Business Law PDF - University of Southern Philippines Foundation

UNIVERSITY OF SOUTHERN PHILIPPINES FOUNDATION BUSINESS LAW ATTY. JERIC MAR C. CALONGE, CPA, REB AC 102 19:00 - 20:30 Mon & Wed 1st Semester, S.Y. 2024-2025  Business Law 2 1 2 3 Law on Sale...

UNIVERSITY OF SOUTHERN PHILIPPINES FOUNDATION BUSINESS LAW ATTY. JERIC MAR C. CALONGE, CPA, REB AC 102 19:00 - 20:30 Mon & Wed 1st Semester, S.Y. 2024-2025  Business Law 2 1 2 3 Law on Sales Law on Agency Law on Pledge and Mortgage AC 102  Law on Sales Civil Code of the Maceda Philippines Recto Law Articles Law 1458 to 1623 AC 102  A. Definition of Sales I. Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefore a price Definition certain in money or its equivalent. and A contract of sales may be absolute or conditional. Essential The essence of a contract of sale is the transfer of ownership or that the Requisites recipient has the ability to alienate the thing transferred to him. AC 102 Nature of Obligations created for Definition in Art. 1458 [Villanueva] 1. For the SELLER To transfer ownership and to deliver possession of the subject matter 2. For the BUYER To pay the price AC 102 01 Essential Elements Consent or meeting of minds Elements Object or subject matter Cause or consideration of 02 Contract Non-essential Elements of Sale Natural Accidental AC 102  (1) Consent or meeting of the minds B.1. Consent refers to seller’s consent to transfer Essential ownership of, and deliver, a determinate things, and to buyer’s consent to pay the price certain. Elements Being a consensual contract, the contract of sale is perfected at the moment there is a “meeting of of a Valid the minds” upon the thing which is the object of the contract and upon the price. [Art. 1475] Contract of Requisites (1) Legal Capacity Sale (2) Offer and acceptance, and [Coronel vs. CA, 1996; De Leon] (3) No vitiation of consent AC 102  A person is not incompetent to contract merely because of advanced years or by reason of physical infirmities [Paragas vs. Heirs of D. Balanco, 2005]. Exceptions to consent being a requisite: (1) Expropriation (2) Ordinary Execution Sale (3) Judicial Foreclosure Sale, and (4) Extra-judicial Foreclosure Sale Special Case: If sale involves the conjugal property of spouses, consent must be given by both. B.1. Essential Elements of a Valid Contract of Sale AC 102  (2) Object or subject matter Must be determinate or capable of being determinate, licit and within the commerce of man, and possible (3) Cause or consideration Refers to “price certain in money or its equivalent.” It must be real, certain, and pecuniary. B.1. Essential Elements of a Valid Contract of Sale AC 102  (1) Natural B.2. Those deemed to exist in certain contracts Non- in the absence of any contrary stipulations (ex. warranty against eviction, hidden essential defects) (2) Accidental Elements of Those which may be present or absent a Contract depending on the stipulations of the parties (ex. conditions, interest, penalty) of Sale [Coronel vs. CA, 1996; De Leon] AC 102  (1) Preparation, conception, negotiation C. or generation stage From the time the prospective contracting Stages of parties indicate interest in the contract to the time the contract is perfected Contract of (2) Perfection or “birth” of the contract Sales Upon the concurrence elements of the sale of the essential (3) Consummation or “death” of the contract Begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment [De Leon] thereof. AC 102 Characteristics of a Contract of Sale (1) Consensual Perfected by mere consent and without any further acts (2) Bilateral and Reciprocal Imposes correlative obligations on both parties to the relationship. Consequently, power to rescind is implied. (3) Principal Can stand on its own and does not depend on another contract for validity, as contrasted from an accessory contract. AC 102 Characteristics of a Contract of Sale (4) Onerous Imposes valuable consideration as prestation, as distinguished from a gratuitous contract. Consequence: all doubts in construing an onerous contract shall be resolved in that which gives greater reciprocity of interests [Art. 1378]. (5) Commutative Because a thing for value is exchanged for equal value, as contrasted from an aleatory contract. Test: as long as the party belives in all honesty that he is receiving equal for what he gave up for, then commutative character is complied with. (6) Nominate Given a particular name by law AC 102  (1) Absolute Kinds of When sale is not subject to any condition and the title immediately passes to the purchaser Contract of upon delivery Sale (2) Conditional Ownership of the object remains with the vendor until fulfillment of the condition/s AC 102 Parties to a Contract of Sale Art. 1489. All persons who have capacity to enter into obligations may enter into a contract of sale A. KINDS OF INCAPACITY (1) Absolute incapacity - when persons cannot bind themselves at all (2) Relative incapacity - only with regard to certain persons and certain class of property (3) Specific incapacity or special disqualifications AC 102  1. Minors A.1. 2. Insane or demented 3. Deaf-mutes who do not know how to write Absolute 4. Civil interdiction 5. Judicially-declared incompetents (Art. 39) Incapacity a. Prodigal b. Imbeciles [ARTS. 1327, 1397, 139] c. Absence and presumption of death d. Persons not of unsound mind but by reason of age, disease, weak mind, and other similar causes, cannot take care of themselves and manage their property without outside aid (easy prey for deceit and exploitation) AC 102  (1) Husband and wife [Art. 1490] A.2. General Rule: Cannot sell property to each other Relative Exceptions: a.Separation of property in marriage settlement Incapacity b. Judicial separation of property. MARRIED PERSONS Sale by husband in favor of a concubine after he had abandoned his family and left conjugal home where his wife and children lived and from whence they derived their support, is void. [Ching vs. Goyanko, Jr., 2006] AC 102  (2) Alienage [Art. 39] A.2. General Rule: Aliens are disqualified from purchasing or acquiring real property Relative Exceptions: Incapacity If acquisition is through hereditary succession MARRIED PERSONS (3) Trusteeship [Art. 39] AC 102  The sale entered into by agents, guardians, A.3. and executors and administrators shall be voidable, as it affects only private interests. Special The sale entered into by public officers, Disqualificat lawyers, justices and judges, and others specially disqualified by law shall be void, as it affects public interest. ions (1) Agents [ARTS. 1491-1492] [AGE-PLJ] Cannot purchase or acquire property whose administration or sale was entrusted to them Exception: principal gives consent AC 102  (2) Guardian A.3. Cannot purchase property of person under his guardianship Special Guardianship is a trust of the highest order, Disqualificat and the trustee cannot be allowed to have any inducement or neglect his ward’s interest. [Phil Trust Co vs. Roldan, 1956] ions Art. 1491(2) in relation to Art. 1409 does not apply where the sale was under a special [ARTS. 1491-1492] [AGE-PLJ] power attached to the real estate mortgage, pursuant law. Under Act. No. 3135, a mortgagee-creditor is allowed, as an exception, to participate in the bidding under the same condition as any other bidder [Fiestan v. CA, 1990] AC 102 A.3. Special (3) Executors and Administrators Cannot acquire or purchase property of estate Disqualificat under their administration. ions Does not apply to purchase of hereditary rights, as these are not under their administration. [ARTS. 1491-1492] [AGE-PLJ] The prohibition on executors and administrators does not apply if the principal consents to the sale. [Distajo vs. CA, 2000] AC 102 A.3. (5) Lawyers Cannot acquire or purchase property or rights in litigation in which they take part by virtue of Special their profession. Disqualificat Lawyers may have undue influencer over client; greed may get the better of the sentiments of loyalty and disinterestedness. [Valencia vs. ions Cabanting, 1991] [ARTS. 1491-1492] [AGE-PLJ] Prohibition is definite and permanent and cannot be cured by ratification. [Rubias vs. Batiller, 1973] AC 102 A.3. (5) Lawyers Exceptions: An assignment to a lawyer by his client of an Special interest in the property does not violate Art. 1491, where: Disqualificat (a) A judgement has been rendered and has become final; and ions (b) In case of contingency fee arrangements: [ARTS. 1491-1492] [AGE-PLJ] the interest of the lawyer may be annotated as an adverse claim on the property awarded to his client [Director of Lands vs. Ababa, 1979] AC 102 A.3. (6) Justices, judges, prosecuting attorneys, clerks and other officers and employees connected with the Special administration of justice Cannot acquire or purchase property or rights Disqualificat in litigation or levied upon an execution before the court within whose jurisdiction or territory ions they exercise their respective functions. Rationale: to prevent fraud and to surround [ARTS. 1491-1492] [AGE-PLJ] their profession with prestige Prohibition applies only on sales or assignment during the pendency of litigation involving the property. [Macariola vs. Asuncion, 1963] AC 102 B. B.1. Absolute Incapacity Effects of (1) If both parties are incapacitated: unenforceable [Art. 1489] Incapacity (2) If only one (1) party is incapacitated: voidable Exception: If necessaries are sold and delivered to an incapacitated person: pay a reasonable price therefor [Art. 1489] AC 102  B.2. Relative Incapacity B. Sale between spouses is void. Effects of Rationale: (1) To protect third persons who may have contracted with the spouse Incapacity (2) To avoid undue advantage of the dominant spouse over the weaker spouse (3) To avoid circumvention of the prohibition against donations between spouses [Medina vs. CIR, 1961] Such prohibition shall likewise apply to common law spouses. [Calimlim-Canulas vs. Fortun, 1984] But if already sold to a third person who relied on the title of his immediate seller, reconveyance to the seller spouse is no longer available. [Cruz vs. CA, 1997] AC 102