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Sales Week 2 - Formation of the Contract of Sale - NCC 1475 - 1488 -…

- - - - Forms of Acceptance
  - - - Preparatory & Independent Contract - which grants a person exclusive period to decide w/n they can accept option. In exchange, optioner pays option granted consideration independent of the purchase price. This consideration can be anything.
        
        Offer holder has burden of proving that there was separate consideration.
        
        Exercise of Option - Option, as a continuing offer all that is needed to exercise it is acceptance and notification of such acceptance. (Nietes v. CA)
        
        Where there is acceptance of an offer without consideration - This generates a perfected contract of sale. This harmonizes NCC 1324 and 1479. (Sanchez v. Rigos)
        
        Object - Option to buy/sell within a specific period.
        
        Breach of an option contract - only indemnity and damages.
    - - Stipulation in a contract which grants right holder option to enter into a contract according to the specified terms before such owner can enter into a contract with a third party.
        
        Basically, stipulation where if a third party offers to buy/lease then option holder can purchase/lease before the 3rd party.
        
        Differs from option contract whereby it is not an independent contract.
        
        If there is a contract entered into in violation of an existing right of first refusal then remedies are:
        Rescission - only if the vendee in the new contract is a possessor in bad faith (Rosencor v. Inquing) viz. NCC 1385
        Damages - if vendee in new contract is a possessor in good faith. Damages against vendor.
        
        Right of first refusal must be premised on a perfected contract in order to give rise to obligations. This is because it is in effect a stipulation in a contract only.
        
        There must be identity in terms and conditions offered to a buyer and the lessees. (Tanay Devcorp v. CA)
        
        Governed by laws of general application - Ang Yu v. CA - laws on general application
        
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        Accessory contract - consideration for the ROFR is the same as the principal contract.
      - Mutual Promise to Buy and Sell (1479)
        
        If mutual promise to buy and sell - then reciprocally demandable.
        
        Unlike option contract where unilateral promise to buy and sell.
- - - - Theory of Cognition - perfection as soon as acceptance of the offeree is known by he offeror. (whether knowledge is constructive or not)
        
        Also applicable to withdrawal of offers. Withdrawal only as soon as offeree knows the withdrawal.
        
        San Miguel v. Huang - manner of payment of the purchase price is an essential element for the perfection of a contract. Because disagreement on manner of payment tantamount to disagreement on purchase price.
        
        Perfection - mere giving of earnest money doesn't mean that the sale is perfected. There must still be concurrence of all essential elements of a contract.
      - As applied to an option contract - such option is perfected where there is certain offer and absolute acceptance as regards to the option.
        
        Earnest money vs Option Money (1482)
        Article 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. (1454a)
        
        Earnest Money - part of the purchase price (so part of the contract of sale mismo).
        
        Option money - money paid to retain the option (so payment for the option contract, not purchase price per se)
        
        Earnest Deposit - Not option, not earnest money. Instead, only money given to guarantee that the other party will not back out. (San Miguel v. Huang)
        
        Confusion - because both sets of money given prior to sale.
        
        Option money - before actual sale
        
        Earnest Money - Given before the main balance.
        
        Basically since parehas early binabayad people get confused.
    - - Manner of Payment - jurisprudence adds that the manner of payment is a requisite for perfection. This is because a disagreement on manner of payment indicates a lack f consent or meeting of the minds.
  - - - Advertisements - are mere invitations to make an offer.
        
        Exception - where advertisements are complete offers, such that absolute acceptance can perfect the contract. e.g. Advertisements for rewards, etc.
        
        In these cases, offeror may revoke but such revocation must be made after a reasonably tacit period AND publicly.
        
        In advertisements for bidders, only invitation to make proposals (bids)
    - - Article 1403. The following contracts are unenforceable, unless they are ratified:
        (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive 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 sufficient memorandum;
        Article 1476. In the case of a sale by auction:
        (1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.
        (2) 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.
        (3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation.
        (4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. (n)
        
        Sale by Auction - each separate lot is a separate contract of sale. Perfected when the hammer falls - as to the highest bidder.
        
        Seller may reserve the right to bid on the thing sold. However, if they do then such must be announced to other auction participants.
        
        So they can't collude to drive prices up in secret.
      - Bars to Perfection of Contract (1330 &1338)
        
        Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a)
        Article 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (1269)
        
        Place of Perfection (1319)
        
        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. The offer
        must be certain and the acceptance absolute. A
        qualified acceptance constitutes a counter-offer.
        Acceptance made by letter or telegram does not bind
        the offerer except from the time it came to his
        knowledge.
        The contract, in such a case, is presumed
        to have been entered into in the place where the offer
        was made.
- - - - For Enforceability
        
        For Validity (NCC 1356)
        
        Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present.
        However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)
        
        Sale of Realty Through An Agent (1874) - If sale of land/interest through agent, AUTHORITY must be in writing.
        
        Sale of Large Cattle (1581 & Admin Code 529)
        
        Electronic Commerce Act (RA 8792)
        
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        Article 1581. The form of sale of large cattle shall be governed by special laws. (n)
        
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        Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (n)
        
        Authority - Should be in writing (special power of attorney). Otherwise, the sale shall be void. If sale without authority then unenforceable (1403).
        
        For Convenience (1358)
        
        Enforceable Against 3rd Parties - Refers to a class of contracts that are valid and enforceable between the contracting parties but require a specific form to be enforceable against 3rd parties.
        
        Article 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. (1279a)
        
        Article 1358. The following must appear in a public document:
        (1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by articles 1403, No. 2, and 1405;
        (2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;
        (3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;
        (4) The cession of actions or rights proceeding from an act appearing in a public document.
        All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by articles, 1403, No. 2 and 1405. (1280a)
        
        Statute of Frauds (1403 & 1405)
        
        Two Classes of Unenforceable Contracts
        
        Article 1403. The following contracts are unenforceable, unless they are ratified:
        (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
        (2) Those that do not comply with the Statute of Frauds as set 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 agreement cannot be received without the writing, or a secondary evidence of its contents:
        (a) An agreement that by its terms is not to be performed within a year from the making thereof;
        (b) A special promise to answer for the debt, default, or miscarriage of another;
        (c) An agreement made in consideration of marriage, other than a mutual promise to marry;
        (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive 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 sufficient memorandum;
        (e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
        ( f ) A representation as to the credit of a third person.
        (3) Those where both parties are incapable of giving consent to a contract.
        
        Article 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefit under them.
        
        (1) Those entered into by persons without authority or legal representation in behalf of another
        
        (2) Those that do not comply with the statute of frauds
        
        Sale of personal property at a price not less
        than P500 UNLESS the buyer accepts and receives the goods;
        
        Sale of real property or an interest therein
        regardless of the price involved; and
        
        Sale of property not to be performed within a
        year from the date thereof regardless of the
        nature of the property and the price involved
        
        Statute of Frauds - sets of laws or statutes that require certain classes of contracts to be in writing to be enforceable between the contracting parties.
        
        Oral Contracts - oral contracts falling under the statute of frauds are still valid and existing between the contracting parties. Only that they must be in written form to be enforceable.
        
        Ratification - Contracts in violation of the statute of frauds can be ratified by (1) Failure to object to presentation of oral evidence; (2) Acceptance of benefits under them;
        
        Writing - doesn't really require contracts to be in writing.
        Instead, all about mode of proving the promise/contract. Proof can be in the form of (1) Written instruments such as memorandum or written contract; (2) Acceptance and receipt of part of the goods (Receipt); (3) Payment or acceptance of some part oft he purchase price.
        
        Partial Performance - not limited to payment. So long as parties began compliance with their obligations can be partial performance.
        
        Enforceability - Valid contract, but speaks as to w/n the rights and duties provided in the contract can be enforced by the parties.
        
        Purpose - to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses.
        
        Refers to executory contracts - where there has been no performance. Thus, no reliable evidence can be presented.
    - - NCC 1483 - Article 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. (n)
        Article 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.
        Article 1358. The following must appear in a public document:
        
        Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by articles 1403, No. 2, and 1405;
        
        The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;
        
        The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;
        
        The cession of actions or rights proceeding from an act appearing in a public document.
        
        All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by articles, 1403, No. 2 and 1405. (1280a)
      - Intention of the parties will always be the primary consideration for determining the nature of the contract thus, form generally not needed.
        
        Types of contracts that require formalities:
        
        Contracts ad esentia/ad solemninatem - contracts whereby the form is required for their validity (Negotiable instruments)
        
        Ad probationem - where the form is required to prove the existence of a contract (Statute of Frauds)
        
        Where the forms is required to make the contract effective against 3rd parties. (Public documents)
        
        NCC 1358 - requisites provided not require form in order to validate the contract, but only to ensure their efficacy. Thus, valid between the contracting parties already.