Orcullo, Cristy Marie Mordeno

Father Saturnino Urios University

Law 207 - Sales

1. Define contract of sale.

As provided under Article 1458 of the New Civil Code, sale is a contract where
one party (seller or vendor) obligates himself to transfer the ownership of and to
deliver a determinate thing, while the other party (buyer or vendee) obligates
himself to pay for said thing a price certain in money or its equivalent.

2. The perfection of the contract of sale gives rise to two sets of obligations. What
are these two sets of obligations? Explain.

The two sets of obligations of the perfection of the contract of sale gives rise
to two sets of obligations. These obligations are to transfer the ownership of and to
deliver a determinate thing as to the seller or vendor and to pay for said thing a price
certain in money or its equivalent as to the buyer or vendee, under Article 1458 of
the New Civil Code.

3. What are the elements of a contract of sale? Explain each element.

The elements of the contract of sale are consent, object certain or the subject
matter, and the cause or consideration or the price certain.

Consent is the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract.

Object certain or subject matter refers to the determinate thing which is the object
of the contract may be personal or real property, may be present or future, must be
licit and must be within the commerce of men.

Cause or consideration refers to the “price certain in money or its equivalent. The
cost at which something is obtained, or something which one ordinarily accepts
voluntarily in exchange for something else, or the consideration given for the
purchase of a thing. “It’s equivalent”means that payment need not be in money, so
that there can be a sale where the thing given as token of payment has been
“assessed and evaluated and its price equivalent in terms of money has been
determine”.
4. Distinguish between a conditional sale, on the one hand, and an absolute sale,
on the other hand.

In conditional sale ownership remains with the vendor and does not pass to the
vendee until full payment of the purchase price; the full payment of the purchase
price partakes of a suspensive condition, and non-fulfillment of the condition
prevents the obligation to sell from arising; while sale is absolute when there is no
stipulation in the contract that title to the property remains with the seller until full
payment of the purchase price.

In conditional sale, the seller is granted the right to unilaterally rescind the contract
predicated on the fulfillment or nonfulfillment, as the case may be, of the prescribed
condition; whereas in an absolute sale, the title to the property is not reserved to
the seller or if the seller is not granted the right to rescind the contract based on the
fulfillment or non-fulfillment, as the case may be, of the prescribed condition.

5. Distinguish between a contract of sale and a contract to sell.

A contract to sell has been defined as "a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price." In a contract to sell,
"ownership is retained by the seller and is not to pass until the full payment of the
price ." It is "commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installments by withholding ownership over the
property until the buyer effects full payment therefor.

An agreement which stipulates that the seller shall execute a deed of sale only upon
or after the payment of the purchase price is a contract to sell, not a contract of sale.

In a contract of sale, the vendor has lost ownership of the thing sold and cannot
recover it, unless the contract of sale is rescinded and set aside. In a contract to sell,
however, the vendor remains the owner for as long as the vendee has not complied
fully with the condition of paying the purchase price. If the vendor should eject the
vendee for failure to meet the condition precedent, he is enforcing the contract and
not rescinding it.

6. Explain: Sale is a form of “title” not a “mode”.

Sale is a form of “title” not a “mode” means that “he contract of sale by itself, is
not a mode of acquiring ownership” as enumerated in Article 712 of the New Civil
Code. The contract transfers no real rights; it merely causes certain obligations to
arise.
7. What is an option contract?

Under Article 1479 of the New Civil Code, an option contract is a promise to
buy and sell a determinate thing for a price certain. It is a preparatory contract
separate and distinct from the main contract itself. It merely secures a privilege to
buy/sell and gives the party granted the option the right to decide w/n to enter into
a principal contract. It binds the party who has given the option not to enter into the
principal contract with any other person during the agreed time and within that
period.

8. Are promises to buy and/or to sell demandable?

As provided under Article 1479, Paragraph 2 of the New Civil Code promises
to buy and/or to sell are not demandable. A unilateral promise to sell or to buy a
determinate thing for a price certain does not bind the promissor even if accepted
and may be withdrawn at any time. The optionee after accepting the option and
before he exercises it has the right, but not the obligation to buy or sell, as the case
may be.

Once the option is exercised, a bilateral promise to sell and to buy ensues
both parties are then reciprocally bound to comply with their respective
undertakings. If he withdraws the offer before the acceptance by the optionee-
offeree, the optionee-offeree may not sue for specific performance on the proposed
contract since it has failed to reach its own stage of perfection but offerror is liable
for damages for breach of the option.

9. A transferred to B a parcel of land for the price of 1million pesos. It was agreed
in the contract that B will pay 400,000 in cash and that for the remaining
amount, he will convey his old Ford Ranger Wildtrak, now valued at 600,000.
What kind of contract is this? 5pts

As provided under Article 1468 of the New Civil Code, as between sale and
barter is that it is a contract of sale when intention is not clear, and the value of thing
is equal or less than amount of money; while in barter, when the intention is not
clear, and the value of thing is more than amount of money.

In the given problem; the intention of the parties could not be ascertained
whether it is a contract of sale or that of a barter; hence the reference is the value of
the thing and the amount of money. Ford Ranger Wildtrak valued 600K while the
amount of money is 400K; hence the value of the thing which is the Ford Ranger is
more than the value of money.

Thus, it is respectfully submitted that the contract is that of a barter.

10. X co. granted to A the exclusive right to sell in the Visayas a certain number of
beds which the Company was manufacturing at the invoice price of the beds in
Manila, with a discount of 20 percent, the price to be paid at the end of 60 days.
What contract is perfected – a contract of sale or contract of agency? Reasons.

The contract perfected in the abovementioned case is a contract of sale.

Before recognizing what kind of a contract a particular agreement is formed,
importance should be given in its essential elements and clauses. As regards the
object and cause of such contract, in this case is the delivery of the beds which A
might order at a particular price and manner stipulated, to be paid at the end of 60
days with a discount of 20 percent. Thus, there was the essential characteristic of the
contract of sale.

There was the obligation on the part of X co. to supply the beds, and, on the
part of A to pay their price. These features exclude the legal conception of an agency
or order to sell whereby the mandatory or agent received the thing to sell it, and
does not pay its price, but delivers to the principal the price he obtains from the sale
of the thing to a third person, and if he does not succeed in selling it, he returns it.

Thus, by virtue of the contract between X co. and A, the latter, on receiving
the beds, was necessarily obliged to pay their price within the term fixed, without
any other consideration and regardless as to whether he had or had not sold the
beds.

11. X Shoe Store, Inc. entered into separate contracts with 2 movie stars, A and B.
With A, the agreement was that the shoe store shall deliver at specified date for
a price of P1,000 a pair of shoes of a specified brand which the store had been
manufacturing for the general public but which at the time of the contract had
already been sold out, and with B, the agreement was that the shoe store shall
deliver at a specified date for a price of P2,000 a pair of shoes to be made
specially for him, in accordance with a design submitted by him. What is the
nature of these 2 contracts?

With regards to the contract between X Shoe Store and A, the contract is a
sale because the goods he ordered are procured in the ordinary course of business,
only they are out of stock. Since the seller intends to manufacture again, it is
considered a contract of sale. However, with regards to the contract between X Shoe
Store and B, is a contract for a piece of work because they are specially ordered by
the buyer from the seller and they are not procured in the ordinary course of
business.

As provided under Article 1467 of the New Civil Code , “A contract for the
delivery at a certain price of an article which the vendor in ordinary course of his
business manufactures or procures for the general market, whether the same is on
hand at the time or not, is a contract of sale, but if the goods are to be manufacture
specially for the customer upon his special order, and not for the general marker, it
is a contract for a piece of work.”
12. “A” sells his 1976 Colt Lancer Sedan to “B”, a compadre, and leaves it to “B” to
determine the price. If “B” refuses to fix a price and simply takes the car, is he
still obliged to pay the price? Explain.

Yes, B is still obliged to pay the price. As a general rule provided under Article
1473 of the New Civil Code, the fixing of the price can never be left in the descrition
of one of the contracting parties.

However, if the price fixed by one of the parties is accepted by the other, the
sale is perfected. Therefore, the act of “A” in leaving to “B” the power to determine
the price of the car is illegal. But this will not affect the validity of the sale.

Furthermore, “A” delivered the car to “B,” and the latter takes it. This will
bring into play the provisions of Article 1474 of the New Civil Code. According to the
article, if the thing or any part thereof has been delivered to and appropriated by the
buyer, he must pay a reasonable price therefor. What is a reasonable price is a
question of fact dependent upon the circumstances of each particular case.

13. A offered to sell his house and lot to B who was interested in buying the same
for P200,000. In his letter to B, A stated that he was giving B a period of one
month within which to raise the amount and that as soon as B is ready, they will
sign the deed of sale. One week before the expiration of the one-month period,
A went to B and told him that he is no longer willing to sell the property unless
the price is increased to P250,000. May B compel A to accept the P200,00 first
offered, and execute the deed of sale? Reasons.

No, B cannot compel A to accept the P200,000 first offered, and execute the
deed of sale. Generally, under Article 1479 of the New Civil Code, a promise to buy
and sell a determinate thing for a price certain is reciprocally demandable. An
accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a “consideration distinct
from the price”.

However, in the instant case, it is undeniable that the offer of A is merely a

unilateral promise to sell his house and lot to B for P200,000 without any
consideration distinct from the purchase price. The promise of A is not binding upon
him. As a matter of fact, even if B had formally accepted the option of one month
given to him by A, such acceptance would be of no moment since “there is no
consideration thereof distinct from the purchase price”. A can always change his
mind at any time.
 Hence, the option does not bind him for lack of a cause or consideration. It
would have been different if B had accepted terms and conditions of the offer to sell
and paid a consideration distinct from the price within the period of the option
before said offer was withdrawn by A. In such a case, a contract of sale would have
been generated right then and there. As it turned out, A withdrew his offer in time.

14. A granted B the exclusive right to sell his assembled bicycles in Butuan City, the
price is payable within 60 days from delivery, and promising B a commission of
20% on all sales. After the delivery of the bicycles to B, but before he could sell
any of the bicycles, B’s store was completely burned without his fault, together
with all of the bicycles. Must B pay A for his lost bicycles. Why? 5pts

Yes, B must pay A for his lost bicycles. The contract to which the parties
entered into is a contract of sale and not a contract to sell on the grounds that the
bicycles are made payable within 60 days from delivery even if B is unable to resell it.

Article 1504 of the New Civil Code provides for the creation of the liability of
the buyer, that is, when the ownership and delivery of the subject matter has
already been transferred to the buyer, the goods are at the buyer’s risk.

Thus, A having able to deliver the bicycles to B, creates the liability on the
part of B to exercise the diligence of a good father of a family at his own risk. As a
buyer, ownership passed to B upon delivery and, under Art. 1504 of the Civil Code,
the thing perishes for the owner. Hence, B must still pay the price.

15. There is a stipulation in a contract of a lease that if the lessor should desire to
sell the leased premises, the lessee shall have a 30-day exclusive option to
purchase the same, However, if it is sold to another, the lessor is bound and
obliged to stipulate in the deed of sale that the purchaser shall recognize the
lease and be bound by all the terms and conditions thereof. What right was
granted to the lessee, a right of first refusal or an option contract?

The lessee was granted a right of first refusal and not an option clause or an
option contract.

The right of first refusal is an integral part of the contract of lease,

consideration is built into the reciprocal obligation of the parties. Assurance that the
lessee will be given first crack or first option to buy the property at the price which
lessor is willing to accept. A right of first refusal means identity of terms and
conditions to be offered to the lessee and all other prospective buyers

An option is a contract granting a privilege to buy or sell within an agreed

time and at a determined price. It is a separate and distinct contract from that which
the parties may enter into upon the consummation of the option. It must be
supported by consideration. The right of first refusal is an integral part of the
contract of lease. The consideration is built into the reciprocal obligations of the
parties.