Contract of Sale: Nature and Form

Nature and Form of the Contract of Sale

• A contract of sale involves one party obligating themselves to transfer ownership and deliver a specific item.
• The other party is obligated to pay a price certain in money or its equivalent.
• A contract of sale can be absolute or conditional.
• The item for sale must be lawful, and the seller must have the right to transfer its ownership at the time of delivery.

Determinate Things

• A thing is determinate when it is particularly designated or physically segregated from all others of the same class.
• A thing is considered determinate if it can be made so without a new agreement between the parties when the contract is entered into.

Potential Existence and Future Goods

• Things with potential existence can be the object of a sale.
• The sale of a mere hope or expectancy is subject to the condition that the thing will come into existence.
• The sale of a vain hope or expectancy is void.
• Goods in a contract of sale can be existing goods owned/possessed by the seller, or "future goods" to be manufactured/acquired.
• A contract of sale can involve goods whose acquisition depends on a contingency.

Ownership and Shared Interest

• A sole owner can sell an undivided interest in something.
• In fungible goods, a sale can involve an undivided share of a specific mass, even if the mass's exact quantity is unknown.
• The buyer becomes an owner in common, with their share proportional to the amount bought.
• If the mass is smaller than the amount bought, the buyer owns the whole mass, and the seller must make up the difference.
• Unless there's a contrary intention, things subject to a resolutory condition can be sold.

Contract Interpretation

• When a contract has characteristics of both a sale and an agency to sell, its essential clauses determine its nature.
• A contract to deliver an article at a certain price, which the vendor manufactures or procures for the general market is a contract of sale.
• A contract for goods manufactured specially for a customer is a contract for a piece of work.

Consideration

• If the consideration is partly money and partly another thing, the parties’ intention determines the transaction type.
• If the intention isn't clear, barter occurs if the thing's value exceeds the money; otherwise, it's a sale.

Price Certainty

• A price is considered certain if it can be determined with reference to another certain thing.
• Price certainty can exist when its determination is left to a special person or persons.
• If the appointed person cannot or will not fix the price, the contract is inefficacious, unless the parties agree on a future price.
• If the third person acts in bad faith or makes a mistake, courts can fix the price.
• A party not at fault can seek remedies if the third person is prevented from fixing the price due to the other party's fault.

Adequacy of Price

• Gross inadequacy of price does not invalidate a sale, unless it indicates a defect in consent or intent for a donation.
• If the price is simulated, the sale is void, but it may be shown to be a disguised donation or other contract.
• Prices for securities, grain, liquids, etc., are certain when tied to a definite day/market price, including amounts above or below that price.

Determination of Price

• The determination of price cannot be left to one party's discretion; however, the sale is perfected if the price set by one party is accepted by the other

Determination of Price When Not Agreed Upon

• If the price cannot be determined, the contract is inefficacious.
• If the buyer has received and used the item, they must pay a reasonable price.
• The reasonable price depends on the circumstances.

Perfection of Contract

• A contract of sale is perfected when there is a meeting of minds on the object and the price.
• From perfection, parties can demand performance, subject to contract law.

Auction Sales

• In an auction, each lot is a separate contract of sale.
• An auction sale is perfected when the auctioneer announces it, usually with the fall of the hammer.
• Bidders can retract bids, and auctioneers can withdraw goods before perfection, unless the auction is "without reserve."
• The seller can reserve the right to bid, unless prohibited by law or stipulation.
• If no notice is given about the seller's right to bid, the seller/auctioneer cannot induce others to bid on their behalf.
• Violations can be treated as fraudulent by the buyer.

Transfer of Ownership and Stipulations

• Ownership transfers to the buyer upon actual or constructive delivery.
• Parties can stipulate that ownership does not pass until full payment.

Promises

• A promise to buy and sell a specific item for a certain price is reciprocally demandable.
• An accepted unilateral promise to buy/sell is binding if supported by consideration separate from the price.

Risk of Loss or Benefit

• After the contract is perfected, Articles 1163-1165 and 1262 of the Civil Code govern any injury to or benefit from the thing sold.
• This rule applies to fungible things sold independently for a single price.
• If fungible things are sold by weight/number/measure, the buyer bears the risk only after they are weighed/counted/measured and delivered, unless the buyer is in delay.

Sales by Description or Sample

• In sales by description or sample, the contract can be rescinded if the goods don't match the description or sample.
• If the contract is by sample and description, the goods must match both.
• The buyer has a reasonable opportunity to compare the goods with the description or sample.

Earnest Money

• Earnest money is part of the price and proves contract perfection.

Contract Form

• A contract of sale can be written, oral, or inferred from conduct, subject to the Statute of Frauds.

Remedies for Installment Sales

• In installment sales of personal property, the seller can demand fulfillment, cancel the sale (after two missed installments), or foreclose the chattel mortgage (after two missed installments).
• If foreclosing, the seller has no further action against the buyer for unpaid balance, and contrary agreements are void.
• These remedies also apply to leases of personal property with an option to buy, if the lessor deprives the lessee of possession.

Installments or Rents Paid

• In the case of installment plans, a stipulation that installments paid will not be returned to the buyer is valid unless unconscionable.

Expenses

• The vendor bears the expenses for the execution and registration of the sale, unless otherwise stipulated.

Expropriation

• Expropriation of property for public use is governed by special laws.