Sales Flashcards by Paul Robert CPA

Sale
- 2 parties : Seller (Vendor) and Buyer (Vendee)
- what is the obligation of seller? of buyer?

Seller - to transfer ownership + to deliver determinate thing
Buyer - to pay a price certain in money

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Characteristics of Contract (BCCNOP)

Bilateral
Consensual
Commutative
Nominate
Onerous
Principal

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Service can be an object in a contract of sale. True or False?

Indeterminate thing may be an object in a contract of sale. True or False?

False (only thing or right)
- since purpose is to transfer ownership

True (Generally : Determinate Thing)
- However, indeterminate thing who are physically segregated → determinate na → can be an object in a contract of sale

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Another Requisites of Object
- must be within commerce of men (licit)
- seller must have a right to transfer ownership at time it is delivered

Things subject to a resolutory condition, since it will be extinguished, may not be an object. True or False?

at time it is delivered (not perfection)

False → it may be an object (e.g. right of repurchase)

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From the flashcard above, it stated “at time it is delivered”. Thus, future goods can be an object in a contract of sale.

Other term for “sale of future things”

Emptio Rei Speratae - valid

Future Thing → must come into existence = X void

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Other term for “sale of hope or expectancy”

Sale of vain hope is valid. True or False?

Emptio Spei - valid
- example → lotto ticket

Vain Hope - void

Hope → no need to come into existence (since hope yung binili)

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Can future inheritance, being a future thing, be an object in a contract of sale?

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In a contract of sale, the cause we are talking about is “price”.

YES

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Price must be certain
- fixed by the parties
- with reference to another thing certain
- determination of price is left to will of a 3rd person

What will happen if the 3rd party is in bad faith or mistake?

What will happen if the 3rd party is prevented by the seller/buyer?

What will happen if the 3rd party is unwilling or unable to determine a price?

court may fix the price

Fulfillment + Damage
Rescission + Damage

contract is not effective (since price is essential element)

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Gross inadequacy of price does not affect a contract of sale. True or False?

False (Generally : True)
- However, if there’s a defect in consent or the parties really intended it to be a donation → it affects the contract of sale

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Kinds as to Transfer of Ownership
- Absolute
- Conditional

What about contract to sell?

Absolute
- transfer of ownership → upon delivery, even if payment is not yet complete

Conditional
- transfer of ownership → upon fulfillment of condition

Contract to Sell → is a conditional sale. However, transfer of ownership → upon execution of a deed of sale

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Contract of Sale or Agency to Sell
- there is transfer of onwership

Contract of Sale
- Agency to Sell → no transfer (only right to sell property)

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Contract of Sale or Agency to Sell
- after delivery, buyer bears the risk of loss

Contract of Sale
- Agency to Sell → risk of loss remains to the principal (not transferred to the agent)

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Contract of Sale or Contract for Piece of Work
- special order

Contract for Piece of Work
- Contract of Sale → in the ordinary course of business (whether on hand or not - kahit di pa napproduce)

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In a sense, parang same lang yung contract of sale at yung contract for piece of work. Bakit need pa sila idistinguish sa isa’t-isa?

Contract of Sale = covered by Statute of Frauds
Contract for Piece of Work = X

Kaya if ever may sale of real property na P300 lang at contract for piece of work yon, valid pa rin siya (hindi unenforceable)

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If consideration is partly in money, partly in kind. Is it a contract of sale or barter?

Depends
1. Intention of Parties
2. If intention is not clear
a. Thing > (it is a barter)
b. Thing ≤ (it is a sale)

Example
- money = 5,000
- in kind = 5,000

This is a “sale” since less than or equal to. If the value of in kind is 5,001, it is a “barter”

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If the promise to buy and/or sell is bilateral (mutual promise), it is reciprocally demandable. True or False?

If the promise to buy and/or sell is unilateral, and it is not accepted by the offeree, there is a contract. True or False?

True

False (there is no contract)

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If the promise to buy and/or sell is unilateral, and it is accepted by the offeree, it is already binding to the offeror. True or False?

Depends

If no consideration (option money) → not binding to Seller. Seller can withdraw.
If with consideration (option money) → perfected option contract. Seller cannot withdraw.

NOTE : However, if acceptance is already communicated → cannot withdraw
- whether with option money or not
- since “perfected” already (no option anymore)

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Always remember to look out for this.
Sale - period to pay
Option - period to decide

YES

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If you pay earnest money, it is a proof of a perfected contract of sale. True or False?

True “earnest” kaya magiging part siya ng purchase price
- Option → no perfected sale yet (not part of purchase price unless agreed)

Option Money → separate consideration for “period” to accept / withdraw offer

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Sale by Auction
- perfection → fall of hammer
- before perfection
(1) bidder → may cancel bid
(2) seller → may withdraw goods

Does a seller has a right to bid?

No
- XPN : (1) notice → given to bidders
- XPN : (2) right to bid → expressly reserved
- XPN : (3) not prohibited by law

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Sale of Goods

Description OR Sample
- description do not correspond → rescind
- sample do not correspond → rescind

Description AND Sample
- description + sample do not correspond → rescind

Yes

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Obligations of the Vendor
- to take care of the thing
- to pay taxes related to sale
- to warrant the thing

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to take care of the thing = after perfection, before delivery

Loss of Thing Awaiting Delivery
- Entirely lost → contract = no efffect
- Partly lost → (1) withdraw (2) demand remaining part
- Deteriorated without knowledge of Seller
(1) void
(2) valid (those not deteriorated)

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Yes

Risk of Loss - res perit domino "owner suffers loss" EXCEPTIONS 1. stipulated 2. security title → seller retains ownership, to secure payment = **buyer** bears risk of loss 3. delay → the one who caused delay = will bear risk of loss

Yes

Sale **or Return** - ✓ transfer of ownership - who bears risk of loss? Sale **on Approval** / Trial - ✘ transfer of ownership - who bears risk of loss? ## Footnote Sale on Approval - transfer of ownership if accepted or ratified

- Buyer → sale or return = with sale, pwede lang ibalik - Seller → sale on apprival = no sale yet, itetesting pa lang

At time of perfection, seller need not be the owner - he can sell items even if he is liquidator, executor, etc... What if at time of delivery, seller is really not the owner? - buyer = no better title than seller EXCEPTIONS (buyer = acquires good title even if seller is not the owner) - seller → authorized by owner - seller → authorized by judicial authority (e.g. guardian, executor) - estoppel → whether owner (in pais) or seller (by deed) - sale of apparent owner → "buyer in good faith" - purchased from merchant store

Yes

Delivery **(for things)** - Actual or Constructive Constructive - Execution of Public Instrument - Symbolic Delivery - Traditio Longa Manu - Traditio Brevi Manu - Constitutum Possessorium

- Symbolic Delivery → e.g. keys - Traditio Longa Manu → by pointing, must be agreed - Traditio **B**revi Manu → **B**uyer is in possession - Constitutum Po**ss**e**ss**orium → **s**eller is in possession ## Footnote Remember in Symbolic Delivery → only applicable in movable property - e.g. key for warehouse = considered as actual delivery, not symbolic delivery

Delivery **(for rights)** - Execution of Public Instrument - Quasi Traditio

Quasi Traditio - buyer → has title of ownership already (e.g. certificate of stock) - buyer → authorized by seller to exercise rights (e.g. proxy)

Quantity to be Delivered Personal Property if **less than** agreed upon - reject whole (if indivisible) - reject whole - accept + pay (1) full selling price (if buyer knew it will be less than) (2) FMV of delivered (if buyer X knew it will be less than) if **more than** agreed upon - reject whole (if indivisible) - accept + reject the rest - accept + pay selling price if mixed with different goods - accept + reject the rest

Yes

Quantity to be Delivered Real Property if **less than** agreed upon - specific performance - reduction of price (accion quanti minoris) - rescission (1) if area is lacking **?** (2) buyer would not have enter contract if **more than** agreed upon - accept + reject the rest - accept + pay selling price if quality is lacking - rescission (1) if area is lacking **?** (2) buyer would not have enter contract if for lump sum - no matter the agreement (1) seller → deliver entire area (2) buyer → pay price agreed upon if **more than** agreed upon (lump sum) - reduction of price - rescission

- at least 1/10 - more than 1/10

Unpaid Seller - not fully paid - paid through negotiable instrument → dishonored Rights of Unpaid Seller - rescission - possessory lien - stoppage in transitu - resale

Yes

Possessory Lien - seller remains in possession Grounds - purchase price → due and demandable (1) buyer → insolvent (2) credit → no stipulation (3) credit → with stipulation, but expired Buyer sell thing to a third person - seller → does not lose right of possessory lien + stoppage in transitu - XPN : seller assented to the transfer - XPN : negotiable instrument has been negotiated ## Footnote May exercise this whether he is as agent or bailee of the buyer

Possessory Lien will be lost - FOB shipping point - buyer or agent → obtains possession - waiver

Stoppage in Transitu - seller will stop goods whil in transit - will begin after possessory lien (not simultaneous) In transit - **✓** goods already arrived to the buyer → buyer rejects - ✘ goods already arrived to the buyer → carrier acknowledges - ✘ carrier wrongfully refuses to deliver **Requisite** (not merely grounds) - purchase price → due and demandable (1) buyer → insolvent How to exercise stoppage in transitu?

- take actual possession of goods - give notice to carrier (1) carrier → redeliver to seller (XPN : negotiable instrument is not surrendered) (2) seller → pay for expenses of redelivery

Resale - seller cannot be a buyer in resale Grounds - purchase price → due and demandable (1) goods → perishable (2) buyer → in default for a long time (3) seller → expressly reserves right in case of default Proceeds of Resale - excess → will go to **?** - deficiency → will go to **?** ## Footnote To exercise right of resale → must have possessory lien or stoppage in transitu

Second Buyer has good title against First Buyer Excess → seller Deficiency → buyer

Rescission - seller may recover damages from buyer Grounds - purchase price → due and demandable (1) buyer → in default for a long time (2) seller → expressly reserves right in case of default ## Footnote To exercise right of rescission → must have possessory lien +or stoppage in transitu

Yes

Double Sale - both sales must be valid, rescissible, or voidable Rules - Movable → first possessor in good faith - Immovable → first registrant in good faith (2) first possessor in good faith (3) oldest title

Yes

Express Warranty - will induce the buyer to buy - seller's opinion → not warranty (XPN : seller is an expert) Implied Warranty - against eviction - against hidden defects - against non-apparent encumbrances

Yes

Implied Warranty Against Eviction - buyer → shall have legal and peaceful possession of the thing Requisities - buyer → lost possession of the thing (by final judgement) - seller → defendant of buyer **Extent of Liability** seller ✗ good faith → VICED (Value, Interest, Costs, Expenses, Damages) seller ✓ good faith - ✗ waiver → VICE - ✓ waiver, ✗ knowledge of risk → V only (consciente) - ✓ waiver, ✓ knowledge of risk → N/A (intencionada)

Yes

Implied Warranty Against Hidden Defects - buyer → would not have buy it or for lower price only Warranty on Fitness of Goods - sinabi ni buyer yung purpose kung bakit siya bibili - nagtiwala si buyer sa skill ni seller Warranty of Merchantable Quality - seller → dealer of that specific good, assured that it will function as intended (e.g. powermac) **Remedies (What is the prescriptive period?)** 1. Withdraw 2. Accion quanti Minoris ## Footnote if visible defect, but buyer is expert → seller is not liable anymore

6 months from delivery

Thing With Hidden Defect → become lost - cause is defect itself (1) Selling Price (2) Expenses (3) Interest (good faith) or Damages (bad faith) - other causes (1) Selling Price less Value at time of loss

Yes

Redhibitory Defect - hidden even if by professional - not applicable in case sold at public auction GR : 1 animal = sa kanya lang yung redhibitory defect - XPN : lovebirds Void Sale of Animals - contagious disease - warranty of fitness (sa goods → withdraw or accion, sa animals → void) **Remedies (What is the prescriptive period?)** 1. Withdraw 2. Accion quanti Minoris ## Footnote Sale of Large Cattle → governed by special laws

animal dies within **3 days** after purchase - seller is liable (cause is existing at time of purchase) Prescription → 40 days

Implied Warranty Against Non Apparent Encumbrances - not apparent - not stipulated - not recorded in registry of deeds **Remedies (Prescriptive period → 1 year from?)** 1. Rescind 2. Damages

1 year from - rescind → from execution of deed - damages → from discovery

Obligation of Vendee (Buyer) - to pay price → time and place stipulated (if none = time and place of delivery) - to accept delivery → cannot be installment (**XPN** : stipulated) Suspension of Payment - if disturbed in possession of thing (**XPN** : mere trespass, seller gives security) Deemed Acceptance - express or implied Refusal of Delivery - must notify seller → not bound to return it to seller (**XPN** : depositary) Right to Examine Goods (**XPN** : stipulated) - if previously not examined - if buyer requests - ✗ COD

If **personal** property → buyer does not pay price, does not accept delivery - seller may rescind

Extinguishment of Contract of Sale - Conventional Redemption → right of repurchase "pacto de retro" - Legal Redemption → right to be subrogated (co-owners, adjacent rural & urban land) Conventional Redemption - **resolutory conditional** ownership → transferred to buyer Period to Exercise Right of Repurchase - **4** years (max of 10 years) - nag expire → consolidation of ownership (buyer = now an absolute owner) (1) real property → must have judicial order (2) personal property → by operation of law

Yes

Legal Redemption Co-Owners, Rural Land, Urban Land - Subject Matter - Redemption Price - Multiple Redemptioners ## Footnote Period to Exercise → **30 days** from notice in writing

Subject Matter - Co-Owner → Real Property or Personal Property - Adjacent **Rural** Land → Rural Land, limit of **1 hectare**, buyer = already owns a rural land - Adjacent **Urban** Land → Urban Land, **so small** (only for speculation) Redemption Price - Co-Owner → Purchase Price (XPN : reasonable price) - Adjacent Rural Land → Purchase Price - Adjacent Urban Land → Purchase Price Multiple Redemptioner - Co-Owner → all (pro-rata) - Adjacent **Rural** Land → **(1) smaller lot area**, (2) first to signify - Adjacent **Urban** Land → one whose use is **best justified**

What law applies to installment, personal property? ## Footnote REPER

Recto Law ## Footnote "Installment" Sales → not sales "on credit"

Time of Delivery 1. stipulated 2. if none = reasonable time Place of Delivery 1. stipulated 2. if none = usage or trade 3. if none = seller's place of business 4. if none = seller's residence ## Footnote This does not apply to sale of **specific goods** (where the thing as at time of perfection)

Yes

What law applies to installment, real property? ## Footnote MARE What RA number?

Maceda Law (RA 6552) - must be **residential** → not commercial ## Footnote "Installment" Sales → not sales "on credit"

Recto law is for the benefit of buyer. True or False? Maceda law is for the benefit of buyer. True or False?

True - since ang remedies of seller is alternative (can only choose 1), parang pinoprotect yung buyer True - since rights of buyer

In Recto Law, what is the remedy of the seller - in case 1 or more installments is unpaid - in case 2 or more installments are unpaid ## Footnote 3 remedies

**1 or more installment** 1.exact fulfillment **2 or more installment** 2.cancel the sale 3.foreclose chattel mortgage (must be on **thing sold**)

What to remember in "foreclose chattel mortgage"?

- Seller cannot recover deficiency - It is an absolute rule

In Maceda Law, what is the rights of the buyer - if paid **less than** 2 years of installment ## Footnote Grace Period - how many days? Unlimited ba yung pag avail sa grace period?

- Grace Period = 60 days ## Footnote Grace Period = can only be applied once every 5 years

In Maceda Law, what is the rights of the buyer - if paid **at least** 2 years of installment ## Footnote Grace Period - how many days? What if buyer still did not pay within the grace period? Unlimited ba yung pag avail sa grace period?

- Grace Period = 60 days **(+ 1 month for every 1 year after the 2-year requirement)** If still fail to pay, seller may cancel / rescind contract **(not automatic)** - after 30 days from notice to rescind - + payment of CSV ## Footnote Grace Period = can only be applied once every 5 years

How to compute Cash Surrender Value? ## Footnote What is the maximum?

= 50% of total payments made '+ 5% per year (after 5 years) Maximum → 90% For example, if 7th year 50% + 10% 10% = 5% x 2 years (7-5)

Sales Flashcards

(55 cards)