Sales and Consumer Protection Laws

 

CHAPTER 1: NATURE OF THE CONTRACT OF SALE

Definition of Sale

  • Nature of Obligations Created in a Sale

  • Subject Matter of Sale

  • Essential Elements of the Contract of Sale

  • Stages in the Life of Sale

Essential Characteristics of Sale

  1. Nominate and Principal

  2. Consensual

    • Modalities Affecting the "Consensuality" of Sale

  3. Bilateral and Reciprocal

  4. Onerous

  5. Commutative

  6. Sale as a Form of "Title" and Not a "Mode"

Sale Distinguished from Other Similar Contracts

  • From Donation

  • From Barter

    • Rules to Determine Whether Contract is Sale or Barter

  • From Dacion en Pago

  • From Contract for a Piece of Work

    • Statutory Rule on Distinguishing Sale from Contract for a Piece of Work

    • Legal and Commercial Rationale for Distinguishing

  • From Agency to Sell or to Buy

    • Distinguishing Sale and Agency to Sell/Buy

    • Statutory Rule for Delineation

    • Legal and Commercial Rationale for Distinguishing

  • From Lease


CHAPTER 2: PARTIES TO THE CONTRACT OF SALE

General Rule on Capacity of the Parties
Minors, Insane or Demented Persons, and Deaf-Mutes

  • Necessaries

  • Senility and Serious Illness

Sales by and Between Spouses

  • Sales with Third Parties

  • Sales between Spouses.  

    • Status of Prohibited Sales Between Spouses

    • Rationale for Prohibition

    • Rationale for Exceptions to the Prohibition under Article 1490

  • Applicability of Incapacity to Common-Law Spouses

Specific Incapacity Mandated by Law

  • Legal Status of Contracts Entered in Violation of Articles 1491 and 1942

    • A Different Form of “Ratification”

    • Proper Party to Raise Issue of Nullity

    • Fraud or Lesion Not Relevant for Nullity

  • Agents

  • Guardians, Administrators, and Executors

    • Hereditary Rights Not Covered

  • Judges, Justices, and Others Involved in the Administration of Justice

  • Attorneys

    • Contingent Fee Arrangements


CHAPTER 3: SUBJECT MATTER OF SALE

Requisites of Valid Subject Matter

  • Lack of Any Requisite Results in Non-Existent Sale

1. Subject Matter Must Be a "Possible Thing"

  • Emptio Rei Speratae

  • Emptio Spei

  • Sale of Things Subject to Resolutory Condition

  • Subject Matter as the Nexus of Sale

2. Subject Matter Must Be Licit

  • Sales Declared Illegal by Law

3. Subject Matter Must Be "Determinate" or "At Least Determinable"

  • “Determinate” Subject Matter

  • “Determinable” Subject Matter

  • Test of “Determinable” Is the Object Upon Which the Minds Met, Not the Covering Deed

  • When Quantity of Subject Matter Is Not Essential for Perfection

  • Generic Non-Determinable Objects

  • Status of Sale Not Complying with Third Requisite

  • Sale of Undivided Interest

  • Sale of Undivided Share in Mass

  • Sale of Mortgaged Property

  • Seller's Ability to Transfer Ownership Required at Time of Delivery, Not at Perfection

    • Conflicting Rulings

    • Exception: When Seller Must Be Owner at Perfection

    • Subsequent Acquisition of Title by Seller


CHAPTER 4: PRICE AND OTHER CONSIDERATION OF SALE

Meaning of “Price”
Requisites for Valid Price

  1. Price Must Be “Real”

    • When Price Is “Real”

    • When Price Is “Simulated”

    • When Price Is “False”

    • Meeting of Minds as to Price

    • Effect of Non-Payment of Price

    • Accommodation Does Not Make a Sale Void for Lack of Price

    • Simulation of Price Affects Delivery of Subject Matter

  2. Price Must Be in “Money or Its Equivalent”

    • Concept of “Valuable Consideration”

    • Adequacy of Price to Make It “Real”

  3. Price Must Be “Certain” or “Ascertainable” at Perfection

    • Agreement that the Parties Shall Fix the Price in the Future

    • Price Fixed by a Third Party

    • Fixing of Subject Matter by a Third Party

    • Price Ascertainable in Reference to Other Certain Things

    • Effect of “Unascertainability” of Price

  • Manner of Payment of Price Must Be Agreed Upon

  • Understanding the Doctrine on Agreement on Terms of Payment

  • Instances When There Is a Sale Even Without an Agreed Price

  • Meaning of “Preceding Articles” in Article 1474

  • Meaning of “Inefficacious” in Article 1474

  • Concept of “Appropriation”

Inadequacy of Price

  • Distinguished from Simulated Price

  • Rescissible Contracts of Sale

  • Judicial Sales

  • Sales with Right to Repurchase

When Motive Nullifies Sale


CHAPTER 5: FORMATION OF THE CONTRACT OF SALE

Stages in the Life of Sale
Policitacion Stage

  • Advertisements and Invitations

  • Offers

  • Option Contracts

    • The “Location” of Options

    • Definition and Essence of an Option Contract

    • Characteristics of an Option Contract Compared with Sale

    • Obligations of the Offeror in a Valid Option

    • Elements of a Valid Option Contract

    • Meaning of “Separate Consideration”

    • When an Option Is Without Separate Consideration

    • Option Not Deemed Part of Renewal of Lease

    • The Option Period

    • Proper Exercise of an Option

    • Effects of Exercise of an Option

    • Summary of Rules on Options

  • Right of First Refusal

    • Limited Application of Equatorial Realty

    • Various Rulings on Rights of First Refusal in Lease Agreements

      • Rentals as Consideration for the Right

      • Sublessee May Not Take Advantage of Sublessor's Right

      • Right Does Not Extend with Lease Extension

      • Obligations of the Offeror Under a Right of First Refusal in a Lease

      • Right Does Not Apply When There Is No Intention to Sell to a Third Party

  • Proposed Doctrine on Option Contracts vs. Right of First Refusal

    • Alternative Doctrine on Enforceability of Rights of First Refusal

    • Enforceability of Options vs. Rights of First Refusal

  • Intent to Buy and to Sell

  • Mutual Promises to Buy and Sell

Perfection Stage: Offer and Acceptance

  • Consent that Perfects a Sale

  • Offer Must Be “Certain”

  • Acceptance Must Be “Absolute”

    • When "Deviation" Is Allowed

    • Acceptance May Be Express or Implied

    • Acceptance by Letter or Telegram

    • Acceptance Subject to a Suspensive Condition

    • Acceptance in Auction Sales

  • Earnest Money

    • Function of Earnest Money

    • Different Treatments of Earnest Money

    • Distinguishing Earnest Money from Option Money

    • Effect of Rescission on Earnest Money Received

  • Place of Perfection

Form of Sales

  • General Rule: Form Not Required for Validity

    • Requirement for Public Instrument for Immovable Property under Article 1358

    • Function of the “Deed of Sale”

  • When Form Affects Validity

  • Statute of Frauds: Form Required for Enforceability

    • Nature and Purpose of the Statute of Frauds

    • Sales Covered by the Statute of Frauds

    • Exceptions to the Statute of Frauds in Sales

    • Nature of a Memorandum

    • Partial Performance 

    • Effect of Partial Execution on Third Parties

    • Nature and Coverage of Partial Performance

    • Waiver of Provisions of Statute of Frauds

    • Rulings on Receipts to Prove Sale

    • Rulings on Other Business Forms to Prove a Sale

  • Sales Effected as Electronic Commerce

    • Legal Recognition of Electronic Data Messages

    • Legal Recognition of Electronic Documents

    • Evidentiary Rules for Electronic Documents

    • Legal Recognition of Electronic Signatures

    • Presumptions Relating to Electronic Signatures

    • Perfection of Electronic Transactions

    • Consummation of Electronic Transactions

    • Electronic Commerce in Carriage of Goods

    • Rules on Transport Documents

  • Other Special Rules on Form

    • Equitable Mortgage Claims Need Not Be in Writing

    • "Sales on Return or Approval" Must Be in Writing

    • Right of First Refusal Must Be in Writing

When a Sale Is Completely Simulated

CHAPTER 6: PERFORMANCE OF PARTIES' OBLIGATIONS UNDER THE SALE

Obligations of the Seller

  1. To Preserve the Subject Matter

  2. To Deliver the Subject Matter

  3. To Deliver the Fruits and Accessories

  4. To Warrant the Subject Matter

Tradition as a Consequence of a Valid Sale

  • Essence of Tradition

    • Types of Delivery

  • Actual Delivery

  • Constructive Delivery

    • Execution of Public Instrument

      • Constructive Delivery Has Same Effect as Actual or Physical Delivery

      • When Execution of Public Instrument Does

      • Not Produce Effects of Delivery

      • Special Variation to Addison Doctrine

    • Symbolic Delivery

    • Constitutum Possessorium

    • Traditio Brevi Manu

    • Traditio Longa Manu

    • Delivery of Incorporeal Property

    • Delivery by Negotiable Document of Title

    • Delivery Through Carrier

      • F.A.S. Sales

      • F.O.B. Sales

      • C.I.F. Sales

Effects and Completeness of Delivery

  • General Rules

    • Delivery Must Be Pursuant to a Valid Sale

    • Delivery Must Be Made by the Seller Who Has Ownership

    • To Whom Delivery Must Be Made

    • Buyer’s Refusal to Accept

  • Delivery for Movables

    • Goods Held by Third Party

    • Reservation of Ownership

    • “Sale by Description and/or Sample”

    • “On Sale or Return”

    • “Sale on Approval,Trial, Satisfaction, or Acceptance”

    • Written Proof of Delivery

    • Time, Place, and Expenses of Delivery

    • Conditions of Goods Delivered

  • Delivery for Immovables

    • Sale per Unit or Number

    • Sale for a Lump Sum

    • Lump Sum vs. Sale by Unit of Measure

    • Sale in Mass

    • Expenses of Delivery and Registration

Obligations of the Buyer

  1. To Pay the Price

  2. To Accept Delivery

    • Opportunity to Inspect Goods

    • Goods Sold Deliverable by Installments

    • Effect of Acceptance on Seller's Warranty

    • Refusal to Accept Goods

Law on Double Sales

  • Rules of Double Sales Must Be Considered in the Realm of Tradition

  • Article 1544 as the Platform for Discussion

  • Two Divergent Systems When It Comes to Land

    • The Case for Registered Land

  • Article 1544 Does Not Overcome the Priority Rules Under P.D. 1529

  • The Case for Unregistered Land

  • Global Rules on Double Sales

    • Highest Priority: Registration in Good Faith Under P.D. 1529

    • Second Priority: Buyer at Auction Sale Under the Rules of Court

    • Third Priority: Article 1544 Rules on Double Sales

  • Essential Elements for Applicability of Article 1544

    • Nature of the Multiple Sales Involved

    • Applicability to Auction Sales

    • Applicability to Contracts to Sell and Adverse Claims

    • “Sameness” of Subject Matter

    • The Sales Must Involve the Same Seller

    • Article 1544 Is Not a Contest Between Two Protagonists Running the Same Race

    • Who Is a Purchaser in Good Faith?

      • Burden of Proof

      • Requisite of Full Payment

      • Obligation to Investigate Known Facts

      • Special Rule for Real Estate Market Players

      • Land in Adverse Possession

      • Annotation of Lis Pendens

      • Annotation of Adverse Claim

      • Existence of Relationship

      • Stipulations in the Deed Showing Bad Faith

      • When Dealing with a Non-Registered Owner

  • Requisites of “First to Register”

    • Prior Registration by the Second Buyer Must Always Be in Good Faith

    • The Need for the Second Buyer to Do a Positive Act Under Article 1544

  • First to Possess in Good Faith

    • Registration in Good Faith Always Preempts Possession in Good Faith

    • Possession Under Article 1544 Refers to Material and Symbolic Possession

  • When Article 1544 Does Not Apply, the Rule of Priority in Time Applies


CHAPTER 7: DOCUMENTS OF TITLE

Definition and Function

  • Warehouse Receipts Act and Bonded Warehouse Act

  • Rationale for Documents of Title

Types of Documents of Title

  1. Negotiable Document of Title

  2. Non-Negotiable Document of Title

  3. Effects of Errors on Document of Title

  4. Effects of Using "Non-Negotiable" Terms on Negotiable Documents of Title

Negotiation of Negotiable Documents of Title

  • Who Can Negotiate

  • How Negotiation Is Properly Effected

    • By Delivery Alone

    • By Endorsement and Delivery

  • Effects of Proper Negotiation

  • Effects of Merely Transferring/Delivering Order Negotiable Documents of Title

  • Effects and Consequences of Unauthorized Negotiation

Assignment of Non-Negotiable Documents of Title

  • How Assignment Is Made

  • Effects of Assignment

Warranties on Negotiation and Assignment of Documents of Title
Effects When the Owner of the Document of Title Has No Legal Title to the Goods

  • When Goods Are Covered by a Non-Negotiable Document

  • When Goods Are Covered by a Negotiable Document

Rules on Levy/Garnishment of Goods Covered by Documents of Title

  • When Covered by a Non-Negotiable Document of Title

  • When Covered by a Negotiable Document of Title


CHAPTER 8: SALE BY A NON-OWNER OR ONE HAVING VOIDABLE TITLE: THE "LIFE" OF A CONTRACT OF SALE

Philosophical Discussions on Stages in the "Life of Sale"
When the Seller Is Not the Owner of the Subject Matter

  • At Perfection

  • At Consummation

  • Sales by Co-Owners

  • Exceptions to the Rule on the Effect of the Sale of a Definite Portion by a Co-Owner

Exceptions to Rules on Legal Effects of Sale by a Non-Owner

  1. When the Real Owner Is Estopped

  2. Recording Laws

  3. Statutory Power; Judicial Sales

  4. Sales at Merchant Stores

  5. When the Seller Has Only Voidable Title to the Subject Matter

  6. "Title" as to Movable Properties

  7. Applicable Rules to Immovables


CHAPTER 9: LOSS & DETERIORATION, FRUITS & ACCESSIONS

Before Perfection
At the Time of Perfection
After Perfection but Before Delivery

  • Loss of the Subject Matter

  • Deterioration, Fruits, and Improvements

After Delivery
Structuring a Clearer Doctrine on Loss, Deterioration, Fruits, and Improvements

Cases:
Nature of Sales:

1.       Yu Tek & Co. vs. Gonzales (L-9935, Feb. 1, 1915)
2.       Coronel vs. Court of Appeals (263 SCRA 15; 1996)
3.       Lao vs. Court of Appeals (275 SCRA 237; 1997)
4.       Cantemprate vs. CRS Realty Dev. Corp (587 SCRA 492; 2009)
5.       Inchausti & Co. vs. Cromwell (20 Phil 345; 1911)
6.       Celestino & Co. vs. Collector of Internal Revenue (99 Phil 841; 1956)
7.       Gonzalo Puyat & Sons, Inc. vs. Arco Amusement Co. (72 Phil 402; 1941)
8.       Ker & Co., Ltd. Vs. Lingad (38 SCRA 524; 1971)

Parties to the Contract of Sale

9.     Lagabala vs. Santiago (371 SCRA 360; 2001)
10.   Domingo vs. Court of Appeals (367 SCRA 368; 2001)
11.   Heirs of Ignacia Aguilar-Reyes vs. Mijares (410 SCRA 97; 2003)

Subject Matter of Sale

12.   Sibal vs. Valdez (50 Phil 512; 1927)
13.   Carabeo Vs. Dingco (647 SCRA 200; 2011)
14.   Johannes Schuback & Sons Phil. Trading Corp. vs. Court of Appeals (227 SCRA 719; 1993)

Price and Other Considerations

15.   GSIS vs. Court of Appeals (228 SCRA 183; 1993)
16.   Mapalo vs. Mapalo (17 SCRA 114; 1966)
17.   Balatbat vs. Court of Appeals (261 SCRA 128; 1997)
18.   Ong vs. Ong (139 SCRA 133; 1985)

Formation of the Contract of Sale

19.   Ang Yu vs. Court of Appeals (238 SCRA 602; 1994)
20.   Polytechnic University of the Philippines vs. Golden Horizon Realty Corp (615 SCRA 478; 2010)
21.   Adelfa Properties vs. Court of Appeals (240 SCRA 565; 1995)

Performance of Parties
22.   Sabio vs. International Corporate Bank (364 SCRA 385; 2001)
23.   Addison vs. Felix (38 Phil 404; 1918)
24.   Dy Jr. vs. Court of Appeals (198 SCRA 826; 1991)
25.   Carumba vs. Court of Appeals (31 SCRA 558; 1970)

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