Sales Reviewer for Finals

 

Law on Sales

 

1.       Is a Deed of Sale where the stated consideration had not in fact been paid valid?

 

No. A Deed of Sale where the stated consideration had not in fact been paid is not valid.

 

There can be no doubt that the contract of sale lacked the essential element of consideration. It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of consideration. Moreover, Art. 1471 of the Civil Code, which provides that "if the price is simulated, the sale is void," also applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.

 

Consideration and consent are essential elements in a contract of sale. Where a party’s consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null and void ab initio. [Heirs of Intac vs CA, G.R. No. 173211]

 

 

 

2.       Distinguish between emptio res speratae and emptio spei.

 

Emptio Rei Speratae is refers to the sale of thing having potential existence; while Emptio Spei refers to the sale of mere hope or expectancy.  As to uncertainty; Emptio Rei Speratae is uncertain with regard to quantity & quality; on the other hand Emptio Spei is uncertain with regards to the existence of the thing.  In Emptio Rei Speratae the contract deals with future thing; whereas in Emptio Spei, the contract deals with present thing-hope or expectancy.

 

In Emptio Rei Speratae, the sale is valid only if the expected thing will exist. So that if the condition is not fulfilled, if the thing does not come into existence, the contract cannot have the effect for lack of an essential requisite [Rabuya, 2017].  In Emptio Spei, the sale is valid even though expected thing does not come into existence as long as the hope itself validly existed [Art. 1461 NCC].

 

 

 

3.       Calvin Klein is an American resident in Manila, about to leave on a vacation, sold his car to Ralph for U.S. $2,000.00, the payment to be made 10 days after delivery to Tommy, a third party depository agreed upon, who shall deliver the car to Ralph upon receipt by Tommy of the purchase price. It was stipulated that ownership is retained by Calvin Klein until delivery of the car to Tommy. Five days after the delivery of the car to Tommy, it was destroyed in a fire which gutted the house of Tommy without the fault of either Tommy or Ralph. Is Ralph still legally obligated to pay the purchase price?

 

Yes.  Ralph is still legally obligated to pay the purchase price.

 

        The Supreme Court in the case of Song Fo & Co. v. Oria gives the following Doctrin: "If the object is lost after perfection but before delivery. Here the buyer bears the loss, as exception to the rule of res perit domino."  The implication in the case of Roman v. Grimalt, supra, is clear. Had the sale been perfected, the buyer would have borne the loss, that is, he would still have had to pay for the object even if no delivery had been made.

Art. 1480 (pars. 1 and 2) clearly, states that injuries between perfection and delivery shall be governed by Art. 1262, among others. And Art. 1262 in turn says that “an obligation which consists in the delivery of a determinate thing shall be extinguished if itshould be lost or destroyed without the fault of the debtor, and before he has incurred in delay.” (This means that the obligation of the seller to deliver is extinguished, but the obligation to pay is not extinguished.) [Paras, 2016].

 

Hence, even the Car has not yet been delivered to Ralph, but the contract of sale had already perfected; therefore Ralph is still legally obligated to pay the purchase price of the said car even if no delivery had been made.

 

 

 

4.       Briefly discuss the Recto Law.

 

Installment Sales Law; commonly known as the “RECTO LAW”. It is embodied in Art. 1484 of the NCC, which provides for the remedies of a seller in the contracts of sale of personal property by installments.

 

This law covers contracts of sale of personal property by installment (Act No. 4122). It is also applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing [PCI Leasing and Finance Inc. v. Giraffe- X Creative Imaging, Inc., G.R. No.142618].

 

Recto Law applies only to sale payable in installments and not to a sale where there is an initial payment and the balance is payable in the future, because such is a straight sale, not a sale by installments.

 

 

 

5.       Briefly discuss the Maceda Law.

 

Realty Installment Buyer Act; commonly known as the “MACEDA LAW.” It is embodied in R.A. 6552 which provides for certain protection to particular buyers of real estate payable on installments. The law declares as "public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions.

 

The law involves the sale of immovables on installment (Maceda Law, RA 6552).

(1) Coverage: Residential Real Estate (Villanueva, 2009).

(2) Excluded:

a. Industrial lots;

b. Commercial buildings (and commercial lots by implication);

c. Sale to tenants under agrarian laws; and

d. Sale of lands payable in straight terms (Sec. 3, RA 6552).

 

 

 

 

6.       When is the seller of goods deemed to be an unpaid seller?

 

One is considered as unpaid seller when:

(1) The whole of the price has not been paid or tendered; or

(2) 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 the dishonor of the instrument, the insolvency of the buyer, or otherwise (NCC, Art. 1525)

(3) It includes an agent of the seller to whom the bill of lading has been indorsed, or consignor or agent who has himself paid, or is directly responsible for the price, or any other person who is in the position of a seller (Pineda, 2010).

 

Unpaid seller is a person specially disqualified by law to enter into contracts of sale.

 

 

 

7.       What are the remedies of the unpaid seller?

 

Remedies of an Unpaid Seller are the following:

                (A) Ordinary Remedies

[a] Action for Price (NCC, Art. 1595) exercised when ownership has passed to buyer; price is payable on a day certain; or goods cannot readily be resold for reasonable price and Art. 1596 of NCC is inapplicable.

[b] Action for Damages – In case of wrongful neglect or refusal by the buyer to accept or pay for the thing sold.

                (B) Special Remedies [NCC, Art. 1596]

[a] Possessory Lien (NCC, Art. 1527) – seller not bound to deliver the object of the contract of sale if buyer has not paid him the price. This remedy presupposes that the sale is on credit.

[b] Stoppage in Transitu (NCC, Art. 1530)

[c] Special Right to Resell the Goods (NCC, Art. 1533)

[d] Special Right to Rescind (NCC, Art. 1597)

 

 

 

8.       Victoria sold a piece of unregistered land to Yves who immediately took possession and improved the same while registration proceedings under the Torrens System was still pending. The Deed of Sale was not registered. A month later, the Original Certificate of Title was issued in the name of Victoria, “free from all liens and encumbrances.” Subsequently, the same land was sold at public auction to satisfy a debt of Victoria to Sherrie , the judgment creditor. The notice of levy, the certificate of final sale were registered. Sherrie sold her rights to the property to Kate who then sued Yves in order that she be declared the owner of the property. Who has the better right to the land, Yves or Kate? Give reasons.

 

Kate has better right to the land.

 

Although Yves already took possession and made improvements of the land; such possession does not vest her with ownership to the said land. It is also submitted that the contract of sale between Yves and Victoria was already perfected and the ownership of the land was transferred by her [Yves’] possession to the said land; but nevertheless, Yves did not able to register the same in the Register of Deeds as provided by law in P.D. 1529, Sec. 52; which states that “every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.”  Such failure to register the land on the part of Yves is fatal on her side.

 

Registration is the operative act which gives validity to the transfer or creates a lien upon the land. A certificate of title serves as an evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein (Spouses Vilbar v. Opinion, G.R. No. 176043). Hence, the registration made by Sherrie gives her the indefeasible and incontrovertible title to the property.

 

As to Kate as an innocent purchaser of value of the said subject land; she is not required by the law or the court to go beyond what appears on the face of the title.  All persons dealing with a property covered by Torrens certificate of title are not required to go beyond what appears on the face of the title. Where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may defeat his right thereto (Chua v. Soriano, GR.No. 150066)

 

 

 

 

9.       In a case where the buyer failed to pay the price of a real property in accordance with a contract to sell, what law governs in case of cancellation of the contract?

 

In a case where the buyer failed to pay the price of a real property in accordance with a contract to sell; the law which governs in case of cancellation of the contract is governed by Republic Act No. 655219 or the Maceda Law.

 

If the buyer fails to pay the installments [of a real property] due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act [Sps Bonrostro vs Sps Luna, 2013].

 

 

 

 

10.   Monique offered to sell a set of furniture to B for P15,000. Dolce immediately accepted the offer. However, unknown to both parties, the residence of Monique was gutted by a fire of accidental origin 2 hours before Monique made the offer to Dolce. All of the effects of Monique including the furniture were destroyed by the fire. Monique now demands payment of the P15,000 on the ground that the sale was perfected. Can Dolce be compelled to pay? Reasons.

 

No. Dolce cannot be compelled to pay.

 

There is in fact no valid contract of sale for at the moment of presumed perfection (acceptance of Dolce to the offer), there was no more subject matter (the furniture having been destroyed two hours before Monique made the offer to Dolce). Monique, as owner, bears the loss of the car.

 

The elements of a contract of sale are:

[a] consent

[b] determinate subject matter

[c] consideration

 

In this case; since there is wanting of the determinate subject matter due to its loss before the offer was made by the seller (Monique), hence the contract of sale has not perfected.

 

 

 

11.   Victor, Jo and Issey are owners of an undivided parcel of land. They sold it to Valentino jointly and in the same contract, with a right to repurchase. Victor tried to repurchase the entire parcel of land, but Valentino refused to accede Victor’s demand. Is Valentino’s refusal justified? Reasons.

 

No. Valentino’s refusal is unjustified.

 

Under the New Civil Code, in Art. 1620 provides that “a co-owner of a thing may exercise the right of redemption in case the shares of all the other-co-owners or of any of them, are sold to a third person.”

 

Victor is entitled to exercise the right of legal redemption is clear because being the co-owner he has an ideal and aliquot share of the said undivided parcel of land.  And there contract specially provides with a right to repurchase.  Such contract is vending upon the parties.  And the law is clear that anyone of the co-owner may exercise the right of redemption.

 

 

 

12.   Jimmy sold his house and lot to Christian and gave Christian until May 2019 to pay the balance of the purchase price. After Christian failed to pay the installments due, Jimmy made no judicial demand for rescission of the contract nor did he execute any notarial act demanding the same as required under Art. 1592 of the NCC. Christian still made payments even after the May 2019 deadline, which Jimmy accepted. Could Jimmy exercise his right to rescind the sale?

 

No, Jimmy cannot exercise his right to rescind the sale

 

Article 1592 of the New Civil Code provides that “In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.”

 

In the case at bar, Jimmy did not make judicial demand for rescission of the contract nor did he execute any notarial act demanding the same as required under Art. 1592 of the NCC; hence he cannot rescind the contract.  In the case also; Christian was not yet in “delay” for the payment because the grace period given by Jimmy for Christian to make for the payment of the balance was May 2019; and Christian made the payment of the said month.

 

If there is no “delay” on the part of Christian; hence there is no right to demand incumbent upon Jimmy. Hence, Jimmy cannot exercise his right to rescind the sale.

 

 

 

13.   How is a contract of sale extinguished?

 

A contract of sale is extinguished by:

(1) Same causes as how an obligation is extinguished, namely:

a. Payment or performance;

b. Loss of the thing due;

c. Condonation or remission of the debt;

d. Confusion or merger of the rights of creditor and debtor;

e. Compensation;

f. Novation;

g. Annulment;

h. Rescission;

i. Fulfilment of resolutory condition; or

j. Prescription

(2) Conventional Redemption

(3) Legal redemption

                Redemption is a mode of extinguishment wherein the seller has the right to redeem or repurchase the thing sold upon return of the price paid.

 

 

 

14.   When is a contract of sale perfected? When is there a transmission of ownership of the thing sold?

 

A contract of sale is perfected by mere consent, manifested by the meeting of the minds as to the offer and acceptance on the subject matter, price and terms of payment.

 

There is transmission of ownership of the thing sold when such thing is delivered to the vendee [Asset Privatization Trust vs T.J. Enterprises, G.R. No. 177195]. The thing shall be understood as delivered when it is placed in the control and possession of the vendee.