Law on Sales Chapter 1-3 Reviewer
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CHAPTER 1 – Nature and Form of the ContractContract of sale Characteristics:Consensual – by mere consentBilateral – both are boundOnerous – there is priceCommutative – equivalentNominate – “sale”Principal – independent contractEssential requisites:Consent/meeting of minds Object Cause/considerationKinds of contract of sale:Absolute – no conditionCondition – contingentRequisites concerning Object:Things – licit and not impossible; illicit = null & voidRightsKinds of illicit things:Per se (of its nature)Per accidens (provisions of law)Right of vendor to transfer ownership:One can sell only what he ownsSufficient if right exists at time of deliverySubject matter must be determinate Not determinate = null & voidSale of things having potential existence May be an object of saleSale of a mere hope or expectancy Valid; Void if vainGoods which may be the object of sale:Existing goodsFuture goodsSale of future goods Valid as executory contractSale of undivided interest in a thing:By sale ownerBy co-ownerSale of an undivided share of a specific mass: Fungible goods – any unit is equivalent of any other unitSale of thing subject to a res. condition may be an object of sale Happening extinguishes obligationSale vs. Agency to sell:Sale – buyer receives goods as ownerAgency – receives goods of principalSale – buyer pay priceAgency – agent accounts for proceedsSale – buyer cannot return object soldAgency – can return if unable to sellSale – seller warrants thing soldAgency – agent makes no warrantySale – buyer can deal with thing sold as ownerAgency – bound to principal’s instructionsSale vs. Contract of Piece of Work CPW – never would have existed but for the order of buyer; -risk of loss to contractor; not with Statute of Frauds CS – thing exists even without order; risk of loss to buyerSale vs. Barter Barter – both give things Sale – give a thing and receive price in moneyWhen price considered certain: No sale if price not certain or ascertainable If price not fixed by 3rd person – contract is ineffective If 3rd person is prevented, IP may resist or ask for fulfillmentGross inadequacy in price: Defect – may be annulled because consent is vitiated
Effect where price is simulated:Void; valid as donation (intended)Ownership not transferred (not intended)Price on a given day at particular market: Must be certainFixing of price by one of contracting parties not allowed To be justIf price cannot be fixed, Contract is inefficaciousEffect of failure to determine price: Executory – no effect; no obligation Delivered – pay reasonable priceStages of Contract of Sale:NegotiationPerfectionConsummationPerfection If one does not comply, injured party may sue for fulfillment or rescission with payment of damages.Right of Owner to Fix his Own Price Reasonable or unreasonableEffect of failure to pay price/absence of price:Price Stipulated- demand performance, rescission, cancellation No price- sale is void/non-existent; no contract of saleRules Governing Auction Sales:Sale of separate lots by auction are separate salesSale perfected by the fall of the hammerRight of seller to bid in the auctionNo notice given – unlawful; to avoid puffingNotice given – expressly reservedOwnership of things transferred by delivery Actual or constructive Note: nonpayment prevents transfer of ownershipKinds of promise treated in Article 1479:Accepted unilateral promise to sell (promisee elects to buy)Accepted unilateral promise to sell (promisee elects to sell)Bilateral promise to buy & sell reciprocally acceptedEffect of Unaccepted Unilateral Promise No juridical effect or legal bond; policitationOptionprivilege existing in one person for which he has paid a consideration which gives him the right to buy/sell from/to another person, if he chooses, at any time within the agreed period at a fixed price, or under, or in compliance with certain terms and conditions; exercised when sale may be perfectedEffect of Accepted Unilateral Promise May be withdrawn; It is only if the promise is supported by a consideration distinct and separate from the price that its acceptance will give rise to a perfected contract.Effect of Bilateral Promise to Buy and Sell Perfected saleRisk of Loss or DeteriorationLost before perfection – seller bears loss (res perit domino)Lost at time of perfection – contract void/inexistentLost after perfection but before delivery – buyer bears lossLost after delivery – buyer bears lossArticle 1480 Non-fungible goods: If the risk ought to belong to the buyer before delivery, the benefit ought to belong to him who has the risk.