updated sales reviewer

8/12/2019 Updated Sales Reviewer

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I

SALES

INTRODUCTION

Nature and Form of the Contract

Art. 1458. By the contract of sale one of the contractingparties obligates himselfto transfer the ownershipand to

deliver a determinate thing, and the othertopay therefor

a price certainin money or its equivalent.

A contract of sale may be absoluteor conditional.Definition:

Contract of Sale - A contract whereby one of the parties

(SELLER/VENDOR) obligates himself to deliver something to the

other (BUYER/PURCHASER/VENDEE) who, on his part, binds himself

to pay therefor a sum of money or it equivalent (PRICE).

KINDS

1. Absolute - Where the sale is not subject to any conditionwhatsoever and where title or ownership passes to the buyer

upon delivery of the thing sold

2. Conditional -Where the sale contemplates a contingency (1461,

1462(2), 1465) and in general where the contract is subject to

certain conditions (1503 (1), usually the full payment of the

purchase price (1478) Art. 1461.Things having a potential existence may be the

object of the contract of sale. The efficacy of the sale of a

mere hope or expectancy is deemed subject to the

condition that the thing will come into existence.xxx

Art. 1462. xxx There may be a contract of sale of goods,whose acquisition by the seller depends upon a

contingency which may or may not happen.

Art. 1465. Things subject to a resolutory condition may bethe object of the contract of sale.

Art. 1503. When there is a contract of sale of specificgoods, the seller may, by the terms of the contract, reserve

the right of possession or ownership in the goods until

certain conditions have been fulfilled. The right of

possession or ownership may be thus reservednotwithstanding the delivery of the goods to the buyer or

to a carrier or other bailee for the purpose of transmission

to the buyer.

Art. 1478. The parties may stipulate that ownership in thething shall not pass to the purchaser until he has fully paid

the price.

DISTINCTION

Contract of sale (absolute) Contract to sell (conditional)

real obligation obligation to give

remedies available:specific performance; SP

w/ damages; rescission; R

w/ damages; damages

personal obligationobligation to do

remedies available:resolution or

damages

CHARACTERISTICS OF CONTRACT OF SALE

1. Nominate- law gave it a name2. Principal- can stand on its own; unlike accessory contract3. Bilateral- imposes obligation on both parties

a. obligation of sellertransfer ownership & deliverb. obligation of buyerpay for price

- Consequence: power to rescind is implied in bilatera

contracts

4. Onerouswith valuable consideration- Consequence: all doubts in construing contract to be

resolved in greater reciprocity of interest

5. Commutativeequal value is exchanged for equal value- Test: subjectiveas long as parties in all honesty that he is

receiving equal value then it complies with test & would not be

deemed a donation; but must not be absurd.

- Inadequacy of price or aleatory character not sufficient

ground to cancel contract of sale; inadequacy can showvitiation of consent & sale may be annulled based on vice but

not on inadequacy

6. Consensualmeeting of minds sufficient to perfect a contractof sale but delivery is required to consummate.

- Title & not a modegives rise to an obligation to transfer; it is

delivery w/c actually transfers ownership;

ESSENTIAL REQUISITES OF A CONTRACT OF SALE

1. Consento Art. 1319. Consent is manifested by the meeting

of the offer and the acceptance upon the thing

and the cause which are to constitute the

contract.xxx

o Art. 1475. The contract of sale is perfected at themoment there is a meeting of minds upon the

thing which is the object of the contract and

upon the price. xxx

o seller: agrees to transfer and deliver; buyeragrees to pay

o parties must have legal capacity to give consentand to obligate themselves

2. Subject matter/object determinate thing or at leastcapable of being made determinate

o specific/ determinate thing : particularlydesignated or physically segregated from al

others of the same class; identified by its

individualitycannot be substituted

3. Cause or consideration price; must be in money or itsequivalent (check, promissory note, Negotiable

instrument); does not include goods or merchandisemay

be barter

STAGES OF CONTRACT OF SALE

1. Negotiation2. Perfection3. Consummation

PERFECTION

1. parties are face to face: offer is accepted withouconditions and without qualifications

-negotiated thru phone it is as if the parties are face to

face2. thru correspondence/telegram: offeror receives

knowledge or has knowledge of the acceptance of the

offeree

3. sale is made subject to a suspensive condition: perfectionis had from the moment the condition is fulfilled

Consent: reciprocal obligations of the parties arise

Ownership, however, of the thing is transferred only upondelivery


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D. CONTRACT OF SALE vs. DONATION

Sale Donation

Consideration Onerous Gratuitous

Form Consensual Formal

Governing Law Sale Donation

E. CONTRACT OF SALE vs. DACION EN PAGO

Dacion en pago - contract where property is alienated tosatisfy/extinguish obligation to pay debt

novates creditor-debtor relationship into seller-buyer delivery is required ( real contract )

SALE DATION IN PAYMENT

No pre-existing credit/debt Pre-existing credit/debt

Gives rise to obligations Extinguishes obligations

Cause/consideration: seller

price; buyer - object

Cause or consideration: person

offering dationpayment of debt;

creditor: acquisition of the object

offered in lieu of the original credit

Giving of the price: generallyends the obligation of the

buyer

Giving of the object in lieu of credit:may extinguish partially or completely

the credit

F. CONTRACT OF SALE vs. LEASE

Sale Lease

Obligation Transfer Ownership Use for a specified

period with the

obligation to return

Consideration Price Rent

Ownership Seller has to be the

owner to transferownership

Lessor need not be

the owner

Rent-to-ownIs really a contract of sale by instalments

III

SUBJECT MATTER/OBJECT

CODAL PROVISIONS

Art. 1459.The thing must be licit and the vendor must have a right

to transfer the ownership thereof at the time it is delivered.

Art. 1460.A thing is determinate when it is particularly designatedor physically segregated from all others of the same class.

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.

Art. 1461.Things having a potential existence may be the object of

the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed

subject to the condition that the thing will come into existence.

The sale of a vain hope or expectancy is void.

Art. 1462. The goods which form the subject of a contract of sale

may be either existing goods, owned or possessed by the seller, or

goods to be manufactured, raised, or acquired by the seller after the

perfection of the contract of sale, in this Title called "future goods."

There may be a contract of sale of goods, whose acquisition by the

seller depends upon a contingency which may or may not happen.

ESSENTIAL REQUISITES OF OBJECTS OF SALE

1. Determinate or determinable2. Licit3. Existing/ Future/ Contingent

A. DETERMINATE

Art. 1409 If there is subject matter but the intention regarding

subject matter can not be ascertainedVOID

1. Specific - Particularly designated or segregated from alothers of the same class

2. Generic - Determinableo Test: reach a point of description where both

minds concur

o At the time the contract is entered in to thething is capable of being made determinate

without the necessity of a new or furthe

agreement between parties to ascertain its

identity, quantity or qualityo Exact quantity not essentialo Sale of generic thingsVALID; still executoryo There can only be contract of sale when subject

is finally chosen for deliveryalready segregated

or designated; but before designation, valid

contract of sale already exists

3. Undivided interest(BUYER becomes co-owner) (1463)4. Undivided share in mass of fungible goods (BUYER

becomes co-owner) (1464)

B. LICIT

Lawful: not contrary to law, morals, good customs, publicorder and public policy

Must be within the commerce of men Must not be impossible

Art. 1347. All things which are not outside the commerce of men,

including future things, may be the object of a contract. All rights

which are not intransmissible may also be the object of contracts.

No contract may be entered into upon future inheritance except in

cases expressly authorized by law.

All services which are not contrary to law, morals, good customs

public order or public policy may likewise be the object of a contract.

Art. 1348. Impossible things or services cannot be the object of

contracts.

Art. 1409.The following contracts are inexistent and void from the

beginning:

(1) Those whose cause, object or purpose is contrary to law, morals,

good customs, public order or public policy; xxx(3) Those whose cause or object did not exist at the time of the

transaction;

(4) Those whose object is outside the commerce of men;

(5) Those which contemplate an impossible service; xxx

Void for having a void subject matter:

(6) Contrary to law

(7) Simulated/fictitious

(8) Did not exist at a time of transaction

(9) Outside commerce of men

(10) Impossible service

(11) Intention can not be ascertained

(12) By provision of law


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Kinds of Illicit Things:

1. illicit per se (of its nature) e.g. sale of human flesh for human

pleasure

2. illictper accidens(because of some provisions of law declaring it

as illegal) e.g. sale of land to an alien

SALE AND OWNERSHIP

Seller must be the owner of the thing

rationale: one can sell only what he ownsnemo dat quad non habet nobody can dispose of that which

does not belong to him only at a time of consummation since tradition transfers

ownership but to have a perfected contract of sale, vendor

need not be owner of thing; can be validated/ratified by

subsequent acquisition of title by seller

reason: since future goods or goods whose acquisition by the

seller depends upon a contingency may be the subject matter of

sale, it would be inconsistent to require that it must be owned at the

time of sale (not possible to own a thing or right not in existence)

C. EXISTING/FUTURE/CONTINGENT

subject matter: may be existing; not existing but capableof existence (under present technology)

Art. 1462

a. EXISTING GOODS - Goods owned or possessed by theseller

b. FUTURE GOODSo Goods to be: manufactured (future airplane)/printed (subscription

to a newspaper),

raised (young of animals, future agricultural products), acquired (land the seller is expected to buy) things whose acquisition depends upon a contingency

which may or may not happen (one can sell a specific

car which will be given by ones parent if one passes

the bar exam this year)

Sale of future goodsexecutory contract (to be fulfilled bythe acquisition and delivery of the goods specified

Art. 1461

a. SALE OF THINGS HAVING POTENTIAL/POSSIBLEEXISTENCE (Emptio Rei Sperati sale of an expected

thing)

o Sale of future things; no physical existence yeto Potential/possible existence: reasonably certain to

come into existence as the natural increment or usual

incident of something in existence already belonging

to the seller, and title will vest on the buyer the

moment the thing comes into existence

o Non happening of condition: RESOLUTORY:EXTINGUISH THE CONTRACT

o Remedy: can recover what has been paidb. SALE OF HOPE (Emptio Spei)

o Every sale of future thing is subject to condition thatthey will come into existence

o If hope does not come true NO RECOVERY OFPAYMENT/NO RESCISSION

o Aleatory character but valido e.g. sale of a valid sweepstakes ticket, whether the

ticket wins or not

o BUT sale of vain hope is void e.g. sale of a losing ticketfor a sweepstakes already run (except if for collectors

item); sale of falsified ticket

INCORPOREAL RIGHTS

(Arts. 1463, 1464)

Art. 1463.The sole owner of a thing may sell an undivided interes

therein.

Sole owner may sell the entire or a specific portion thereofor an undivided interest therein and such interest may be

designated as an aliquot part of the whole

Legal effect of sale of undivided interest: buyer becomes aco-owner

FUNGIBLE GOODSArt. 1464. In the case of fungible goods, there may be a sale of an

undivided share of a specific mass, though the seller purports to sel

and the buyer to buy a definite number, weight or measure of the

goods in the mass, and though the number, weight or measure of

the goods in the mass is undetermined. By such a sale the buyer

becomes owner in common of such a share of the mass as the

number, weight or measure bought bears to the number, weight o

measure of the mass. If the mass contains less than the number,

weight or measure bought, the buyer becomes the owner of the

whole mass and the seller is bound to make good the deficiency from

goods of the same kind and quality, unless a contrary intent appears

FUNGIBLE GOODS -Goods of which any unit, is from its nature and

mercantile usage, treated as the equivalent of any other unit

IV

PRICE

Definition: Sum stipulated as equivalent for the thing sold

- What is considered equivalent? It is a relative and subjective

determination

Characteristics of Valid Price

1. Must be in money or its equivalent2. Must be certain or ascertainable at the time of the

perfection of the contract

3. Must be real1. Money or its equivalent

Money = currency

Or its equivalent = promissory notes, checks and other mercantile

instruments generally accepted as representing money

2. Certain or Ascertainable

A. parties have fixed or agreed upon a determinate amount

If the determination of the price is left to the discretion ofonly one of the parties, it cannot be said that the othe

consented to the price he did not or could not previously

know

BUT: if fixed by one and accepted by the other, there is ameeting of minds

B. sufficient that it is fixed with reference to another thing certain

Price that the thing will have on a definite day in a particular exchange or market when an amount is fixed above or below the price on such

day

when an amount is fixed above or below the price in suchexchange or market provided said amount be certain

C. Determination of the price is left to the judgment of specified

person/s

If contract states that price is to be determined by 3rdpartycontract is already perfected (there is just a suspensive

conditionactual fixing of price)


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Parties are bound by the decision of said person EXCEPT if heacted in bad faith or mistake

3rdparty fixes price in bad faith or mistake court willfix the price

EFFECT if 3rdparty is unable or unwilling to fix price : Withoutthe fault of the seller/buyer: parties have no cause of action

Reason: suspensive condition does not happen yet Result: INEFFICACIOUS/ contract shall become

ineffective

EXCEPT: parties subsequently agree upon the price

3rdparty is prevented from fixing the price by the fault of theseller or buyer: party not in fault may obtain redress fromthe courts

3.Real price stated should be the one intended by the parties If fictitious: no intention with respect to price - VOID If false/simulated: what appears in contract is not the true

price

VALID if there is true consideration (relativesimulation)

VOID but if none (because it is fictitious)Simulation of a contract: process of intentionally deceiving others

by producing the appearance of a contract that really does not exist

or which is different from the true agreement

4. Others

GR: Although a sale is commutative, gross inadequacy of price in

ordinary sale does not render contract void

Except: inadequacy of price indicates a defect in consent/ consent is

vitiated: contract may be annulled (voidable contract)

concerns the property of a ward/absentee in a contract ofsale by his guardian/ one in representation of the absentee

and there is lesion of more than of the value of the

property: contract may be rescinded (rescissible contract)

real intention of the parties is a donation or some other actor contract

Effect of gross inadequacy of price in involuntary or execution sales

Judicial/execution sale: one made by a court with respect to the

property of a debtor for the satisfaction of his unpaid indebtedness

GR: mere inadequacy of the price is not sufficient groundfor the cancellation of the execution sale

Exceptions: price is so low as to be shocking to theconscience of the court, sale will be set aside

BUT: is the seller has the right to repurchase, validity of saleis not affected upon the theory that the lesser the price, the

easier it is for the owner to buy back the property

When price can not be determined in accordance with any ofthe preceding rules, contract of sale is INEFFICACIOUS/contract is without effect (parties have no obligations to

perform)

However, when Subject Matter/thing or any part has beendelivered: BUYER must pay reasonable price therefore

reasonable price/value of goods: the market price at thetime and place fixed by the contract or by law for the

delivery of the goods

Court can fix price

IV

FORMATION OF CONTRACT OF SALE

3 Stages in Life of a Contract of Sale

1. Policitacion/Negotiation/ Preparation/Conception Stageoffer is floated or acceptance is floated but they do not

meet; the time when parties indicate their interest but no

concurrence of offer & acceptance

2. Perfection/Birth concurrence of all requisites; meetingof the minds

3. Consummation/Termination/Death parties performtheir respective undertakings/obligationsRules in Policitacion:

offer is floatedprior to acceptance, may be withdrawnat will by offeror

offer floated with a period without acceptanceextinguished when period has ended & may be withdrawn

at will by offeror; right to withdraw must not be arbitrary

otherwise, liable to damage under Art 19, 20, 21 of civ

code

offer floated with a condition extinguished byhappening/non-happening of condition

offer floated without period/without condition continues to be valid depending upon circumstances otime, place & person

offer is floated & there is counter-offeroriginal offer isdestroyed, there is a new offer; can not go back to origina

offer

Provisions

Art. 1479. 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.

Art. 1479. par. 1

bilateral promise to buy and sell reciprocally accepted parties can exact fulfillment/ demand the fulfillment of the

obligations

Art. 1479, par.2

1. unilateral promise to sell in which the promisee (acceptorelects to buy

2. accepted unilateral promise to buy in which the promisee(acceptor) elects to sell

acceptance of unilateral promise must be plain, clear andunconditional

A unilateral promise to sell or to buy a determinate thingfor a price certain does not bind the promissor even i

accepted and may be withdrawn at any time

It is only if the promise is supported by a considerationseparate and distinct from the price that its acceptancewill give rise to a perfected contract

Option Contract

A contract granting a person the privilege to buy or not tobuy certain objects at any time within the agreed period at

a fixed price

floats in thepolicitacionstage offer with a period but founded upon a separate

consideration distinct from the price

no presumption of consideration, needs to be proven


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Characteristics:

a. not the contract of sale by itself, distinctb. nominatec. principal; but can be attached to other principal contractsd. onerouse. commutativef. unilateralvscontract of sale which is bilateral

Requisites:

1. subject matter of sale must be agreed upon2. price of sale & manner of payment must be agreed upon3. consideration separate & distinct from price4. period as per contract; if period not provided

prescribes in 10 years (written contract)

5. how exercised: notice of acceptance should becommunicated to offeror without actual payment as long

as there is delivery of payment in consummation stage

PERFECTION

Art. 1475. 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.

From that moment, the parties may reciprocally demand

performance, subject to the provisions of the law governing the

form of contracts.

Sale is a consensual contract, perfected by meeting ofminds regarding subject matter & price

Meeting of Minds:Offercertain

Acceptanceabsolute

Qualified acceptance merely a counter-offer whichneeds to be absolutely accepted to give rise to perfected

contract of sale

Business ads are mere invitations to make an offer exceptwhen it appears to be otherwise

Acceptance by letter/telegrambinds only at time it cameto knowledge of SELLER; prior thereto offer may still be

withdrawn Must be exact terms to be considered absolute A sale by auction is perfected when the auctioneer

announces its perfection by the fall of the hammer or in

other customary manner. Until such announcement is

made, any bidder may retract his bid; and the auctioneer

may withdraw the goods from the sale unless the auction

has been announced to be without reserve.

Place of perfection: where the meeting of minds happen;when acceptance sent by mail, perfection is deemed

where the offer is made

Performance has nothing to do with perfection stage Ownership, however, of the thing is transferred only upon

delivery

Art. 1477.The ownership of the thing sold shall be transferred to

the vendee upon the actual or constructive delivery thereof.

Consent: reciprocal obligations of the parties arise Parties can demand fulfilment of others obligation,

subject however to the provisions of law on form

FORM OF SALES

1. Form not important in validity of sale

Sale being consensual, may be oral or written, perfectedby mere consent as to price & subject matter

Art. 1483. 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.

2. When form is important for validity; exception by specific

provision of law;

power to sell a piece of land granted to an agent otherwise VOID

sale of large cattle; must also be registered with Municipatreasurerotherwise VOID sale of land by non-Christian if not approved by Governor

VOID

3. When form is important for enforceability (STATUTE OF

FRAUDS)

Art. 1403. The following contracts are unenforceableunless they are ratified: xxx

(2) Those that do not comply with the Statute of Frauds asset forth in this number. In the following cases an

agreement hereafter made shall be unenforceable by

action, unless the same, or some note or memorandum,

thereof, be in writing, and subscribed by the party charged

or by his agent; evidence, therefore, of the agreemen

cannot be received without the writing, or a secondaryevidence of its contents:

a) An agreement that by its terms is not to be performedwithin a year from the making thereof; xxx

(d) An agreement for the sale of goods, chattels or thingsin action, at a price not less than five hundred pesos

UNLESSthe buyer accepts and receives part of such goods

and chattels, or the evidences, or some of them, of such

things in action or pay at the time some part of the

purchase money; but when a sale is made by auction and

entry is made by the auctioneer in his sales book, at the

time of the sale, of the amount and kind of property sold,

terms of sale, price, names of the purchasers and person

on whose account the sale is made, it is a sufficien

memorandum; (e) An agreement of the leasing for a longer period than

one year, or for the sale of real property or of an interest

therein. xxx

EARNEST MONEY/ARRAS

Art. 1482. Whenever earnest money is given in a contract of sale

it shall be considered as part of the price and as proof of the

perfection of the contract.

Money given by the buyer to the seller to bind the bargain money given as part of purchase price/ partial payment its acceptance is proof that contract of sale

exists/perfected

EARNEST MONEY vs OPTION MONEY

EARNEST MONEY OPTION MONEY

Part of the purchase price Money given is distinct

consideration

Given only when there already a

sale

Applies to a sale not yet

perfected

When given, buyer is bound to

pay the balance

Would be buyer gives option

money, he is not required to buy

**But option money can become earnest money once both

parties agree.


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V

SALE BY INSTALLMENT

RECTO LAW

Art. 1484. In a contract of sale of personal property the price of

which is payable in installments, the vendor may exercise any of the

following remedies:

1. Exact fulfillment of the obligation, should the vendee fail topay;

2. Cancel the sale, should the vendee's failure to pay covertwo or more installments;3. Foreclose the chattel mortgage on the thing sold, if one

has been constituted, should the vendee's failure to pay

cover two or more installments. In this case, he shall have

no further action against the purchaser to recover any

unpaid balance of the price. Any agreement to the contrary

shall be void.

Does not apply to the sale of personal property onstraight terms

Requisites for applicability:

a. there must a contractb. contract must be one of sale (absolute)c. what is sold is personal propertyd. sale must be on installment plan

Installment: any part or portion of the buyingprice including downpayment

Remedies are alternative, not cumulative or successive.Election of one is a waiver of the right to resort to the

others

REMEDIES UNDER THE RECTO LAW

1. SPECIFIC PERFORMANCE seller is not limited to theproceeds of the sale on execution; may still recover from

the purchaser the unpaid balance of the price

2. RESCISSIONthere must be mutual restitution3. FORECLOSURE mortgaged personal property is sold at

public auction and the proceeds of the sale shall beapplied to the satisfaction of the claim secured by the

mortgage

Wisdom of Law

If the third remedy is chosen, the vendor shall have nofurther action against the buyer for the recovery of the

unpaid price; any agreement to the contrary is void

Prevents mortgagees from buying the mortgaged propertyat the foreclosure sale for a low price and then bringing

suit against the mortgagor for the balance again; prevents

a situation where the vendee is without property and still

indebted

Art. 1485. The preceding article shall be applied to contractspurporting 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.

Leases of personal property with option to buy on the partof the lessee who takes possession or enjoyment of the

property leased are really sales or personalty payable in

installments

Purpose of the provision: to prevent vendors fromresorting to this form of contract which usually is in reality

a sale by instalments in contravention of the provisions of

1484

Art. 1486. In the case referred to in the two preceding articles, 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.

Art. 1487.The expenses for the execution and registration of the sale

shall be borne by the vendor, unless there is a stipulation to the

contrary.

THE MACEDA LAW

Republic Act 6552

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON

INSTALLMENT PAYMENTS.

a.k.a. "Realty Installment Buyer Act."

All transactions or contracts involving the sale or financingof real estate on installment payments, where the buyer

has paid at least two years of installments

o Including residential condominium apartments Excluding:a. industrial lotsb. commercial buildings; and,c. sales to tenants (Under Land Reform Law)

RIGHTS UNDER THE MACEDA LAW

If buyer defaults, (after paying 2 years of installments):

1. To pay, without additional interest, the unpaidinstallments due within the total grace period earned by

him

Grace Period = One month for every one year ofinstallment (Therefore the minimum grace period shall be

60 days)

However, this right (right to continue paying) shall beexercised by the buyer only once in every five years of the

life of the contract and its extensions, if any.

2. If the contract is canceled, the seller shall refund to thebuyer the cash surrender value of the payments on the

property. Cash surrender value = 50% of the total payments made

and, after 5 years of installments, an additional 5 % every

year but not to exceed 90% of the total payments made.

Provided, That the actual cancellation of the contract shaltake place:

o After thirty days from receipt by the buyer of thenotice of cancellation or the demand fo

rescission of the contract by a notarial act and

upon full payment of the cash surrender value to

the buyer.

For purposes of applying the remedies under the Maceda Law:

Down payments, deposits or options on the contract shalbe included in the computation of the total number oinstallment payments made.

If installments made are less than two years:

The seller shall give the buyer a grace period of not lessthan sixty days from the date the installment became due.

If the buyer fails to pay the installments due at theexpiration 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.


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Right of Assignment under Maceda Law

Under Section 3 and 4, the buyer shall have the right tosell his rights or assign the same to another person or to

reinstate the contract by updating the account during the

grace period and before actual cancellation of the

contract. The deed of sale or assignment shall be done by

notarial act.

Right to pay in full

The buyer shall have the right to pay in advance anyinstallment or the full unpaid balance of the purchaseprice any time without interest and to have such full

payment of the purchase price annotated in the certificate

of title covering the property.

Prohibitory Character of the Law

Any stipulation in any contract hereafter entered intocontrary to the provisions of the law shall be null and void

Pactum Comisorium Art. 2088 NCC. The creditor cannotappropriate the things given by way of pledge or

mortgage, or dispose of them. Any stipulation to the

contrary is null and void

VI

CAPACITY TO BUY AND SELL

Art. 1489

All persons who are authorized in this Code to obligate themselves,

may enter into a contract of sale, saving the modifications contained

in the following articles.

Where necessaries are those sold and delivered to a minor or other

person without capacity to act, he must pay a reasonable price

therefor. Necessaries are those referred to in Article 290.

General Rule: All parties with capacity to contract can enter into a

valid contract of sale

1. Natural Persons2. Juridical Persons

Incapacitypertains only to those provided for by law; cannot be

extended to other cases

Kinds of incapacity:

1. Absolute persons who cannot bind themselves in anycase

2. Relative exists only with reference to certain persons orcertain class of property; when certain persons, under

certain conditions, cannot buy certain property

Limited capacity under the civil code

Art. 39.The following circumstances, among others, modify or limit

capacity to act: age, insanity, imbecility, the state of being a deaf-

mute, penalty, prodigality, family relations, alienage, absence,

insolvency and trusteeship. The consequences of these circumstancesare governed in this Code, other codes, the Rules of Court, and in

special laws. Capacity to act is not limited on account of religious

belief or political opinion.

A married woman, twenty-one years of age or over, is qualified for

all acts of civil life, except in cases specified by law.

Limited Capacity under the Rules of Court

Section 2, Rule 92 of the Rules of Court:

Sec. 2. Meaning of word "incompetent." - Under this rule, the word

"incompetent" includes persons suffering the penalty of civil

interdiction or who are hospitalized lepers, prodigals, deaf and dumb

who are unable to read and write, those who are of unsound mind,

even though they have lucid intervals, and persons not being of

unsound mind, but by reason of age, disease, weak mind, and other

similar causes, cannot, without outside aid, take care of themselves

and manage their property, becoming thereby an easy prey for

deceit and exploitation.

Necessaries

Art. 290. Support is everything that is indispensable for sustenance

dwelling, clothing and medical attendance, according to the socia

position of the family.Support also includes the education of the person entitled to be

supported until he completes his education or training for some

profession, trade or vocation, even beyond the age of majority.

Art. 194.Support comprises everything indispensable for sustenance

dwelling, clothing, medical attendance, education and

transportation, in keeping with the financial capacity of the family.

The education of the person entitled to be supported referred to in

the preceding paragraph shall include his schooling or training for

some profession, trade or vocation, even beyond the age of majority

Transportation shall include expenses in going to and from school, o

to and from place of work.

Sale to a minor or incompetent person

General Rule: Contracts entered into by a minor or othe

incapacitated person is voidable

Exception

Contract is valid where necessaries are sold and delivered to an

incapacitated person, even without the intervention of his parent or

guardian; the said incapacitated must pay a reasonable price and he

has the right to recover any excess above the reasonable value paid

Sale between spouses

Art. 1490. The husband and the wife cannot sell property to each

other, except:

1. When a separation of property was agreed upon in themarriage settlements; or

2. When there has been a judicial separation or propertyunder Article 191.

Relative incapacity

Reason: for the protection of 3rd

persons who, relying upon

supposed property of either spouse, enters into a contract with

either of them only to find out that the property relied upon was

transferred to the other spouse

prevent defraudation of creditors avoid situation where dominant spouse takes advantage of

the other

avoid circumvention on prohibition of donation betweenspouses

Effect of sale between spousesVoid/inexistent because it is expressly prohibited by law

BUT not everybody can assail the validity of thetransaction

1. prior creditors and heirs of either spouse may invoke thenullity of the sale

2. either spouse; persons who become creditors after thetransaction cannot invoke nullity

Common Law Spouses (Paramours)

Status of contract: VOID (per case law) Rationale: evil sought to be avoided is present


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Marriage settlement/ante-nuptial contract

Agreement entered into by persons who are about to beunited in marriage and in consideration thereof for the

purpose of fixing the property relations that would be

followed by them for the duration of the marriage

Separation of propertyOther disqualified persons

Art. 1491. The following persons cannot acquire by purchase, even at

a public or judicial auction, either in person or through the mediation

of another:

1. The guardian, the property of the person or persons whomay be under his guardianship;2. Agents, the property whose administration or sale may

have been entrusted to them, unless the consent of the

principal has been given;

3. Executors and administrators, the property of the estateunder administration;

4. Public officers and employees,the property of the State orof any subdivision thereof, or of any government-owned or

controlled corporation, or institution, the administration of

which has been intrusted to them; this provision shall apply

to judges and government experts who, in any manner

whatsoever, take part in the sale;

5. Justices, judges, prosecuting attorneys, clerks of superiorand inferior courts, and other officers and employeesconnected with the administration of justice,the property

and rights in litigation or levied upon an execution before

the court within whose jurisdiction or territory they

exercise their respective functions; this prohibition includes

the act of acquiring by assignment and shall apply to

lawyers, with respect to the property and rights which may

be the object of any litigation in which they may take part

by virtue of their profession.

6. Any others specially disqualifiedby law.Incapacity by fiduciary relationship

Persons (even through the mediation of another) whobecause of their position and relation with the persons

under their charge or property under control areprohibited from acquiring said property either directly or

indirectly and whether in private or public sale

Reason of prohibition: to prevent fraud on the part of thepersons enumerated and minimize temptations to exert

undue and improper influence

Effect of sale in violation of provision

Par. 1-3 guardian, agent, executor, administrator:VOIDABLE because only private interests are affected

Par. 4-6 public officer or employee, judges, governmentexperts, justices, judges, prosecuting attys, clerks, officers

and employees: VOID because public interest is involved

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