Law on sales

DEFINITION : CONCEPT

A Contract whereby one of the contracting parties known as the

seller or vendor, obligates himself to transfer the ownership of and
to deliver a determinate thing and the other party known as the
buyer or vendee, obligates himself to pay therefor the price certain
in money or its equivalent.
QUESTION:

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
STAGES OF A CONTRACT OF SALE

1. NEGOTIATION
• From the time the prospective contracting parties indicate interest in the
contract to the time the contract is perfected
2. PERFECTION
• It takes place upon the occurrence of the essential elements of the sale,
which is the meeting of the minds of the parties as to the object of the
contract and upon the price.
3. CONSUMMATION
• Begins when the parties perform their respective undertakings under the
contract of sale, culminating in the extinguishment thereof.
QUESTION:

THE STAGES OF A CONTRACT OF SALE ARE THE FOLLOWING EXCEPT:

A. NEGOTIATION
B. COUNTER-OFFER
C. PERFECTION
D. CONSUMMATION
QUESTION:

IT IS AN ACT BY WHICH ONE PARTY PARTS WITH THE TITLE TO AND

THE POSSESSION OF THE PROPERTY, AND THE OTHER ACQUIRES THE
RIGHT TO AND THE POSSESSION OF THE SAME.

A. DELIVERY
B. CONTRACT OF SALE
C. EVICTION
D. CONTRACT TO SELL
 ACTUAL DELIVERY

CONSTRUCTIVE

TRADITIO SYMBOLICA

KINDS OF TRADITIO LONGA MANU

DELIVERY TRADITIO BREVI MANU

TRADITIO CONSTITUTUM POSSESORIUM

DELIVERY BY LEGAL FORMALITIES

QUASI TRADITIO
QUESTION

IT OCCURS WHEN IT IS PLACED UNDER THE CONTROL AND

POSSESSION OF THE VENDEE.

A. ACTUAL DELIVERY
B. CONSTRUCTIVE DELIVERY
C. DELIVERY BY OPERATION OF LAW
D. OTHER KINDS OF DELIVERY AS INTENDED BY THE PARTIES
ACTUAL DELIVERY

• Means actual physical transfer of control and possession to the

buyer
QUESTION:

IT IS A DELIVERY BY OPERATION OF LAW

A. REAL DELIVERY
B. ACTUAL DELIVERY
C. LEGAL DELIVERY
D. QUASI-TRADITIO
CONSTRUCTIVE DELIVERY

• DELIVERY OTHER THAN PHYSICAL DELIVERY

QUESTION
TRADITIO SYMBOLICA

• The seller delivers the symbol of possession of a property e.g.

keys; applicable to movables only
TRADITION LONGA MANU

• Delivery of a movable by mere consent or agreement of the

parties usually made by pointing at the thing; applicable to
movables only
TRADITIO BREVI MANU

• Delivery that takes place when the buyer is already in possession

of the thing sold even before the sale; applicable to movables
only.
TRADITIO CONSTITUTUM POSSESSORIUM

• Delivery that takes place when the seller continues in possession

of the thing sold after the sale but in another capacity such as a
lessee or depositary.
• Literally means “delivery by agreement of possessors.” Opposite
of tradition brevi manu;
• Applicable to both movables and immovables
DELIVERY OF LEGAL FORMALITIES

• When the sale is made through a public instrument, the execution

thereof shall be equivalent to the delivery of the thing sold, if
from, if from the deed the contrary does not appear or cannot be
clearly inferred;
• applies to both personal and real property;
• Applicable to both movables and immovable.
QUASI TRADITIO

• Delivery of incorporeal property.

• Shares
• Receivables
• Patents
• Trademarks
• Bank deposits
 ELEMENTS OF A
CONTRACT OF SALE
ESSENTIAL ELEMENTS

1. CONSENT OF THE CONTRACTING PARTIES

2. SUBJECT MATTER WHICH SHOULD BE A DETERMINATE THING
3. PRICE CERTAIN IN MONEY OR ITS EQUIVALENT
NATURAL ELEMENTS

• Those that are inherent in every contract of sale

1. WARRANTY AGAINST EVICTION
2. WARRANTY AGAINST HIDDEN DEFECTS AND ENCUMBRANCES
3. ACCIDENTAL ELEMENTS
WARRANTY AGAINST EVICTION

• Eviction means deprivation of the buyer of the whole or part of

the thing sold by virtue of a final judgement in court.
WARRANTY AGAINST HIDDEN DEFECTS AND
INCUMBRANCES

• Hidden defects is a defect that is not patent or visible;

• an encumbrance means a burden or impediment imposed upon a
thing.
ACCIDENTAL ELEMENTS

• Refer to particular stipulations of the parties such as terms, place

and time of payment and other conditions agreed upon.
CHARACTERISTICS OF
CONTRACT OF SALE
• CONSENSUAL
• PRINCIPAL
• BILATERAL
• ONEROUS
• COMMUTATIVE
• NOMINATE
REQUISITES

1. The thing must be within the commerce of men

2. The thing must be not contrary to laws, morals, good customs,
public order and public policy;
3. The thing must be determinate if it is particularly designated or
physically segregated from all others of the same class.
OTHER RULES ON OBJECT

• The seller must have the right to transfer the ownership of the
thing at the time that it is delivered;
• it is not necessary that the seller be the owner of the thing at the
time of sale
OTHER RULES ON OBJECT

• Things have potential existence may be the object of a contract of

sale;
• However, the thing must come to existence, otherwise the sale
will not be effective for not having a subject matter.
• EMPTIO REI SPERATAE (sale of future thing)
• MUST COME INTO EXISTENCE OTHERWISE THE SALE WILL NOT BE EFFECTIVE
• EMPTIO SPEI (sale of hope itself)
• Produces effects even if the thing hoped does not come into existence.

• EXCEPTION : Sale of vain hope is void.

OTHER RULES ON OBJECT

• The goods which form the subject of a contract of sale may be

either:
1. Existing goods owned or possessed by the seller.
2. Goods to be manufactured, raised or acquired by the seller after the
perfection of the contract of sale, called “Future goods” of goods whose
acquisition by the seller depends upon a contingency which may or may
not happen.
OTHER RULES ON OBJECT

• The sole owner of a thing may sell an undivided interest therein.

• Such sale shall produce the effect of making the seller and buyer
co-owners of the thing sold.
• Undivided interest means that the physical division or metes and
bounds are not specified or expressed.
OTHER RULES ON OBJECT

• SALE OF FUNGIBLE GOODS

• Fungible goods refer to interchangeable goods that allow one to be replaces
by another without loss of value.

• THINGS SUBJECT TO A RESOLUTORY CONDITION MAY BE THE

OBJECT OF A CONTRACT OF SALE.
RULES ON PRICE

1. The price is the sum that will be paid for the property that is
sold.
2. Price must be certain otherwise the sale is void because of lack
of meeting of the minds of the contracting parties.
• The price is considered certain if:
1. It is a fixed amount
2. It is certain with reference to another thing certain
3. If the determination is left to the judgement of a specified person or
persons, subject to the following rules:
RULES ON PRICE

• The price is considered certain if:

1. It is a fixed amount
2. It is certain with reference to another thing certain
3. If the determination is left to the judgement of a specified person or
persons, subject to the following rules:
a. 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.
b. If the third person or person acted in bad faith or by mistake, the courts may
fix the price.
c. 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.
RULES ON PRICE

3. Fixing of the price cannot be at the sole discretion of one party.

However, if the price fixed by one of the parties is accepted by
the other, the sale is perfected.
4. Effect if price cannot be fixed:
• Where the price cannot be determined in accordance with the above stated
rules, the contract is inefficacious or without effect.
RULES ON PRICE

5. GROSS INADEQUACY OF PRICE

• Does not affect the validity of the contract of sale.
• However such gross inadequacy may indicate either:
• A defect in the consent; or
• The parties really intended a donation or some other act or contract.
WHO MAY BE PARTIES TO A CONTRACT OF
SALE?

A. ALL PARTIES WHO ARE CAPACITATED MAY ENTER INTO A CONTRACT

OF SALE.
B. MINORS
• Where necessities are sold and delivered to a minor or other person without
capacity to act, he must pay a reasonable price therefor.
• Necessaries are those indispensable for sustenance, dwelling, clothing and
medical attendance.
C. SALE BETWEEN SPOUSES IS VOID; APPLIES ALSO TO COMMON LAW
SPOUSES.
• When a separation of property was agreed in the marriage settlement; or
• When there has been a judicial separation of property.
WHO MAY BE PARTIES TO A CONTRACT OF
SALE?
D. RELATIVE INCAPACITY TO BUY
• The following persons cannot acquire by purchase, even at a public or judicial
auction sales or in legal redemption, compromises and renunciations, either in
person or through mediation of another:
• The guardian – the property of the person who may be under his guardianship
• AGENTS – The property whose administration or sale may have been entrusted to
them unless consent of the principal has been given;
• EXECUTORS AND ADMINISTRATORS – the property of the estate under their
administration.
• PUBLIC OFFICERS AND EMPLOYEES – The property of the state or any subdivision
thereof or of any GOCC or institution, the administration of which has been
entrusted to them.
• JUSTICE, JUDGES AND PROSECUTING ATTORNEYS, CLERKS OF SUPERIOR OR INFERIOR
COURTS AND OTHER OFFICERS AND EMPLOYEES CONNECTED WITH THE
ADMINISTRATION OF JUSTICE – the property levied upon an execution before the
court within whose jurisdiction or territory they exercise their respective functions.
PERFECTION OF CONTRACT OF SALE

• A CONTRACT OF SALE IS PERFECTED AT THE MOMENT THERE IS A

MEETING OF THE MINDS UPON:
• The thing which is the subject of the sale; and
• The PRICE.
FORM OF A CONTRACT OF SALE

• Subject to the provisions of the Statute of Frauds and of any other

applicable stature, a contract of sale may be in any of the
following terms:
• In writing,
• By word of mouth
• Partly in writing and partly by word of mouth
• May be inferred from the conduct of the parties
RULES IN CASE OF SALE BY AUCTION

• The sale by auction is perfected when the auctioneer announces

its perfection by the fall of the hammer, or in any other manner.
RIGHTS OF THE PARTIES BEFORE THE
PERFECTION

• Any bidder may retract his bid

• Because the bid is merely an offer and an offer may be withdrawn at
anytime before acceptance.
• The auctioneer may withdraw the goods from the sale unless the
auction has been announced to be without reserve.
RIGHTS OF THE PARTIES AFTER PERFECTION

• The winning bidder cannot retract his bid nor can the auctioneer
withdraw the goods since there is already a perfected contract.
RIGHT OF THE SELLER TO BID

• The seller may bid at the auction provided the following requisites
are present:
a. The right to bid must have been reserved expressly by or on behalf of the
seller;
b. His right to bid must not be prohibited by law or stipulation;
c. Notice must be given that the sale is subject to a right to bid by or on
behalf of the seller.
RULES ON PROMISE TO
BUY OR SELL
BILATERAL PROMISE

• ONE PARTY PROMISED TO BUY AND THE OTHER PARTY PROMISES TO

SELL A DETERMINATE THING AT AN AGREED PRICE

• This is as good as a perfected sale; for enforceability, the rules in

Statute of Frauds must be observed.
UNILATERAL PROMISE

• THE PROMISE TO BUY OR TO SELL A DETERMINATE THING AT A

CERTAIN PRICE IS MADE BY ONLY ONE OF THE PARTIES. THE
PROMISE MAY BE ACCEPTED OR NOT AND SHALL HAVE THE
FOLLOWING EFFECTS:
a. If not accepted by the promise – no legal effect
b. If accepted by the promise
1. If supported by a consideration distinct from the price, the promise is binding
upon the promisor.
2. If it is not supported by any consideration distinct from the price, the promise
is not binding upon the promisor. Accordingly, the promisor can withdraw his
promise by informing the promise of such withdrawal even before the lapse of
any option period given to the promise
EARNEST MONEY AND OPTION MONEY

• EARNEST MONEY
• The money given as part of the purchase price and as proof of the
perfection of the contract; paid by the buyer to show his legitimate interest
and earnest desire to purchase the thing.
• OPTION MONEY
• Is the consideration paid for the purpose of holding one to his promise to
buy or sell a determinate thing for a certain period of time, which
consideration is separate and distinct from the purchase price.
SALE BY SAMPLE, DESCRIPTION, SALE OR
RETURN, SALE ON APPROVAL

• SALE BY SAMPLE
• The parties contract solely with reference to the sample. The seller
warrants that the bulk of goods delivered correspond with the sample shown
to the buyer
• SALE BY DESCRIPTION
• The parties contract solely with reference to the description. The seller
warrants that the bulk of the goods delivered correspond with the
description of the goods presented to the buyer.
SALE BY SAMPLE, DESCRIPTION, SALE OR
RETURN, SALE ON APPROVAL

• SALE BY SAMPLE AND DESCRIPTION

• The seller warrants that the bulk of the goods delivered correspond with
both the sample and description, and not with only one. The buyer shall
have reasonable opportunity of comparing the bulk with the description of
the sample.
• SALE OR RETURN
• The ownership of the goods is transferred to the buyer on delivery, but the
buyer has the option to revest their ownership on the seller by returning
them within the time fixed in the contract, or if the time has not been
fixed, within a reasonable time.
SALE BY SAMPLE, DESCRIPTION, SALE OR
RETURN, SALE ON APPROVAL

• SALE ON APPROVAL OR ON TRIAL OR ON SATISFACTION

• Ownership of the goods remains with the seller despite delivery but shall be
transferred to the buyer in the following cases:
• When he signifies his approval or acceptance of the goods
• When he does an act adopting the transaction e.g. makes use or consumes the
thing
• If he does not signify his approval or acceptance of the goods but retains the
goods without giving notice of rejection within the time fixed in the contract,
or within a reasonable time, and such time has expired.
RULES ON DOUBLE SALE

• The determination of who has preferred right (who becomes the

owner) in case the same thing had been sold to the different
buyers is governed by the following:
• MOVABLES
• Ownership shall be transferred to the person who may have first taken
possession thereof in good faith.
RULES ON DOUBLE SALE

• IMMOVABLES
• The buyer who first registered in good faith; good faith means the registrant is
not aware that there was a prior buyer or that somebody else is in possession of
the property sold with prior claim of ownership.
• Should there be no inscription and possessor, the property shall be considered
owned by the person who in good faith presents the oldest title-first in time,
stronger in right.