx years. When can S redeem the house ‘ond lot? Wihin si years from the date of the sale. 2. S sold his house and lotto B with the right to redeem it within fifteen years. Until when can S exercise ia right? Within ten years from the date ofthe sale. 3, S sold his house and lotto B withthe right to repurchase it once he has the money. When can S ‘epurchase the house and dot? Within ten years from the dat ofthe sale If there isa prohibitive period of redemption, the peri! redeem will begin after the prohibitive period, but always within (10) years from the date ofthe sale. Example: On December 31, 2000, § sold his house and lot to B with a right to repurchase within seven years {ror December 31; 2006. Until when can S redeem the house and lo Within ten years from the dat ‘the sale or until December 31, 2010; Ss Sedan with the right to repurchase, but there is n0 Pe seed pn within which to redeum, the pened et redam 2 vwithin four year Tom te dateent eee ‘Sold his house and lott B under pacto de retro. No period was agreed upon for the repurchase of the same. When ean S repurchase the house and lot? Within four years from the date of the sale. ‘What will be returnod by the seller to the buyer in ease of ‘redemption in pacto de retro sale? Pico of the sale; Expenses ofthe contract; Other legitimate expenses made by reason ofthe sale [Necessary and useful expenses made on the thing sold. XVIII. LEGAL REDEMPTION Its the process whereby the law automatically grants to certain persons the right to get back the property sold upon relmbursement ‘ofthe price for reasons of public plle. The persons entitled to this ght are th following: 1. the co-owner of the property involved ‘The co-owner of property has the right to legally redeem all tho shares ofthe other co-owners or any of them, which are sold to third persons, This right may be exercised by the co-owner within thirty (0) days from written notice by the seller by reimbursing to the buyer the amount pad by him, Ifthe share or shares are sold for arossly excossive amount, the co-owner who desires to exercise this "ight shall pay only a reasonable amount. ftwo oF more co-owners desire to exorcise this right, they may ‘only doo in proportion t thelr respective shares in the thing owned. ‘This right ofa co-owner shall not be availble ifa co-owner sold hs share to another co-owner 2, the adjacent owner of the property involved ) adjacent owner of rurat land ‘The adjacent owner of rural land, the area of which does not ‘excoed one hectar, is legally entitled to exercise the right of legal Scanned with CamScanner[BSSENTIALS OF BUSINESS LAW pti, nes th yererantes doo 198 ONT any redemption unless the Wer dase to exercise the righ IC vo oF more decal be preferred. Ifthe area of land o srrsgeee scat Sine ne mo ft the adacnt ows Bebveon co-owner ahd "semption shall bret prefoental Tight to exrea P ‘owner to exercise or dhe perf ee aoe oe redemption The pend gent a cower, Le, win inno by te sl ‘The reason for the grant of this right is to foster the devel otagiear! inte eal i b) adjacent owner of urban land ‘When an urban land, which is so small, cannot be us practical purpotes and purchased only for speculation, is tobe the adjacentiadjoining owner has the right of pre-emption reasonable price. The purpose for the grant of this right to aij owner is to prevent speculation. If two or more adjoining ore) desir to exercise the right, he whose intended use ofthe prop best justified shall be preferred. If it has already been si, adjoining owner ean exerese the right of legal redemption = the same period as a co-owner, 3. _ the realestate owner whose property has beens! for tax delinquency 2 ‘A landowner whose property has been sold forthe pays! delinquent taxes thereon has a period of one year fo registration of the sale within which to legally redeem it XIX. SALE OF PROPERTY ON INSTALLMENT BASIS AL RECTOLAW ‘This law (Art. 1484 of the Civil Cx oe ‘vil Code of the Philippines) bests Instat otal otperonal pent thers of hich Undertow to pay ane or eat the seller's remedies in ease ofthe buyer #™ installments are: A. demand for ra installments) ithe be ore Performance (payment ofthe “he buyer fils to pay one or more instllie™* eaer 6 LAW ON BUSINESS TRANSACTIONS salts 2, roecind the contrac of ale ifthe buyer fails to pay two or more installments; ‘3, _ineaso the property sold is mortgaged tothe seller to so- cure the payment ofthe balance, the eeller may avail of the above ‘pwo remedies before he may foreclose the mortgage. Once the seller immediately foreclosed the mortgaged property for failure of the buyer to pay two or more installments, he has no more right to demand for the deficiency in ease the proceeds of the sale, after foreclosure, is less than the amount ofthe abligaton. Any stipulation making the buyer liable for the defiiency after the foreclosure sale Is void, B. MACEDALAW ‘This law (R.A. No. 6552 — The Realty Buyer Protection Act) applies to contracts of sale of immovable property on installments. [As the tile ofthe law suggests it gives emphasis tothe rights of the bayer, to eit: 1, If the buyer has pad installments for a least two years, hae is entitled toa mandatory grace period to pay the unpaid installments without interest, equivalent to one month for every Year of installment payments made. 2. Ir the contract is cancelled or rescinded, the vendor shall rofund to the buyer the cash surrender value equivalent to fifty percent (60%) of the total payments made. After five years of installments the buyer is entitled to an additional five percent (5%) every year but not to exceed ninety percent (90%) of the total payments made 3, If the installments paid were less than two years, the vendor shall give the buyer a grace period of not less than sixty (60) days. Ifthe buyer fils to pay the installments due atthe expiration ofthe grace period, the seller may cancel or rescind the contract after hiety (30) days from reccipt by the buyer of the notice of the ‘cancellation or demand for rescission by notarial act, NOTE: The notie ofancellation or demand for rescission should ‘be notarized; otherwise, the buyer ean still offer to pay the unpaid installments beyond the grace period Scanned with CamScannera [ESSENTIALS OF BUSINESS LAW (ON AND Co} CPD. NO, 957 — THE SUBDIVISK Nn, -MINIUM BUYERS PROTECTIVE DECREE ‘Under the snid Decree, installment payments made by abi, in a subdivision or condominium project for the lot oF uni, Ba fected to buy shall not be forfeited in favor of the owner encloper when the buyer, after due notice to the owner or devee deste from further payment due to the faire of the owner, eveloper to develop the subdivision or condominium proj sNording to the approved plans and within the time limit fe complying with the same. Such buyer may, at his option, by Seimbursed the total amount pad including amortization intere, ‘The rights ofthe buyer in case af failure to pay the installmeng at mentiited above shall be governed bythe on ie - fy De D.AGENCY VA ~e Rips 1, DEFINITIONCONCEPT By the contract of agency a pesos binds himselfto render some service orto do something in represontation or on behalf of another, ‘vith the consent or authority ofthe later. Oly services can be th Ubject ofthe contract. Its a Aduciary contract because it requires {rust and confidence HI, CAPACITY OF THE PARTIES In order to be a valid contrat of agoncy, the principal and the ‘agent must be capacitated. However, even if the agent is {neapaeitated, the contract entered into by him with third persons shall be valid as long asthe principal is capacttate ‘Example Dr. P appointed A, «fifteen year-old student, to sell his motoreyele.'A sold ito his instructor, B. The contract of agency between Dr Pand A ie voidable but the contract of sale between A and Bis valid III, CHARACTERISTICS OF AGENCY ‘The following are the characteristics of the contract of agency: he ate oteril— ete by mera consent ules inves 1 sale of real property or any interest therein, which requires the Authority to be in writing to be valid and enforeeable; 2 Bilateral — both parties have obligations to perform; Sts existence does not depend upon another 3, Principal contrat; 4. Nominate — ithas a name or particular designation under the law = Scanned with CamScanner