SALES and LEASE

1. What are the characteristics of a Contract of Sale?

The following are the characteristics of a contract of sale:

a. Primary;
b. Consensual;
c. Bilateral;
d. Nominate;
e. Commutative; but Aleatory in some instances;
f. Onerous.

2. Why is the contract of sale an aonerous contract?

A contract of sale is an onerous contract because the cause of the sale is for each contracting party is a prestation or
promise of a thing by the other - for the seller the purchase price and for the buyer the determinate thing which is the object
of the sale.

Onerous, because the thing sold is conveyed in consideration of the price and vice versa

3. Why is the contract of sale a consensual contract?

It is consensual because it is perfected by mere consent. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the price.

4. Why is the contract of sale a bilateral reciprocal contract?

It is a bilateral reciprocal contract because it imposes obligations and grants rights to both parties. By the contract of sale
one of the contracting parties binds himself to transfer ownership and to deliver a determinate thing and for the other to pay a
price certain in money or its equivalent. As opposed to unilateral contracts where only one party is expected to fulfill an
obligation.

5. Why is the contract of sale a commutative contract?

A sale is a contract in which each of the contracting parties gives and receives an equivalent.

6. Define natural elements of a contract of sale

Natural elements or those which are deemed to exist in certain contracts, in the absence of any contrary stipulations, like
warranty against eviction (Art. 1548.) or hidden defects (Art. 1561.).

7. What is an accidental element in a contract of sale?

Accidental elements or those which may be present or absent depending on the stipulations of the parties, like conditions,
interest, penalty, time or place of payment, etc.
8. What are the requisites of a thing which constitutes the object of a contract of sale.
The thing must be determinate or at least determinable, legal and not impossible.

9. Distinguish Emptio Rei Sperati from Emptio Spei. Ex C U O

The following are the disctinctions between Emptio Rei Sperati and Emptio Spei.

a) Emptio Rei Sperati is a sale of an expected thing whereas in emptio spei it is a sale of a hope or expectancy that
the thing will come into existence. The sale is with regard to the hope itself;
b) Emptio Rei sperati is subject to the condition that the thing will exist in the future, if not then the contract does
not produce any effect, while in Emptio Spei the contract produces an effect even if the thing does not come
into existence unless it is a bain hope;
c) In Emptio Rei Sperati the uncertainty is with regard to the quantity and qulity of the thing and not the existence
whereas in Emptio Spei the uncertainty is with regard to the existence of the thing.
d) The object of the sale in Emptio Rei Sperati is a future thing, while the object in Emptio Spei is a present thing-
the hope or expectancy.

10. What is Emptio Rei Speratei?

Emptio rei speratae (sale of thing expected) is the sale of a thing not yet in existence /subject to the condition that the
thing will exist and /on failure of the condition, the contract becomes ineffective /and hence, the buyer has no obligation to
pay the price.

11. Is there a distinction between a contract of sale and a contract to sell?

Yes. The disctinctions are the following T N R

a) In a contract of sale, title passes to the buyer upon delivery of the thing sold whereas in a contract to sell, ownership
is reserved to the seller and title is not to pass until full payment of the purchase price.;
b) Non-payment of the purchase price is a negative resolutory condition ina contract of sale and the remedy of the
seller is to ask for the rescission of the contract or to exact fulfilment by reason of the breach, whereas payment in a
contract to sell is a positive suspensive condition, the failure of which is not a breach but prevents the vendor’s
obligation of conveying title from having force and effect.
c) In a contract of sale, recovery can not be made by the seller unless the contract is rescinded and set aside. In
contracts to sell, the owenership is reserved in the vendor if there is non-complicance with the condition of payment
of the purchase price.

12. Y acquired a booklet of 100 sweepstakes tickets for P18 000 with customary discount. What contract dis Y enter into?

Y entered into a contract of sale of a mere hope or expectancy. It produces the effect of a contract of sale regardless
of whether he wins the sweepstakes or not.

13. Almar sold Basty his car. It was agreed that the price will be determined by Basty a week later. Basty fixed the price at
500K. Almar agreed. Is the sale perfected?
 Yes. The general rule is that the fixing of the price can never be left to the discretion 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.

The sale is perfected at the moment there is meeting of the minds upon a determinate thing (object), and a certain
price (consideration), even if neither is delivered.

14. Give the effect of the failure to determine price if the sale is executory.

The sale is inefficacious. Where the price cannot be determined in accordance with the Civil Code, or in any other
manner, the contract is inefficacious.

15. Give the effect of failure to pay the price or the non-delivery of the thing sold.

The failure to pay the price or the non-delivery of the thing sold constitutes the breach of a contract of sale.
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of
bouncing checks. Non-delivery creates a right in favor of the buyer to exact fulfilment of the contract or to rescind the
contract of sale with damages in either case. It does not automatically annul or avoid the sale.

16. What is the concept of reservati dominii in contracts of sale?

It is an exception to the rule that delivery passes title of the thing to the buyer. In a contractual reservation of
ownership the ownership or title remains with the seller by reason of an express contrctual stipulation agreed upon by the
parties. Title is lost only upon the happening of the conditions set forth in the agreement, such as payment of purchase
price.

17. Is pactum reservatii dominii valid?

Yes. It is one kind of conditional sale.
All conditions and stipulations freely agreed upon by the parties are valid and binding between them.

18. Distinguish pactum reservati dominii and contract to sell. RC3

The following are the distinctions:

A. In both instances the title to the subject property is reserved until fulfillment of a suspensive condition such
as the payment of the purchase price.

B. Upon the happening of a suspensive condition in a conditional sale with pactum reservatii dominii, the
contract is perfected and if there has been previous delivery, title over the thing passes to the buyer automatically by
operation of law without further acts by the seller. In contracts to sell however, the transfer of the title is not
automatic. The seller needs to convey the property to the buyer through executing a contract of sale.

C. A 2nd buyer of the property in a conditional sale who has actual or constructive knowledge of the defect in
the tile of the seller renders him a registrant not in good faith. He cannot defeat the first buyer’s title.
 However a 3rd person buying the property subject of a contract to sell, the suspensive condition being
fulfilled, cannot be deemed a buyer in bad faith and the prospetive buyer who entered into the contract to sell
cannot ask for reconveyance of the property to him.

19. Bea’s Hi-Lux was sold on credit. Shortly after delivery a fortuitous event destroyed it. Is the buyer still liable for
the loss?
Yes, the buyer is liable for the loss.

After the delivery, title has been transferred and the rule is that the buyer must bear the loss because ownership
has been transferred to him. The risk assumed is off set by the corresponding rule that any improvement also
belongs to the buyer.

20. B bought a vessel from S on the condition that S prove that she was the real owner by pertinent document.
Before the condition was complied with, the vessel sank due to a storm. Can S demand the price?

No. There was a reservation of the title to the owner, S, until fulfilment of the suspensive condition. The law
provides the act of delivery transfers ownership to the buyer except when there is a contractual reservation to the
seller of ownership.

In case of loss due to a fortuitous event, the owner should bear the loss under the principle of res perit domino.

21. Define earnest money.

Earnest money – or “ARRAS” is something of value given to the seller, to show that the buyer was really
earnest to bind the bargain. It is considered as part of the purchase price and proof of perfection of the contract. It
shall be deducted from the total price.

22. What is option money?

It is the consideration paid in an option contract granting a privilege in one person giving him the right to buy
certain merchandise, at anytime within the agreed period, at a fixed price. It is a value separate ad distinct from the
purchase price.

23. Distinguish option and earnest money.

TNP BS

The distinctions between earnest and option money are:

A. Under payment of earnest money, title over the thing passes upon delivery while in payment of option
contracts, title to the thing is reserved to the seller.
B. The non-payment of earnest money gives rise to an action for specific performance or rescission of the
contract of sale, whereas the non-payment of option money gives rise to an action for specific performance.
C. Earnest money forms part of the purchase price, while option money is a separate and disctinct
consideration in payment of an option contrat.
 D. Under payment of earnest money, the buyer is liable to pay the balance of the purchase price while in
payment of option money, the buyer is not required to purchase.
E. Lastly, under the pament of earnest money, there must be an already perfected contract of sale while in
the payment of option money, it applies only to unperfected contracts of sale.

24. Dan orally sold a piece of land to Jeffrey. Is the sale valid?

The sale is valid provided all the essential elements of a contract to sell are present namely, the cause or meeting
of the minds, the object or subject matter which is determinate, legal and not impossible and the consideration or a
certain purchase price in money or its equivalent.

Notwithstanding its validity, the contract is still unenforceable by reason of its not being placed into writing.

25. If a sale of real property is done through an agent, is it valid?

It is valid only if the authority of the agent is in writing; otherwise it is void.

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void.

26. Can a vendor who chooses to foreclose the chattel mortgage recover unpaid balances?

No. Under the Recto law one of the alternative remedies of the seller is to foreclosure of the chattel mortgage on the
thing sold. In this case, there shall be no further action against the purchaser to recover unpaid balance of the price. The
amount received in the foreclosure sale shall be equivalent to the amount of the purchase price including the unpaid
balances.

27. Del bought an autmobile under an installment plan. Del defaulted in one of the payments. Has the seller Sal have the
right to exact fulfilment of the obligation to pay?

Under the Recto law or Article 1484 of the Civil Code, the right is not yet demandable. To avail of the remedies
under the Recto law there must be the concurrence of the following requisites:
1.There must be a Contract of sale
2.It involves Personal property
3.The sale is payable in installments
4.That there has been a failure to pay two or more installments.

Since only a single payment was missed, the law affords no substantive remedy to the seller as of yet.

28. B bought a laptop on installment. He defaulted in the payment of 2 installment payments. Can the contract be
cancelled?

The seller is given the option to cancel the sale or rescind the sale upon failure to pay two or more installment
payments. However, cancellation of the sale requires mutual restitution. All partial payments of the laptop’s price must be
returned by the seller to B and the laptop must be returned by B to the seller.
 29. B bought a car from S on installment, it was agreed upon that the installments already paid should not be returned if
the sale is cancelled. Is the stipulation valid?

Yes. The stipulation is valid provided it is not unconscionable under the circumstances.

30. A husband sold his land to his wife. Later he borrowed money from C. The loan matured. When C discovered that
the husband had no cash, he decided to question the sale of the land to the wife. Can the creditor go after such property?

No. The relative incapacity of the husband to sell his land to his wife cannot be questioned by C in an accion
pauliana.
Accion pauliana may only be brought when the person who brings the action became a creditor prior to the
transaction being questioned. In the instant case, C became the creditor of the husband after the void sale.

31. What is the effect of the loss of an object before the sale?

The loss of an object before the sale is a burden carried by the seller or owner of the goods under the principle of
res perit domino.

If a sale is later on entered into or perfected, the object being the lost merchandise, that sale is null and void because
it lacks an essential element.

32. Can service be the subject of a contract of sale?

No. While services may be the object of a contract they cannot be the object of a contract of sale.

33. S granted B the exclusive right to sell the former’s beds in Visayas. S was to furnish B with the beds which the
latter might order. The price agreed upon was the invoice price of the beds in Manila with a discount of from 20%
to 25%. Payment was to be made at the end of sixty days. Is there a contract of agency?

No.

The stipulations are precisely the essential features of a contract of purchase and sale. There was the obligation on
the part of S to supply the beds and on the part of B, to pay their price.

These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent receives
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, he returns it.

By virtue of the contract between S and B, the latter, on receiving the beds was necessarily obliged to pay their price
withinthe terms fixed without any other consideration and regardless as to whether he had sold the beds.

Rec-P-Ret-W-D
 34. S sold his car to B. the price to be paid is the price X paid for the car he bought 1 week ago as specified in the invoice
of the sale. Is there a price certain?

Yes. A price is certain if it be certain with reference to another thing certain.

35. When is the sale by auction perfected?

A sale by auction is perfected upon the fall of the hammer.

36. What is “puffing” or “by-bidding”?

“Puffing” or “by-bidding” is the secret bidding by or on behalf of the seller by people who are not themselves
bound undertaken by making fraudulent offers to increase the bid.

37. What is the status of a contract to sell executed by an heir of real property involved in testate proceedings entered into
without the approval of the probate court?

It is valid. A contract to sell does not vest title to the property.

38. When is a sale perfected?

A sale is perfected upon the meeting of the minds upon the things that form part of the subject of the sale and the price
certain in money or its equivalent.

39. When is ownership of the thing sold transferred to the vendee or buyer?

While a contract of sale is consensual, ownership of the thing sold is acquired only upon its delivery, actual or
constructive, to the buyer. Except in conditional sales containing pactum reservati dominii, contracts to sell and insurance
cntracts where transfer of ownership occurs after the happening of certain conditions such as payment of the purchase price.

40. What is “Policitation”?

Policitation is an unaccepted unilateral promise to buy or sell. /Even if accepted by the other party, it does not bind the
promissor and maybe withdrawn anytime. This is a mere offer, and the agreement not yet been converted into a contract.

41. If A promises to buy B’s car for P50 000 and B promises to sell his specified car for P50 000, is there a perfected
contract of sale?

Yes.

When the promise is bilateral, that is, one party accepts the other’s promise to buy and the latter, the former’s promise to
sell a determinate thing for a price certain, it has practically the same effect as a perfected contract of sale since it is reciprocally
demandable. It requires no consideration distinct from the selling price.

42. Which contracts of sale are required to be in writing under the Statute of Frauds?
The following contracts of sale are required to be in writing according to the Statute of Frauds:

1. Sale of personal property at a price not less than P500

2. Sale of real property or an interest therein

3. Sale of property not to be performed within a year from the date thereof

4. “Applicable statute” referred to in 1483 requires that certain contracts of sale be in a certain form

43. So that ownership is transferred must the vendor have ownership at the time of perfection?

No, to transfer ownership he must have title over the determinate thing at the time of delivery.

The vendor need not be the owner of the thing at the time of perfection of the contract; it is sufficient that he has “a
right to transfer the ownership thereof at the time it is delivered.”

44. Who is considered an unpaid seller?

An unpaid seller is one who:

a. has not been paid

b. or to whom the price has not been tendered
c. in case a bill of exchange or other negotiable instrument has been received as conditional payment, AND the
condition on which it was received has been broken by reason of 1.) the dishonor of the instrument, 2.) insolvency of the
buyer or 3.) otherwise. (DIO)

45. What are the remedies of an unpaid seller?

The remedies of an unpaid seller are:

1. Possessory Lien;
2. Right of Stoppage in Transitu when he has parted with the goods and becomes insolvent;
3. Special Right of Resale;
4. Special Right of Rescission;
5. Action for the Price;
6. Action for Damagaes

46. Under what cases may the seller’s possessory lien be exercised?
The seller’s possessory lien may be exercised in the following instances:

1. When the goods habe been sold without stipulation as to credit;

2. When the good have been sold on credit, but the term has expired;
3. When the buyer becomes insolvent.
47. Under what instances does an unpaid seller lose his lien thereon?

The unpaid seller loses his lien on the goods when:

a) Delivery of the goods to a carrier or bailee for the purpose of transmission to the buyer without reserving
ownership or right of possession;
b) When the buyer lawfully acquires possession over the goods;
c) He waves the lien

48. Under what cases is the resale of goods allowed?

The resale of goods are allowed: (P Er Ut)

a) When the goods are perishable in nature;

b) When the right to resell is expressly reserved in case the buyer should be in default; and
c) Where the buyer fails to pay the price for an unreasonable time.

49. When is the vendee entitled to rescind the sale?

Rescission of the sale is allowed:

a) When the right to rescind is expressly reserved should the buyer be in default; and
b) When the buyer fails to pay the price for an unreasonable time.

50. What are the implied warranties in a contract of sale?

The implied warranties in a contract of sale are:

A. Warranty against Hidden Defects;

B. Warranty against Eviction;
C. Warranty as to Fitness; and
D. Warranty as to Merchantibility

51. Are there cases when the vendor shall not be liable for warranty against eviction?

Yes, they are the following:

 1. When the burden or servitude is apparent;
2. When the non-apparent burden or servitude is registered;
3. When the vendee had knowledge of the non-apparent servitude, whether registered or not.

52. When is a contract a contract of sale and when is it a piece of work?

If the thing is ordered in the ordinary course of business, then it is a sale.

If however, it is manufactured specially for the customer and upon his special order and not for the market, then it is
a contract for a piece of work.

53. What is the warranty against eviction?

The warranty against eviction is a representation mde by the seller that he has the right to sell the thing sold and
transfer ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof.

54. Under what instances is rescission not available to the buyer?

Rescission is not available to the buyer when:

Ac Not Ret

A. The buyer accepted the goods knowing of the breach of warranty without protest;
B. When the buyer fails to notify the seller within a reasonable time of his election to rescind;
C. When the buyer fails to return or offer to return the goods in substantially as good condition as they were at the
time of transfer of ownership to him.

55. Define conventional redemption.

It is the right which the vendor reserves to himself to reacquire the property sold, provided he returns to the
vendee the (PELNS) price of the thing sold, the expenses of the contract, any other legal payments made, the
necessary and useful expenses made on the thing sold and fulfills any other stipulations as may have been agreed
upon by the parties.

56. In what form shall a contract of sale be entered into?

Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be
made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the
conduct of the parties.

57. What is the effect of the stipulation that the installments or rents shall be forfeited by the vendee or lessee in the
event the contract of sale is rescinded?

The obligation of mutual restitution is avoided. Only the buyer has to comply with the return of the determinate
thing which is the subject of the contract. The installment payment or rents are forfeited and are not bound to be
returned by the seller.
 A stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as
the same may not be unconscionable under the circumstances.

58. What requisites must be present for a co-owner to exercise the right of legal redemption?

The requisites are: CA3B

(1) There must be co-ownership of a thing;
(2) There must be alienation of all or of any of the shares of the other co-owners;
(3) The sale must be to a third person or stranger (Art. 1620.), i.e., a non-co-owner; and
(4) The sale must be before partition.

59. Is it essential that the thing that is subject to a contract of sale always be determinate?

No. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is
capable of being made determinate without the necessity of a new or further agreement between the parties.

60. What are the principal obligations of the vendor?

(WPD-TT)
The principal obligations of the vendor are to:
1.Transfer ownership (cannot be waived)
2.Deliver the thing sold (cannot be waived)
3.Warrant against eviction and against hidden defects (can be waived or modified since warranty is not an
essential element of the contract of sale)
4.Take care of the thing, pending delivery, with proper diligence (Article 1163)
5.Pay for the expenses of the deed of sale, unless there is stipulation to the contrary

61. What is the effect of gross inadequacy of the price?

a.In Voluntary sales the mere inadequacy of the price does not affect validity of the sale except where the low price 1.)
indicates vice of consent, sale may be annulled or the contract is presumed to be an equitable mortgage; 2. or where the price
is so low as to be “shocking to the conscience”, the sale may be set aside.

b.In Involuntary or Forced sales the mere inadequacy of the price is not a sufficient ground for the cancellation of the sale if
property is real. Except when the price is so low as to be shocking to the moral conscience, judicial sale of personal property
will be set aside and in the event of a resale, a better price can be obtained.

62. Define a contract of sale.

A nominate contract whereby one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent.

63. When is an affirmation of the value of the thing or the seller’s expression of an opinion considered an express
warranty?
 The affirmation of value or the seller’s expression of opinion is deemed an express warranty only when the seller made
such affirmation or statement as an expert and it was relied upon by the buyer, if the natural tendency of such affirmation
or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon.

64. How is the ownership of the thing transferred to the vendee?

The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

65. Who are granted the right of legal redemption?

The following are granted the right t legal redemption:

A. Under the Civil Code (legal redemption): C I H Arl Aul

1.Sale of a co-owner of his share to a stranger (Article 1620)
2.When a credit or other incorporeal right in litigation is sold (Article 1634)
3.Sale of an heir of his hereditary rights to a stranger (Article 1088)
4.Sale of adjacent rural lands not exceeding one hectare (Article 1621)
5.Sale of adjacent small urban lands bought merely for speculation (Article 1622)

B. Under special laws: JEF HTA

1.An equity of redemption in cases of judicial foreclosures
2.A right of redemption in cases of extra-judicial foreclosures
3.Redemption of homesteads
4.Redemption in tax sales
5.Redemption by an agricultural tenant of land sold by the landowner

66. What is an equitable mortgage?

One which lacks the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows
the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible
or contrary to law.

67. If a co-owner sells his share to another co-owner can the other co-owners exercise the right of redemption?

No. Co-owners have no right of legal redemption against each other to whom the law grants the same privilege, but only
against a third person. A third person, within the meaning of Article 1620, is anyone who is not a co-owner. Article 1620 is
intended to minimize co-ownership and the sale of one co-owner to another co-owner will definitely reduce the incidence of
the co-ownership.