TOPICS UNDER THE SYLLABUS F. FORMATION OF CONTRACT OF SALE
1. Preparatory
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1. PREPARATORY
3 STAGES IN LIFE OF A CONTRACT OF SALE A. Policitacion/Negotiation Stage - offer is floated, acceptance is floated but they do not meet; the time when parties indicate their interest but no concurrence of offer and acceptance.
B. Perfection - concurrence of all requisites;
meeting of the minds.
C. Consummation - parties perform their respective undertakings
A. PREPARATORY I. RULES:
1. Offer is floated
Prior to acceptance, may be withdrawn at will by offeror
2. Offer floated with a period
Without acceptance, extinguished when period has ended and maybe withdrawn at will by offeror;
right to withdraw must not be arbitrary otherwise, liable to damage under Art 19, 20, 21 of Civil Code 3. Offer floated
w/ condition
Extinguished by
happening/non-happening of condition
4. Offer floated without
period/without condition
Continues to be valid depending upon circumstances of time, place and person 5. Offer is
floated and there
is counter-offer
Original offer is destroyed, there is a new offer; can not go back to original offer
6. Offer is floated
No authority of offeror to modify offer
7. Offer accepted absolutely
Proceed to perfected stage
OPTION CONTRACT - a contract granting an exclusive right in one person, for which he has paid a separate consideration, to buy a certain object within an agreed period
NOTE: There is no presumption of consideration, it needs to be proven OPTION- an unaccepted or unexercised contractual offer
Characteristics of Option Contract
a. Not the contract of sale by itself, separate and distinct
b. Nominate
c. Principal - but can be attached to other principal contracts
d. Onerous e. Commutative
f. Unilateral – versus contract of sale which is bilateral
g. Preparatory
Consideration in an option contract may be anything of value, unlike in sale where it must be price certain in money. (San Miguel Philippines v. Cojuangco)
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How EXERCISED: Notice of acceptance should be communicated to offeror without actual payment as long as there is delivery of payment in consummation stage
ELEMENTS OF VALID OPTION CONTRACT a. Consent – meeting of the minds
b. Subject matter – an option right, or accepted unilateral offer to buy, or accepted unilateral offer to sell:
i. a determinate object
ii. for a price certain (including manner of payment)
c. Prestation – a consideration separate from purchase price for option given
SITUATIONS IN AN OPTION CONTRACT:
a. With separate consideration i. Option contract is valid
ii. Offeror cannot withdraw offer until after expiry period
iii. Subject to rescission, damages but not to specific performance because this is not an obligation to give b. Without separate consideration
i. OLD RULE - offer is still valid, but option contract is void and not subject to rescission, damages ii. NEW RULE: Right of first refusal
recognized as a valid offer
RIGHT OF FIRST REFUSAL:
1. Creates a promise to enter into a contract of sale and it has no separate consideration, not subject to specific performance because there is no contractual relationship here and it is not an obligation to give (not a real contract)
2. New doctrine: May be subject to specific performance.
The right of first refusal is only subject to specific performance insofar as it is attached to
a valid written principal contract (e.g. lease). RFR becomes one of the considerations in the contract. If RFR is violated, and property sold to another buyer in bad faith, the sale to the 3rd party buyer is rescissible. The price for the 3rd party buyer is to be the basis for the price of the sale back to the one with the RFR. Equatorial Dev’t v. Mayfair Theater, [370 SCRA 56]
Effect of new doctrine: turned the world of policitacion upside down because while valid option contract is not subject to specific performance, right of first refusal which does not even have a separate consideration may be subject to specific performance
Recognizes recovery of damage based on abuse of rights doctrine
OPTION CONTRACT DISTINGUISHED FROM RIGHT OF FIRST REFUSAL
Option Contract Right of First Refusal Principal contract;
stands on its own Accessory; can not stand on its own Needs separate
consideration Does not need separate consideration Subject matter and
price must be valid There must be subject matter but price not important
Not conditional Conditional Not subject to
specific performance Subject to specific performance
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TOPICS UNDER THE SYLLABUS F. FORMATION OF CONTRACT OF SALE
2. Perfection of Sales
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2. PERFECTION OF SALES
GENERAL RULE: A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price; consensual contract
EXCEPTION: When the sale is subject to a suspensive condition
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REQUIREMENTS:
1. When parties are face to face – when there is absolute acceptance of an offer that is certain
2. When thru correspondence or telegram – when the offeror receives or had knowledge of the acceptance
3. When the sale is subject to a suspensive condition – from the moment the condition is fulfilled
NOTES: Qualified acceptance: mere counter-offer which needs to be absolutely accepted to give rise to perfected contract of sale
Business ads are mere invitations to make an offer except when it appears to be otherwise Rules governing auction sales:
1. Sales of separate lots by auction are separate contracts of sale
2. Sale is perfected by the fall of the hammer 3. Seller has the right to bid at the auction provided such right was reserved and notice was given to that effect
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TOPICS UNDER THE SYLLABUS F. FORMATION OF CONTRACT OF SALE
3. Formalities of the Contract
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3. FORMALITIES OF THE CONTRACT Form not important in validity of sale A. Sale being consensual, may be oral or
written, perfected by mere consent as to price and subject matter
B. If particular form is required under the statute of frauds:
- valid and binding between parties but not binding to 3rd persons
- Reason: purposes of
convenience only and not for validity and enforceability; cause of action is granted to sue and compel other party to execute the document When form is important for validity;
exception by specific provision of law;
1. Power to sell a piece of land granted to an agent – otherwise VOID
2. Sale of large cattle; must also be registered with Municipal treasurer – otherwise VOID
3. Sale of land by non-Christian if not approved by Governor– VOID
When form is important for enforceability [STATUTE OF FRAUDS Article 1403 (2)]
a. Performed 1 Year: A sale agreement which by its terms is not to be performed within a year from the making thereof;
b. 500 and Above: An agreement for the sale of goods, chattels or things in action, at a price not less than P500.00;
and
c. Sale Land: A sale of real property or of an interest therein.
EXCEPTIONS TO COVERAGE OF STATUTE IN SALES CONTRACTS:
1. WRITTEN: When there is a note or memorandum in writing and subscribed to by party or his agent (contains essential terms of the contract)
2. PARTIAL EXECUTION: When there has been partial performance/execution (seller delivers with intent to transfer title/receives price)
3. FAILURE TO OBJECT: When there has been failure to object to presentation of evidence (oral)
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4. E-COMMERCE: When sales are effected through electronic commerce
While a sale of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons if not embodied in a public instrument and recorded in the Registry of Deeds. Secuya v. Vda. De Selma, [G.R. No. 136021, February 22, 2000]