Contract of Sales: Essential Elements

• Contract of Sales: One party (seller/vendor) transfers ownership and delivers a specific item, while the other (buyer/vendee) pays a certain price in money or its equivalent.

Contracting Parties

• Seller or Vendor: Obligated to transfer ownership and deliver a specific item.
• Buyer or Vendee: Obligated to pay a certain price for it.

Essential Elements of a Contract of Sale

• Necessary for validity and perfection.

Subject Matter Requisites

• Must be within the commerce of men.
• Must not be contrary to law, morals, good customs, or public policy.
• Must be determinate.
• Vendor must own it at the time of delivery.

Things That Can Be Subject Matter

• Existing goods owned/possessed by the seller.
• Goods made/acquired after the sale ("future goods"), contingent on materialization; if not, the contract becomes void otherwise.
• Goods contingent on an event.
• Things subject to a resolutory condition which will extinguish sale.
• Hereditary rights which result in co-ownership on both sides.
• Undivided interest in co-owned property which results in co ownership.

Things Not Allowed as Subject Matter

• Cause the contract to be null and void
• Those contrary to law, morals, or public policy.
• Those outside the commerce of men.
• Future inheritance.
• Vain hope.

Emptio Rei Speratae vs. Emptio Spei

• Emptio rei speratae: Sale of a future thing.
• Emptio spei: Sale of hope or expectancy.
• Sale of future harvest is an emptio rei speratae.
• Sale of lottery ticket is an emptio spei.
• Emptio rei speratae expects the thing to exist, but quality/quantity is unknown whereas Emptio spei is unsure if it will ever exist.
• Emptio rei speratae has a condition that the things should exist, or there is no contract.
• Emptio spei produces effects even if the thing doesn't exist because hope itself is the subject matter.
• Default is emptio rei speratae if unsure, because it is seen as less risky, and results in the greatest reciprocity of interests.

Price Certainty

• Must be certain, real, and not fictitious.

Instances of Price Certainty

• Parties agree on a definite amount.
• Price is fixed by one party and accepted by the other.
• Price is certain by reference to another certain thing.
• Price is what the thing would have on a definite day, or in a particular exchange or market, if the amount is certain.
• Price determination is left to the judgment of a designated person.

Remedies if a Third Person Fails to Fix the Price

• The contract becomes inefficacious or void unless parties agree on a price.
• Injured party can ask for damages if prevented from fixing the price due to fault by either party.
• If bad faith or mistake occurs, the court may fix a reasonable price.
• The court-fixed price is final and unchangeable.

Price Inadequacy Effects

• Doesn't affect the sale contract, but may indicate consent defect, making contract voidable.
• May indicate a donation or loan with an equitable mortgage, requiring instrument reformation.

Simulated Price Effects

• Absolutely simulated price makes the sale void, requiring declaration of nullity.
• Relatively simulated price hides the parties intent, requiring instrument reformation.

Consent on Determinate Thing and Price

• Determined when there is a meeting of minds on the object and the price.

Perfection of Contract of Sale by Auction

• Occurs when the auctioneer announces perfection by the fall of the hammer/in any other manner.
• Before perfection, any bidder can retract their bid.
• Auctioneer generally withdraws goods unless announced without reservation.
• After perfection, winning bidder can't retract nor can the auctioneer withdraw goods.

Auctioneer Participation

• Participation in bidding needs explicit reservation by/on behalf of the seller.
• Needs to be allowed by law/stipulation.
• Needs notice that the sale has a right to the bid by/on behalf of the seller needs to be given.
• Bidders/puffers are seller-employed people to bid on behalf of seller.
• If the buyers/puffers are not bound by their bids, the consent of the highest bidder is vitiated by causal fraud which makes the perfected state as voidable.

Natural Elements

• These are presumed unless waived.
• Warranty against eviction.
• Warranty against hidden defects.
• Warranty against non-apparent and unregistered servitude/encumbrance in sale of immovable property
• Warranty for merchantability.

Accidental Elements

• These elements only exists when provided by the contracting parties.
• Place of delivery and payment.
• Time of delivery and payment.
• Terms or conditions of payment.
• Interest of the price.

Characteristics of a Contract of Sale

• Principal: Exists independently.
• Consensual: Perfected by consent, except for land sales by an agent, needing written authority for validity.
• Bilateral: Involves obligations from both sides/parties.
• Reciprocal: Object/presentation on one party is the consideration on the other.
• Onerous: Valuable considerations are exchanged for rights.
• Commutative: Parties exchange equivalent values.
• Nominate: Has a special name under the law.

Differences Between Sale and Dacion en Pago

• Sale: No pre-existing credit.
• Dacion en Pago: There is pre-existing credit.
• Sale Creates obligations.
• Dacion en Pago Extinguishes obligations.
• Sale: More freedom in fixing the price.
• Dacion en Pago: There is less freedom in fixing the price.
• Sale: Consideration is the price from the seller's view, and object delivery from the buyer's view.
• Dacion en Pago: Consideration is obligation extinguishment from debtor's, and delivery of object from the creditor's view.
• Both are governed by Law on Sales and are considered onerous transfers.

Differences Between Sale and Payment by Cession

• Sale: No pre-existing credit.
• Payment by Cession: There are pre-existing credits.
• Sale Creates obligations.
• Payment by Cession Extinguishes obligations.
• Sale: Consideration is the price from the seller's view, and object delivery from the buyer's view.
• Payment by Cession: Consideration is obligation extinguishment, and thing assignment, from the debtor's point of view.
• Sale: More freedom in fixing the price.
• Payment by Cession: Less freedom in fixing the price due to pre-exisiting credit amount.
• Sale: Buyer becomes owner upon delivery.
• Payment by Cession: Creditors are given the right to sell property and apply proceeds.
• Sale: Is governed by Law on Sales.
• Payment by Cession: Is governed by FRIA of 2010, a special law.

Differences Between Sale and Contract for a Piece of Work

• Sale: Delivery at price of article vendor manufactures/procures for the market whether on hand or not.
• Contract for a Piece of Work: Goods manufactured specifically for the customer.
• Sale of movable property/immovable is covered by Statute of Frauds.
• Contract for a Piece of Work is not.

Differences Between Sale and Barter

• Sale: Cause is cash.
• Barter: The cause is a noncash asset.
• Sale of movable with a price of P500 is covered by Statute of Frauds otherwise.
• Barter of movable with price of P500 is not covered by Statute of Frauds otherwise.

Determining Sale vs. Barter

• If cause is cash and noncash asset, then determine intent.
• Contract is barter, if noncash is above cash.
• Contract is sale, if cash is above noncash or equal.

Differences Between Sale and Contract to Sell

• Sale transfers once delivered.
• Contract to Sell transfers until later, usually once payment of some sorts occurs.
• Contract of sale has the risk of loss on the buyer.
• Contract to sell has the risk of loss of the seller until payment.
• Non-payment is resolutory condition for sales.
• Payment in full is suspensive condition for contract to sells.
• Double sale applies for both being sales.

Differences Between Sale and Agency to Sell (Consignment Sale)

• Sale transfers ownership passes to the buyer.
• Agency to sell retains ownership held by the principal.
• For sale, buyer to seller to pay.
• For agency to sell, buyer pays the agent, then they agent pays the seller.
• Sales go with law on sales.
• Agency to sells go with law on agency.

Principles on Sale of Undivided Share of Fungible Goods

• If mass quantity is greater than sold, parties become co-owners.
• If mass quantity is less than sold, the buyer owns the whole mass with the seller compensating the difference from goods of similar quality unless intended otherwise

Bilateral vs. Unilateral Promise

• Bilateral promise is as good as a perfected contract of sale.
• Unilateral promise is only binding if supported by option money.
• Unilateral promise not accepted does not produce any effect.

Option vs. Earnest Money (Arras)

• Option reserves property, while earnest is a down payment.
• Option is proof of option contract perfection.
• Earnest is proof of sale contract perfection.
• Option is not part of price.
• Earnest is part of price.

Obtaining Personal Rights

• Personal rights by buyer over fruits of thing sold begin at perfection of contract of sale.

Effect of Complete Loss of Object

• Before or at the moment of perfection, the contract is null and void.

Alternative Remedies for Partial Loss

• Buyer can withdraw/rescind from contract.
• Buyer can demand remaining part and pay accordingly.

Risk of Loss After Perfection/Before Delivery

• Seller bears risk of the object loss based on "res perit domino".
• Buyer bears based upon prevision of the Civil Code.

Effects of Complete Loss After Perfection and Delivery

• Buyer suffers the risk of loss.
• Buyer must pay the previously agreed upon set price.

Contracts Covered by Recto Law

• Installment sales of personal property.
• Leases of personal property with option to buy where the lessor deprived the lessee.

Remedies of Vendor/Lessor

• For single installment failure, sole remedy is exact fulfillment with recovery right for deficiency.
• For two or more installment failures, alternative remedies of exact fulfillment like before, or sell and recover the price or periodic rentals
• Resulting mutual restitution which means the movable goes back to the seller while installments go back after the rents are subtracted.
• Foreclose the chattel mortgage without recovering any deficiency.

Rights of Buyer in Residential Property Sale Under RA 6552

• Grace periods start at date of installment that can be exercised with no interest, only once every five years.
• Less than 2 years is a 60 day minimum.
• Buyer that pays over 2 years of installments is one month per year of said year of installment paid.
• Right to additional 30 days after grace period.
• Rights for cash surrender value after cancellation by seller is no less than 2 years.
• Over 2 years, up to five years is qualified to 50% cash value.
• Over 5 years, an additional 5% every year is added but shall not exceed 90% of total payments.
• Down payments is not included in this.

Rights of Buyer Under PD 957 for Subdivision/Condominium Unit

• Buyer can suspend payments and ask for cancellation if there is noncompliance with the plan.
• Developer pays property tax before ownership transfer without buyer reimbursement.
• Developer can only collect fees for registration of the sale from the buyer.

Persons Incapacitated

• Minors.
• Insane.
• Demented.
• Deaf-Mute people who can't write.
• Drunken.
• Hypnotized.
• If only one party is incapacitated, contract is voidable.
• Unless subject is a necessary, incapacitated person pays a reasonable price.
• If both parties are incapacitated, the contract is unenforceable.
• Husband and wife have a general rules that contracts between them are not valid.
• Prenuptial agreement overrides this rule.
• If there's legal separation under the Family Code of the Philippines.

Prohibited People that can acquire via purchase

• Guardians are unable to get the propert of persons under their gaurdianship
• Agents for adminstration purposes, unless principal has given consent for some sort of exchange
• Executors and administrators of the estate that is under administrative authority under them
• Public officers for the state/GOCC for property under their state / GOCC adminstation
• Judges and prosecuting attorneys under that area of justice

Obligations of the Seller

• Transfer ownership whent the deliverable thing should be offered.
• Deliver subject w acessions and accessories in condition upon perfection of contract.
• Warrant the thing via eviction, hidden defects, and unregistered encumbrances
• Take care of the thing with due diligence.

Obligations of the Vendee

• Pay price under agreed date

Delivery

• This is a form of gaining ownership where object is put under possession.

Types of Delivery

• Actual Delivery
• Constructive Delivery

Types of Constructive Delivery

• By legal formalities, equivalent to public document.
• Symbolic delivery (traditio simbolica)
• Traditio Longa Manu, is a consent to an agreement from the parties on how the item shall be transferred
• Traditio Brevi Manu, already possessin gand now continuing that
• Trades Constituium, posession after sale has commenced
• Consitive Delivier, placing title or through use of right

Differentiating Sale vs Return and Sales on Approval

Delivery to Common Carrier (FOB Shipping Point)

• This assumes that said agreement will be under carrier mean sin terms of delivery.

Ownership and Exceptions

• Non owner can general ly not trasnfer ownershipt o a buyer however if done under the consent from the owner.
• It can also be the sale under the provisions of law to enable the apparent owner to be recognized.
• Also can under statutary power or order of couurt.