Accounting Law on Business Transactions

Questions and Answers

What is the status of the contract of sale between H and W?

Rescissible

Unenforceable

Void

Voidable (correct)

Who among the buyers will have the best right over the property sold by S?

C (correct)

What legal remedy is available to P after A remitted payment for the car?

Action for rescission of contract of sale (correct)

Action for annulment of contract of sale

Action for declaration of nullity of contract of sale

None of the above

What is the operative act that transfers ownership of the determinate thing in a contract of sale?

Always delivery Signup and view all the answers

In which of the following types of transfer will allow the proper party to exercise the right of conventional redemption?

Either a or b Signup and view all the answers

Who can file an action for annulment after B made payments for the car sold by S?

Guardian of B Signup and view all the answers

What is the status of the contract of sale between A and B regarding the cotton destroyed in a fire?

Void as the contract of sale is for specific goods Signup and view all the answers

What contracts were entered into by the parties for Kobe and Andrew's shoes?

Contract of sale for Kobe’s shoes and contract for a piece of work for Andrew’s shoes Signup and view all the answers

Which of the following are distinctions between contract of sale and contract to sell, except?

The rule on double sale applies to contracts of sale while not to contract to sell. Signup and view all the answers

Which future thing cannot be the object of a contract of sale?

Future inheritance of an heir Signup and view all the answers

Which of the following contracts of sale is null and void?

Executory oral sale of real property or any interest therein regardless of the price. Signup and view all the answers

If several persons or co-owners, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, which is true?

Both A and B. Signup and view all the answers

In which of the following cases is the price of the contract of sale considered uncertain making the contract void ab initio?

Sale of a specific cellphone whereby the price is left by the buyer and seller to the judgment of a specified third person. Signup and view all the answers

What is the status of the contract between S and B regarding a specific dining table with a price of P500, considering the production cost is P800?

Rescissible contract. Signup and view all the answers

What is the nature of the contract between S and B involving laptops valued at P40,000 and P20,000 plus cash?

Contract of sale. Signup and view all the answers

Which of the following is not an essential element of contract of sale?

Delivery of the subject matter from the seller to the buyer. Signup and view all the answers

Which of the following may not become a subject matter of contract of sale?

Vain hope. Signup and view all the answers

Which of the following statements is correct regarding the oral agreement between S and B for the sale of a car?

The oral contract of sale of car between S and B is unenforceable by court action. Signup and view all the answers

When does the buyer obtain personal right over the fruits of the determinate thing sold in a contract of sale?

From the moment of actual delivery. Signup and view all the answers

What is the effect of the complete loss of the subject matter of the contract of sale before or at the moment of perfection?

The contract of sale is void ab initio. Signup and view all the answers

Who shall suffer the risk of complete loss of the determinate thing of the object of the contract of sale after perfection but before delivery?

Buyer on the basis of res perit domino. Signup and view all the answers

Is M legally required to pay the reasonable price for a specific ballpen sold to him by A, an adult?

Yes because the subject matter specific ballpen is a necessary. Signup and view all the answers

What is the operative act that transfers ownership from the seller to the buyer in a contract of sale?

Actual delivery or constructive delivery of the determinate thing to the buyer. Signup and view all the answers

What type of constructive delivery is done by S to B when S delivered the key of the warehouse?

Traditio clavium. Signup and view all the answers

What type of constructive delivery is present when B leased back the specific van from S before its physical delivery?

Traditio constitutum possessorium. Signup and view all the answers

Which statement is correct regarding B being robbed of a laptop after an oral sale agreement?

B is still required to pay the price because of the concept of res perit domino. Signup and view all the answers

Which act does not transfer ownership of the subject matter in a sale on trial or sale on approval?

The buyer does an act adopting the transaction such as by consuming or destroying the subject matter. Signup and view all the answers

Which statement is correct regarding the sale of a specific necklace stolen by T and sold to B?

S may legally recover the necklace from B but S must reimburse B of the amount of P10,000. Signup and view all the answers

Which statement is correct regarding D depositing a laptop and it being sold at a store?

D cannot legally recover the laptop from B because the latter obtained good title over the laptop. Signup and view all the answers

Which statement is correct regarding M, a minor, selling a cellphone to B?

T obtained a good title over the specific cellphone. Signup and view all the answers

If a person sold his immovable property under pacto de retro sale and left heirs, which is true?

Both A and B. Signup and view all the answers

Which of the following pertains to legal pre-emption in cases of legal redemption?

If rural land not exceeding one hectare is alienated, the adjoining owner shall have the right of redemption. Signup and view all the answers

Who shall be preferred in legal redemption when two or more adjacent rural land owners intend to exercise their right?

The adjacent rural land owner whose intended use of the land appears best justified. Signup and view all the answers

Who shall be preferred in legal redemption among urban land owners when multiple intend to exercise their right?

The adjacent urban land owner whose intended use of the land appears best justified. Signup and view all the answers

Which of the following instances shall be presumed to be an equitable mortgage?

When the buyer files an action for exact fulfillment to collect the balance of the price. Signup and view all the answers

In case of doubt in construing a contract that has characteristics of both sale with right to repurchase and equitable mortgage, what shall be the general construction of the contract?

Pacto de retro sale. Signup and view all the answers

When may the assignor of credits become liable for the insolvency of the debtor?

Either A or B. Signup and view all the answers

Which of the following is not an essential element of contract of sale?

Delivery of the subject matter from the seller to the buyer. Signup and view all the answers

In which of the following instances are the goods still in transit?

From the time they are delivered to the carrier until the buyer takes delivery. Signup and view all the answers

Which of the following is not a ground for right of resale by an unpaid seller?

The buyer becomes solvent. Signup and view all the answers

In what type of waiver by the buyer of warranty against eviction will the seller become fully exempt from liability?

Waiver consciente. Signup and view all the answers

Which of the following is a ground for the right to rescind the sale by an unpaid seller?

Either A or B. Signup and view all the answers

What is the remedy available to B regarding the deficiency in the area of a lot sold at a price of P1,000 per square meter?

Either A or B. Signup and view all the answers

What is the remedy available to B regarding the inferior quality of a lot consisting of 89 square meters of garden soil and 11 square meters of sand soil?

Either A or B. Signup and view all the answers

Which of the following is not a requirement of a double sale?

The deeds of sales must all be in public instrument. Signup and view all the answers

In case of double sale of movable property, who shall prevail?

First possessor in good faith. Signup and view all the answers

In case of double sale of titled immovable property, who among the buyers shall prevail?

First registrant of the deed of sale. Signup and view all the answers

What refers to a type of waiver of warranty against eviction made by the buyer acting in good faith?

Waiver consciente Signup and view all the answers

What is the legal remedy still available to B after discovering the servitude on the lot?

Either a or b Signup and view all the answers

Which of the following is a remedy not available to the injured buyer in case of breach of warranty of merchantability or quality of a product?

Ask for declaration of nullity of contract of sale on the ground of absence of subject matter. Signup and view all the answers

Which of the following is not a requisite for the enforcement of vendor’s liability for hidden defect on the thing sold?

The warranty against hidden defect must be expressly stipulated in a contract of sale. Signup and view all the answers

What is the status of the sale of broiler chicken suffering from bird flu?

Void contract Signup and view all the answers

Which statement is correct regarding the automatically canceled contract of sale if B defaults in payment?

The contract of sale of house and lot is automatically cancelled on July 1, 2020 based on autonomy of contract. Signup and view all the answers

Which remedy available to the seller for the breach of contract of sale committed by the buyer is correct?

All of the above Signup and view all the answers

Which of the following statements is correct concerning the redemption or repurchase of property sold under pacto de retro?

B may legally demand D, E and F to come to an agreement upon the repurchase of the whole land, and if they fail to do so, B cannot be compelled to consent to a partial redemption of the said land. Signup and view all the answers

Which of the following statements is correct about the scenario where A, B, and C sold their 1/3 share in a specific land to D?

None of the above Signup and view all the answers

Is the automatic rescission of the sale of rice valid if Y failed to take delivery on the agreed date?

Yes, automatic rescission is allowed since, having the character of movables and consumables, rice can easily deteriorate. Signup and view all the answers

What is the standing of the contract when Lino could not agree on which lot to sell to Ramon?

Unenforceable Signup and view all the answers

What is the status of the sale when an agent executed a deed of sale after the principal died?

Void Signup and view all the answers

What is the most accurate statement about the oral sale of land made by Aligada?

If Aligada refuses to deliver the land on the agreed date despite payment by Balane, the latter may not successfully sue Aligada because the contract is oral. Signup and view all the answers

What is the status of the contract when Michael Fermin sold a car without authority?

Void because of the absence of consent from the owner, Mr. Lacas. Signup and view all the answers

Does Y have the right to demand reimbursement from X for repair costs if X sold a car with a hidden defect?

Yes, X is liable whether or not he was aware of the hidden defect. Signup and view all the answers

What is the best legal remedy available to A when B delivered a counterfeit Coach bag?

File an action for damages for breach of contract of sale. Signup and view all the answers

What is the implication if on March 1 the laptop delivered under a sale or return arrangement was destroyed by fire without B's fault?

B is not required to pay the price of the laptop because the obligation is extinguished by fortuitous event. Signup and view all the answers

What is the status of the contract of sale when a minor sells his father's cellphone at a price causing lesion?

Rescissible Signup and view all the answers

What is the correct action for B when S failed to deliver the TV set after the extrajudicial demand?

B may file an action for specific performance with damages against S. Signup and view all the answers

Who has the better right over the laptop sold by S to B when multiple contracts involved the same laptop?

C Signup and view all the answers

What is Mr. B's remedy when Mr. A did not perform his obligation after the sale of land?

File an action for specific performance. Signup and view all the answers

What is the status of the contract of sale when W sold a laptop to H under duress?

Voidable Signup and view all the answers

Is the contract of sale between S and B valid when S sold a lottery ticket that did not win?

Yes, because it involves emptio spei or sale of mere hope. Signup and view all the answers

What is the period for redemption under pacto de retro sale stipulated for 25 years?

25 years Signup and view all the answers

What is the status of the contract when Kevin forged the signature of Lebron to sell the lot?

Lebron cannot recover the land from Carmelo because a forged document or deed of sale, in case of registered lot, can be a root of a valid title if the title is already in the hand of a purchaser for value and in good faith. Signup and view all the answers

Is the contract of sale between X and Y valid relating to the car sale if the price was fixed later?

No because the price of the sale was left to the discretion of one of the parties, that is, the seller, and it was not consented by the buyer. Signup and view all the answers

What is B's obligation regarding the specific good delivered without a determined price?

B has the obligation to pay a reasonable price which depends on the circumstances of each particular case. Signup and view all the answers

Which of the following is an accidental element in a contract of sale?

Warranty against eviction Signup and view all the answers

In which of the following transfers is the right of legal redemption applicable?

Neither A nor B Signup and view all the answers

As a general rule, how is a contract of sale of a piece of land perfected?

By execution of formality required by law Signup and view all the answers

What is the status of the contract when M sold his laptop during the lucid interval to an insane person?

Rescissible Signup and view all the answers

What legal remedy does S have against B after the car sold to B was stolen before payment?

Action to collect the price against B Signup and view all the answers

What happens to the contract when T sold a stolen laptop to B without B knowing about the defect?

Both A and B Signup and view all the answers

What is the status of the marriage contract entered by H and W?

Voidable Signup and view all the answers

Study Notes

General Principles of Accounting Law in Business Transactions

Joint sellers with a right of repurchase must exercise their rights proportionate to their shares.
Price uncertainty in a contract of sale can lead to invalidation; undefined payment metrics are critical.
Custom contracts (e.g., tailored dining tables) may be valid even with varying production costs, depending on terms.
Barter contracts differ from sale contracts based on the nature of exchanged items and cash.
Essential elements of a sale include determinate subject matter, a definite price, and mutual consent.

Subject Matter of Contracts

Future goods and undivided properties can be sold, but "vain hope" cannot be a subject of sale.
Contracts made by minors are generally voidable; exceptions apply when the subject is essential.

Ownership Transfer

Ownership typically transfers upon actual or constructive delivery, not just payment; registration is secondary.
Constructive delivery methods vary; "traditio clavium" involves handing over keys to property, indicating transfer.

Risk and Loss of Subject Matter

Loss before the contract's perfection leaves parties in uncertainty regarding payment obligations.
The buyer bears the risk of loss after the contract is perfected but before delivery in standard cases.

Legal Rights and Redemption

Heirs of a seller with a right to repurchase can collectively agree on redemption terms.
Legal redemption grants adjacent landowners rights under specified conditions regarding rural and urban properties.

Sale and Repurchase

An equitable mortgage situation may arise from a sale with a right to repurchase, especially if intentions to secure debts are evident.
Doubts in contract type lean towards categorizing effectively as equitable mortgages over repurchase agreements.

Resale and Default

Unpaid sellers can reclaim goods under certain conditions; rights to rescind are linked to expressed terms during sales.
A double sale scenario prioritizes the buyer with earlier title acquisition or possession under good faith.

Legal Actions and Remedies

Buyers can demand price adjustments or contract rescissions based on property deficiencies discovered post-sale.
The presence of hidden defects must meet legal criteria, including existence at the time of sale and significant impairment to usability.

Breach of Warranties

Buyers have various remedies for breaching warranty, including retaining goods while seeking damages or rescinding the sale.
Seller's liability for defects requires action within statutory timeframes and must meet specific conditions.

Other Considerations

Confidence in property sales includes seller transparency; hidden servitudes post-sale can lead to indemnification actions.
Reservations and waivers impact seller liabilities and buyer rights; good faith transactions often dictate responsibility.

Specific Scenarios

Contract invalidation occurs under ambiguous pricing clauses.
Legal remedies available depend on clear determinations of buyer's and seller's roles in transactions.

Warranty and Hidden Defects

Warranty against hidden defects must be expressly included in sales contracts.

Sale of Broiler Chickens

Sale of broiler chickens suffering from bird flu is considered a void contract.

Contract of Sale and Default

If a contract states that non-payment leads to automatic cancellation, the contract is automatically cancelled upon default.

Seller's Remedies for Breach

The seller may:
- Sue for the price if goods have been delivered and payment is refused.
- File for damages if goods are not accepted or paid for.
- Rescind the contract if the buyer repudiates or shows inability to pay.

Pacto de Retro Sale

In caso of death of seller, heirs may compel repurchase based on their share.
Buyers cannot be forced to consent to partial redemption without agreement from all sellers.

Unenforceable Contracts

A contract to sell unspecified lots is treated as unenforceable.
Automatic rescission of sale without written notice may not be valid in certain cases.

Authority in Sales

An agent's sale is void if done after the principal's death, as the seller must have authority at the time of sale.

Oral Agreements and Legal Remedies

Oral sales of high-value items typically require written agreements to enforce.
A party may seek damages if delivered item does not match the sales description.

Hidden Defects and Liability

A seller remains liable for hidden defects even if disclaimers are included in the sales contract.

Lesion and Legal Status

Contracts involving lesion where value disparity is evident are rescissible.

Specific Performance Actions

Buyers may file specific performance claims if sellers fail to deliver as promised.

Good Faith Purchasers

Good faith purchasers of stolen goods may need reimbursement to recover property rights.

Steps for Ownership Transfer

Delivery is the key action that transfers ownership in a sale agreement.

Legal Redemption Rights

Legal redemption is applicable in specific transactions like succession and donation.

Targeted Contracts

Depending on the agreement, contracts can vary between sales and service contracts based on product specifications.

Rescission in Contracts

Minors have limited capacity to engage in valid contracts and can seek rescission after the transaction.

Impact of Events on Sales

Sales contracts become void if the subject matter is unintentionally destroyed before delivery.

Distinctions in Sale Agreements

Ownership transfer differs in contracts of sale versus contracts to sell, affecting buyer rights based on delivery and payment terms.

Essential Elements of a Sale

A valid contract of sale requires specific elements such as price and a determinate object.

Redemption Periods

Specific stipulations determine the periods allowed for repurchase, varying based on contract conditions.### Contracts of Sale vs. Contract to Sell
In a contract of sale, the buyer assumes the risk of loss or damage to goods upon delivery, based on the principle "res perit domino" (the thing perishes with the owner).
In a contract to sell, the seller bears the risk of loss until the buyer has made full payment.
Non-payment of the price in a contract of sale results in a resolutory condition; it voids the contract unless the price is paid.
Payment in a contract to sell is a suspensive condition, delaying the transfer of ownership until full payment occurs.
The rule on double sale applies exclusively to contracts to sell, while contracts of sale are not subject to this rule.

Future Things in Sales

Future or potential things can be objects of a contract of sale, but they must ultimately come into existence for the sale to be valid.
Examples of valid future things include:
- Wine anticipated from a specific vineyard.
- Milk expected from a particular female cow within the year.
- Next catch from a specific fisherman’s net.
Future inheritance of an heir is not a valid object of sale until it materializes.

Null and Void Contracts of Sale

Executory oral sale of real property is null and void, regardless of price.
Executory oral sale of goods priced at P500 or more is also void.
Sale of land by an agent without written authority is invalid.
Sale of land by a third party without authorization from the owner is void.

Essay Questions Overview

Distinction between contract of sale, dacion en pago, and payment by cession.
Comparison of the rights of an unpaid seller: possessory lien vs. stoppage in transit.
Comparison of essential, natural, and accidental elements in a contract of sale.
Distinction between Waiver Consciente (conscious waiver) and Waiver Intentionada (intentional waiver).
Enumeration of the modes of extinguishment of a contract of sale.
Differentiation of conventional redemption and legal redemption.

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Test your understanding of accounting law as it pertains to business transactions with this exam. This quiz covers essential principles and scenarios involved in business contracts and co-ownership. Make sure to read carefully and select the best answers.