Contract of Sale Overview

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Questions and Answers

What is indicated by the payment of earnest money in a contract of sale?

It is evidence of simulation in the contract.

It represents a temporary hold on the property.

It shows that the parties intended to fulfill their agreement. (correct)

It serves as a signal of a potential dispute.

Which of the following is NOT a reason given by the SC for a valid contract of sale?

There is a payment of earnest money.

It is the only intention of the parties.

There was no simulation of contract.

The contract was executed solely for display purposes. (correct)

What are the stages of a contract of sale?

Negotiation, validation, and execution.

Negotiation, perfection, and consummation. (correct)

Negotiation, performance, and cancellation.

Preliminary agreement, perfection, and review.

Which scenario indicates a lack of simulation in a contract according to the SC?

There is no outward declaration that differs from the parties' will. Signup and view all the answers

What does the SC state is essential in validating a contract of sale?

The parties must engage in actions toward fulfillment of their covenants. Signup and view all the answers

What is a basic characteristic of an absolutely simulated or fictitious contract?

The apparent contract is not intended to produce legal effects. Signup and view all the answers

Which element confirms the intention of the parties to carry out their agreement in the contract?

The actions undertaken subsequent to the contract. Signup and view all the answers

What conclusion can be drawn about Severino's claims regarding the contract of sale?

The claims are unfounded as the parties executed actions to fulfill their contract. Signup and view all the answers

Which type of goods cannot be used without being consumed?

Consumable Signup and view all the answers

What is a characteristic of non-consumable goods?

They may be used for their intended purpose without being consumed. Signup and view all the answers

What is one of the requisites for a valid price?

Price should be real and not fictitious. Signup and view all the answers

Which of the following is NOT a condition for a valid price?

Price must be uncertain. Signup and view all the answers

What term describes goods that may be substituted based on the intention of the parties?

Fungible Signup and view all the answers

What defines future goods within the classification of goods?

Goods that depend on a specific contingency. Signup and view all the answers

Which of the following options best represents a characteristic of consumable goods?

They may not be substituted after consumption. Signup and view all the answers

What happens when the price agreed upon is grossly inferior to the value of the thing exchanged?

Such price is deemed invalid. Signup and view all the answers

What cannot be left to one of the contracting parties in a sale agreement?

The fixing of the price Signup and view all the answers

What condition is necessary for a price fixed by a third party to be considered valid?

The other party must agree to the price Signup and view all the answers

What is an inadequate price in a contract of sale?

A price that is insufficient to satisfy the actual price of the object Signup and view all the answers

What happens if the parties do not agree to the price fixed by a third party?

They are free to reject it Signup and view all the answers

What is the primary reason the law prohibits one contracting party from fixing the price?

To prevent one party from taking advantage of the other Signup and view all the answers

Which of the following is NOT a valid way for the contracting parties to establish a price?

Leave the decision to an auction Signup and view all the answers

What must a fixed price be in a contract of sale?

In money or its equivalent Signup and view all the answers

What is required aside from the price being fixed for a contract to be valid?

Consent from both contracting parties Signup and view all the answers

What is the first test to determine whether a transaction is a sale or an agency?

Ownership test Signup and view all the answers

Under which circumstance is the transaction classified as a barter?

Value of the thing is greater than the amount Signup and view all the answers

Which statement accurately describes the obligation of an agent in an agency to sell?

The agent merely accounts for the proceeds. Signup and view all the answers

If an agent assumes risk in a transaction, how is their relationship defined?

Buyer-seller relationship Signup and view all the answers

What happens if the transaction involves a combination of money and kind?

It depends on the intention behind the transaction. Signup and view all the answers

In a scenario where the intent is unclear and the value is 50/50 between the object and money, how is the transaction classified?

It is classified as a sale. Signup and view all the answers

Is a written agreement necessary for an agency to sell to be valid and enforceable?

No, it can be verbal. Signup and view all the answers

What might result from the sale of rights as stated in Art. 1347?

Possible criminal liability for estafa. Signup and view all the answers

What is the primary implication of the Tradition Brevi Manu regarding the highest bidder's awareness of the seller's bidding?

Ignorance of the seller's fraud can no longer be claimed. Signup and view all the answers

Under what condition does the auctioneer retain the right to withdraw an object from sale?

If public notification of withdrawal reservation is not provided. Signup and view all the answers

What happens to the ownership of a property once it is sold under Tradition Constitutum Possessorium?

The seller becomes a mere lessee of the property. Signup and view all the answers

What constitutes a nullified sale based on the provided content?

Failure to notify the highest bidder of auction conditions. Signup and view all the answers

What is Quasi-Tradicion concerned with?

The transfer of rights and credits. Signup and view all the answers

In which situation does payment of the price not nullify the contract of sale?

The price payment creates obligations for the seller. Signup and view all the answers

What determines the binding nature of the auction terms for bidders?

Terms and conditions provided by the owner are binding regardless of prior knowledge. Signup and view all the answers

What is required for a symbolic delivery of an incorporeal property?

A written agreement must be executed. Signup and view all the answers

Study Notes

Contract of Sale

A contract of sale is a type of contract where one party (the seller) agrees to sell a thing to another party (the buyer) for a price.
The price must be in money or its equivalent.
The parties must intend to create a contract of sale.
The law specifies that the determination of the price cannot be left to one of the contracting parties unless the other party agrees to the price fixed.

Identifying the Contract of Sale

In the case at hand, the Supreme Court (SC) found that a valid contract of sale existed based on the intent and actions of the parties involved.
The SC reasoned that the parties intended to effect the sale and not simply make it appear like a sale.
In deciding between a contract of sale and agency to sell, consider the following factors:
- Intent of the parties
- If intent is not clear, consider the value of the thing being exchanged. If the thing is more valuable, it's likely barter. If the thing is less valuable, it's likely a sale.
- If the value of the thing and the amount of money are equal, it's likely a contract of sale.
Agency to sell doesn't require a written contract to be valid and enforceable.

Contract of Sale: Key Elements and Terms

The value of the thing sold must exceed the amount of money given as payment for it to be considered a sale.
If the value of the object is less than the price paid, it's a contract of sale.
The parties have full freedom to enter terms and conditions in the contract.
Ownership Test: Ownership is transferred to the buyer under a contract of sale.
Relationship Test: If the relationship between the parties is that of a creditor and debtor, then it's likely a contract of sale.
In a sale, the seller is obliged to pay for the thing. In agency to sell, the agent is not obliged to pay, but rather to account for the proceeds.
If the agent assumes risk, the relationship becomes that of a buyer-seller.

Stages of a Contract of Sale

The stages of the contract of sale are:
- Negotiation
- Perfection
- Consummation

Kinds of Goods

Based on Possession:
- Goods possessed by the seller
- Future goods with the potential to exist, such as those to be manufactured, raised, or acquired after the contract's perfection
- Acquisition depends upon a contingency that may or may not happen
Based on Intention:
- Fungible goods are those replaceable with others of the same kind by the parties' intentions.

Price

The price is the sum agreed upon as the equivalent of the thing sold.
Requisites of a valid price:
- Real and not fictitious
- Certain
- In money or its equivalent
- Not grossly inferior to the value of the thing exchanged

Determining Price

The determination of the price cannot be left to one of the contracting parties unless the other party agrees to the price fixed.
If the contracting parties decide a third party should fix the price, they must both consent to the price fixed.
They may also choose to fix the price themselves.

Inadequate Price

Inadequate price refers to a price that is insufficient to satisfy the real or actual price of the object of the contract of sale. Inadequacy could either be negligible or gross.

Delivery

Different methods of delivery include:
- Tradition Brevi Manu: The grantee has continuous possession of the thing delivered but not under a title of ownership.
- Tradicion Longa Manu: The grantor points out the thing within sight of the grantee; at the time of the transaction, the thing cannot be placed in the buyer’s hands.
- Tradicion Constitutum Possessorium: The owner continues to possess the property after selling it. His possession is no longer as an owner but as a lessee, pledgee, or depository.
- By Operation of Law: Delivery happens by legal means such as inheritance.
- Quasi-Tradition: The delivery of incorporeal property like rights and credits.

Incorporeal Property

Incorporeal property can be delivered symbolically, for example, when the owner gives the buyer the document representing the right.

Payment of Price

Payment of the price does not nullify a contract of sale. It gives rise to the obligation for the other party to demand specific performance or damages for failure to pay the price.

Fraud

If a sale is nullified due to fraud, there may be another auction if the object remains available. The party responsible for the fraud will be liable for damages.
The auctioneer can withdraw the object at any time before the acceptance of the winning bid, unless the public has been notified that there is no such reservation.
If an auctioneer has no reservation to withdraw an object, the object cannot be withdrawn after the auction begins.

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Description

This quiz covers the essentials of a contract of sale, including its definition, requirements, and the intent necessary for its validity. It also touches on the distinctions between a contract of sale and agency to sell, as determined by legal standards. Test your understanding of these concepts and their applications in law.