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NATURE AND FORM OF THE CONTRACT1/27/2012 3:33:00 AM

ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. Characteristics of a contract of sale 1. Consensual -perfected by mere consent 2. Bilateral -both parties are bound to fulfill obligations reciprocally 3. Onerous -thing sold is conveyed in consideration of price 4. Commutative - thing sold is conveyed in consideration of price **Contract may be aleatory in the case of a sale of hope 5. Nominate given a special name in the Civil Code Sale 6. Principal - existence and validity does not depend on another contract Essential requisites of a contract of sale 1. Consent or meeting of the minds - parties must have legal capacity to give consent and to obligate themselves - acceptance of payment by the seller is an indication of his consent **sale against the will of the owner: expropriation of property, execution sale, foreclosure sale of mortgaged or pledged property 2. Object or subject matter - Thing must be determinate or capable of being made determinate - Subject matter may be real or personal property 3. Cause or consideration - price certain in money or its equivalent (check or promissory note) - does not include goods or merchandise - no sale without a price Natural and accidental elements 1. natural elements - deemed to exist in certain contracts **warrant against eviction or hidden defects 2. accidental elements - depends on the stipulations of the parties

**conditions, interest, penalty, time or place of payment Two kinds of contract of sale 1. Absolute title or ownership passes to the buyer upon delivery 2. Conditional contemplates a contingency ** usually full payment ARTICLE 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. Requisites concerning object 1. Things a. determinate b. licit and lawful (not contrary to law, morals, good customs, public order, public policy) c. not be impossible **must be within the commerce of men **subject illicit (void) **outside the commerce of men- public ownership, common to everybody 2. Rights - all not in transmissible or personal may be the object of a sale (right to usufruct, etc) - services can be the object of sale, but not the object of a contract of sale Kinds of illicit things 1. per se (of its nature) - decayed food unfit for consumption 2. per accidens (because of provisions of law declaring it illegal) - lottery tickets, prohibited drugs Right of vendor to transfer ownership 1. One can sell only what he owns - seller must at least be the owner - or must be authorized to sell

2. Sufficient if rights exist at time of delivery - sufficient if he has the right to sell when ownership is to pass ARTICLE 1460. A thing is determinate when it is particularly designated or physical segregated from all others of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. **new or further agreement between the parties- constitutes an obstacle to the existence of the contract, thus renders it void. ARTICLE 1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. Things having potential existence as object of sale - reasonably certain to come into existence already belonging to the seller - title will vest in the buyer the moment the thing comes into existence - thing sold must be specific and identified - thing must also be owned by the vendor at the time Sale of hope or expectancy - sale of an expected thing but is not yet in existence (valid but conditional) - if the hope or expectancy is vain, the sale is void ARTICLE 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods

to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. Future goods as object of sale -a sale of future goods is valid only as an executory contract **first paragraph not valid if goods are to be manufactured especially to the buyer and not readily saleable to others (PIECE OF WORK) ARTICLE 1463. The sole owner of a thing may sell an undivided interest therein. Sale of undivided interest in a thing 1. By sole owner - may sell the undivided share or an interest - if interest is sold, buyer become a co-owner 2. By co-owner - he can dispose of his share even without consent from co-owner ARTICLE 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears. Sale if an undivided share of a specific mass 1. Meaning of fungible goods

- goods, from its nature or by mercantile usage, treated as the equivalent to any other unit **grain, oil, wine, etc 2. Effect of sales (owner may sell only an undivided share, provided the mass is specific or capable of being made determinate) a. buyer becomes co-owner of the mass in proportion to the share with the mass b. if mass contains less than what was sold, buyer becomes the whole mass **seller shall supply whatever is lacking from goods 3. Risk of loss - proportion to co-owners various holdings 4. Subject matter - for the sale of an undivided share, the subject matter is an incorporeal or intangible right ARTICLE 1465. Things subject to a resolutory condition may be the object of the contract of sale. Sale of a thing subject to a resolutory condition Resolutory condition- uncertain event upon the happening of which the obligation subject to it is extinguished. ARTICLE 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. Sale distinguished from agency to sell Contract of agency- a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter Sale 1. buyer receives goods as owner 2. buyer has to pay the price 3. generally, the buyer cannot return the object sold

4. seller warrants the thing sold 5. buyer can deal with the thing sold as he pleases Agency 1. agent 2. agent 3. agent 4. agent 5. agent

receives goods as the goods of the principal simply has to account for the proceeds of the sale can return the object in case he is unable to sell it makes no warranty (no personal liability) must act and is bound according to instructions

ARTICLE 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. Sale distinguished from contract for a piece of work Contract for a piece of work- contractor binds himself to execute a piece of work for employer for a certain price or compensation. Labor, skill or furnish the material. Contract for work 1. thing transferred is not in existence and would not if not ordered 2. risk of loss before delivery borne by contractor 3. not within the Statute of Frauds Contract for sale 1. thing transferred is one in existence even with no order 2. risk of loss borne by buyer 3. within the Statute of Frauds ARTICLE 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the

thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. Sale distinguished from barter Contract of barter or exchange- one of the parties bind himself to give one thing in consideration of the others promise to give another thing. Contract of sale- exchange is a thing for a price in money ARTICLE 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons. Should such person or persons be 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. When price is considered certain 1. No sale if price not certain or ascertainable - price must be certain or capable of being ascertained in money or equivalent - money (currency) - equivalent (promissory notes, checks, etc) 2. Cases when price considered certain a. parties have fixed or agreed on amount b. price certain in reference to another c. determination left to judgement of specified person or persons

** B & C applicable only when no price stimulated by parties Effect where price fixed by third person -when price is fixed, it is binding among parties, unless.. 1. 3rd person acts in bad faith or by mistake **error in judgement cannot serve as basis for disregarding price fixed 2. 3rd person disregards specific instructions or procedures by parties Effect where price not fixed by third person designated 1. refuses or cannot fix price w/o fault from seller or buyer (contract ineffective) 2. prevented from fixing the price w/ fault from seller or buyer, party not in fault may obtain redress from party at fault -choice: rescission or fulfillment, both with damages -FULFILLMENT: court fixes the price ARTICLE 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. ARTICLE 1471. 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. Effect of gross inadequacy of price in voluntary sales 1. General rule - gross inadequacy validity - as long as both parties are in a position to form independent judgement 2. Where low price indicates defect in consent - fraud, mistake, undue influence may be present - contract may be annulled (consent is vitiated) - or price so grossly inadequate that it is shocking to courts conscience 3. Where price stimulated - because vendor really intended to transfer the thing gratuitously - sale is void

4. -

valid as a donation Where parties do not intend to be bound at all ownership not transferred contract void and nonexistent

Effect of gross inadequacy of price in involuntary or execution sale 1. General rule - judicial or execution sale: made by a court for the satisfaction of unpaid indebtedness - inadequacy of price not sufficient ground for cancellation of sale 2. Price so low as to be shocking to the conscience - sale will be set aside 3. Where seller given the right to repurchase 4. 5.

ARTICLE 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain. (1448) ARTICLE 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. (1449a) ARTICLE 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of

each particular case. (n) ARTICLE 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. (1450a)

1/27/2012 3:33:00 AM

1/27/2012 3:33:00 AM