Law on Sales: Contract Essentials

• Law on Sales is another subject in Civil Law.
• In the hospitality and tourism industry, management often enters into sales contracts.
• Sale is a contract perfected by mere consent, with the vendor (seller) and vendee (buyer) having mutual obligations.
• The vendor is obliged to deliver and transfer ownership, while the vendee is obliged to pay the price.
• Breach of these obligations results in legal consequences.
• Chapter IV discusses the rights, obligations, and consequences when entering into a contract of sale.

Contract of Sale

• Art. 1458 states that a contract of sale obligates one party to transfer ownership and deliver a specific item, and the other to pay a certain price in money or its equivalent.
• A contract of sale can be absolute or conditional.

Essential Elements of a Contract of Sale

• Sale is a consensual contract perfected by mere consent.
• Essential elements include:
• Consent or meeting of minds to transfer ownership.
• Definite subject matter (object).
• Price certain in money or its equivalent (consideration).
• The term "equivalent" may include checks or other negotiable instruments.

Forms of Contract of Sale

• The contract of sale is perfected when there is a meeting of minds on the object and the price.
• From that moment, parties can demand performance as per contract law provisions.
• A contract of sale can be written or oral.
• However, specific transactions require a written contract to be enforceable:
• Sale of real property (land, building, etc.).
• Sale of movable property priced at 500 pesos or more.
• Sale to be performed more than one year after the agreement.

Sale of Immovable Property Through an Agent

• When selling land through an agent, the agent's authority must be in writing.
• Without written authorization, the sale is void.

Contract of Sale Note

• A contract of sale of land only needs to be in writing, but does not have to be notarized.
• Though a conveyance of land is not made in a public document (meaning not notarized), it does not affect the validity of such conveyance.

Kinds of Sale

• Two kinds of sale include:

Absolute Sale

• Ownership transfers to the vendee upon delivery.
• A deed of sale is absolute when there is no stipulation that the seller retains ownership until full payment.
• The sale is also absolute if the vendor cannot unilaterally cancel the contract if the vendee fails to pay on time.

Conditional Sale

• Ownership remains with the vendor until full payment.
• Full payment is a suspensive condition, meaning the obligation to sell doesn't arise until it's fulfilled.
• An example is a contract to sell.
• The above example is a conditional sale because the transfer of the ownership is dependent upon the happening of the condition that is the full payment of the contract price and upon execution of another contract that finally transfers ownership.

Transfer of Ownership

• Art. 1477 states ownership transfers to the vendee upon actual or constructive delivery.
• Contract perfection alone doesn't transfer ownership; delivery does.
• The law obligates the vendor to deliver the sold item when it is placed in the hands and possession of the vendee.

Loss or Deterioration of Goods

• If the object is lost before contract perfection, the seller bears the loss.
• If the object is lost after delivery, the buyer bears the loss under the doctrine of "Resperit Domino."

Sale By Non-Owner

• The buyer gains no better title than the seller possessed, where goods are sold by someone who is not the owner.

Buyer Acquiring Better Title

• The buyer can acquire a better title even if the seller isn't the owner in several situations:
• When the sale is authorized by the owner.
• When the owner's conduct prevents them from denying the seller's authority.
• When the sale complies with factor acts, recording laws, or other provisions allowing the apparent owner to dispose of goods.
• When the sale occurs under statutory power or court order.
• When purchased from a merchant's store, fairs, or markets.

Sale of Personal Property on Installment; Recto Law

• Enacted to protect installment buyers often victimized by sellers unjustly enriching themselves, Recto Law provides remedies for buyers.

Remedies Under the Recto Law

• States that the vendor can exercise any of the following remedies:
• Exact fulfillment of the obligation
• Cancel the sale if the buyer defaults on two or more installments.
• Foreclose on the chattel mortgage if the buyer defaults on two or more installments.

Recto Law Applicability

• Recto Law applies if:
• There is an absolute sale or contract of sale.
• The object is personal property.
• The transaction is an installment.

Remedies in Article 1484

• Remedies are alternative, not cumulative.
• Exercising one precludes the others.

Republic Act No. 6552

• Also known as the Realty Installment Buyer Act or Maceda Law.
• Protects real estate buyers on installment plans, protecting them from onerous conditions.
• It delineates the rights and remedies of buyers and protects them from one-sided and pernicious contract stipulations.

Application of RA No. 655

• Applies to real estate sales or financing on installment, including residential condo apartments.
• It does not apply to industrial lots, commercial buildings and sales to tenants.

Rights Granted to the Buyer

• When the buyer has paid at least two (2) years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:
• The buyer has a total grace period, which is fixed at the rate of one (1) month grace period for every one year of installment payments made, to pay without additional interest, the unpaid installments due. This right shall be exercised by the buyer only once in every five years.
• If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent (50%) of the total payments made, and, after five (5) years of installments, an additional five percent (5%) every year but not to exceed ninety percent (90%) of the total payments made.

Buyer Rights

• In case where less than two years of installments were paid:
• The seller shall give the buyer a grace period of not less than sixty (60) days from the date the installment became due.
• If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty (30) days from receipt by the buyer of the notice of cancellation.
• The buyer can sell his rights or assign the same to another person or to reinstate the contract by updating the account.

Obligations of the Vendor

• Obligations of the Vendor:
• To transfer ownership
• To deliver the thing
• To warrant the thing
• To take care of the thing
• To pay the expenses for the execution and registration of the sale, unless there is a stipulation to the contrary (Art. 1487)

Implied Warranties

• Implied warranties are inherent to the contract, always attached even without stipulation; can be waived by agreement.
• Types:
• Warranty against eviction: Seller guarantees the right to sell and peaceful possession; liable if the buyer is evicted.
• Warranty against hidden defect: Guarantees freedom from undeclared faults or encumbrances.

Parties Not Liable

• Persons not Liable for Breach of Warranty:
• Sheriff's sale
• Auctioneer
• Mortgagee
• Pledgee
• Other person professing to sell by virtue of authority in fact or law

Double Sale

• Selling the same object to multiple buyers as "double sale;" Article 1544 of the Civil Code addresses ownership disputes.

Object is Immovable

• If what has been sold two or more buyers is immovable, the ownership shall be transferred to:
• The person acquiring it who in good faith first recorded it in the Registry of Property
• In default thereof, to the person who in good faith was first in possession.
• In default thereof, to the person who presents the oldest title.

Double Sales Good Faith Requirement

• The legal requirement is two-fold: acquisition in good faith and registration also in good faith.
• Good faith must concur with the registration, and bad faith negates any claimed registration.