L a w o n S a l e s Atty.

JazzieSarona

DISTINGUISHED FROM OTHER CONTRACTS

Review: To be able to determine if it is a sale or barter we look at the manifest intention of the parties. If not, it will be considered barter if the value of the thing exceeds the money given or its equivalent. Otherwise it is a sale.

Art. 1638.By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the others promise to give another thing. (1538a)

Art.1640.If one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages. (1539a)

Article 1641 As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. (1541a)

-So the rules that govern barter are the same with those that govern the contract of sale. -However, despite the provisions you still have to remember the distinctions because of the statute of frauds.

Art.1641.As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. (1541a)

Article 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. (1446a)

Like when you are dealing with a sale of real property, it has to be in writing regardless of its value or a personal property worth 500 or more. Remember, they have to be in writing in order to be enforceable. Such rule is not applicable when you are dealing with barter. -Another importance why a need to distinguish is because of the legal redemption. In legal redemption we have a rule their wherein an adjoining owner of an urban land can redeem the property upon sale, but it will not cover a barter or exchange.

In barter, one party binds himself to give one thing in consideration of the other who promises to give another thing. In a barter you give a thing and the other one also gives something, as against a sale where one gives a thing and the other gives the price in consideration of the thing given.

Sale: Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by:

A contract of sale may be absolute or conditional. (1445a)

1.) The manifest intention of the parties. If such intention does not clearly appear, 2.) It shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; 3.) It shall be considered a sale if the amount of the money or its equivalent exceeds the value of the thing. (Article 1468)

Barter: Article 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the others promise to give another thing. (1538a)

So: If value of money is greater than value of thing=SALE If value of thing is greater than value of money=BARTER

PearlCanada&GloriaArafol

 L a w o n S a l e s Atty.JazzieSarona

CONTRACT OF SALE V DONATION

Donation is governed by 7435 and 7439. In there it is defined as an act of liberality, whereby a person disposes a thing gratuitously or a right in favor of another person. Donation is a solemn contract whereas a sale is consensual contract. Acceptance is required in donation. Unlike in donation, in sale there is a dispossession of a valuable consideration, there is substitution of values. In donation it essentially takes away a part of your property or assets. It is important to distinguish because when you reach donation and succession, the donation can affect the rights of compulsory heirs. So the heirs or children can question the deed of donation, but in sales there is no deprivation of rights so the heirs cannot question the sale.

A contract for a piece of work is a nominate contract.

Inchausti v Cromwell(Sale) Test of Existence: by the inquiry whether the thing transferred is one not in existence and never would have existed but for the order of the party desiring to acquire it. Or a thing which would have existed and be subject of a sale to some other persons even if the order had not been given.

Another thing is the price; in sale if price is simulated the sale itself may be is void, because consideration is an essential element of contract of sale. But article 1471 tell us that if it can be shown that in reality it may be a donation or some other form of contract. With regard to donation we have 726, what happens when donor imposes a burden upon the donee? It does not become a sale if the burden is less than the value of the thing donated. But if burden is greater in value then it is not considered a gratuitous donation. So it will be considered an onerous donation, where it can be considered a sale or barter. In such case the law on sales will govern.

In this case the hemp were in existence even before the sale was made. Essentially, the contract here is a contract of sale not contract for labor or piece of work. It is otherwise if the article is made pursuant to an agreement. The articles ordered here is exactly what the seller have on-hand, no change or modification was made at the defendants request.

A contract is one of sale if the thing ordered is substantially in existence at the time of the order and merely requires alteration, modification or adoption to the buyers wishes.

SALE Consideration is the price onerous Perfected by mere consent It is intervivos(during lifetime)

DONATION Liberality of donor Gratuitous Solemn contract wherein you have to comply with the requirements provided by law Not only intervivos but also mortis causa

Celestino Company(Sale)

CONTRACT OF SALE V PIECE OF WORK

Test of Special Orders: Remember that Celestino habitually made windows, sash, etc. It fulfills the orders of its customers based on mouldings, panels, etc. and any person may order. The orders exhibited here were not known to be special requiring the extraordinary service of the factory.

Article 1713 By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. Article 1467A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. (n)

CIR v Arnoldus Carpentry (Sale) In this case SC disregarded the test of existence used in the case of Inchausti. What determines if a contract is one of sale or piece of work is whether the thing is manufactured specially for the customer and upon his special order. If a thing is done specially for another it is for piece of work. If thing is procured for general market, in ordinary course of ones business it is a contract of sale.

Arnoldus sells goods which it keeps in stock and not services. It already has ready stock for products for sale. As a matter of fact the purchased order showed by referring to a model. Samples were displayed, if in stock it is available immediately for its local or foreign customers.

PearlCanada&GloriaArafol

 L a w o n S a l e s Atty.JazzieSarona

Test of Necessity: Takes into consideration the nature of the object, here it confirms the test of special order and the nature of execution of each order. 1714 governs the contract for a piece of work. But by virtue of 1714 itself you apply the law on prescriptive period on the contract of sale as to hidden defects. That is why you have to know what is the cause of action, if it is a breach of warranty in a contract of sale, you apply the law on sales. But if it is a contract for piece of work ,you apply the general rule on prescriptive periods. In this case, since this is a written contract, 10 years will be applicable. On the other hand, if it is an oral contract then it is 6 years. if it is based on fraud, it is 4 years. DINO Case(Piece of work) Take note here it did not take into consideration the quantity, even if it manufactured 40,000 pieces. What happened here, it was based on special order. A contract for a piece of work, labor or material as compare to contract of sale may be distinguish as to whether the thing transferred is one not in existence and which never have existed but for the order of the person desiring it. As such it would be considered a piece of work and not a sale. With all these tests, there is one consistent thing. If the essence of the contract is the object, irrespective of the party giving or executing it then it would be considered a contract of sale. But if the essence of a contract is one of service, knowledge or service of the person who executes or manufactures the object then you have a contract for a piece of work. Generally, if you can buy it that is a contract of sale. If it is exclusive then it is contract for a piece of work. Important to distinguish Contract of Sale from a Piece of work: a. b. c. d. to determine prescriptive period as to tax liabilities with regard to specific performance(no SP for piece of work) statute of frauds(applic. in SALE not in POW except: an act to be executed more than 1 yr after execution of agreement) CIR v ATENEO So here, there is no contract of sale because the funds depend on the contributions given to it. Take note: the determining factor here is that there is no transfer of ownership involved. Whether it is for a contract of sale or piece of work, there is a transfer of ownership. But here, IPC remains the owner of the work they have done. What you have here is only research.

Engineering Machinery v CA(Piece of work) Consensuality Test: Here, what was involved is a contract for a piece of work. The contractor binds himself to execute a piece of work for the employer in consideration of certain price or compensation. What is subject here is not just the purchase of air conditioners but the system. The business here of petitioner is not manufacturing of air-conditions but the installation of the system according to the specification provided by the customers. Compare this in Celestino where they habitually engage in such business and the price does not differ much as compared in the installation of the aircon system. It is important to discuss in this case whether or not it is for a piece of work or contract of sale because of the prescriptive period. The action here was for damages. If it is a sale, it is breach for warranty which is 6months from delivery. If it is for piece of work, the prescriptive period would be 10 years from the time the cause of action accrues. What happened here was that, under art.1144: Actions upon a written contract prescribe in 10yrs. Since the complaint was filed within the 10yr-period the action has not prescribed. Take note: Art.1714-15 in relation to a contract for piece of work. Art.1714 If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. (n) Art.1715 The contract shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contract fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractors cost. (n)

PearlCanada&GloriaArafol

 L a w o n S a l e s Atty.JazzieSarona

CONTRACT OF SALE V AGENCY Here, while there was return of beds by the defendant it was not tantamount to contract of agency. Such was considered as mutual tolerance in performance of the contract, in disregard of its terms. On the issue of commission, it means nothing less but a mere discount on the invoice price. The word agency in the contract, merely expresses that the defendant was the only one authorized to sell the plaintiffs beds in the Visayan island.

Article 1868 By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. Article 1466 In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered.

KER Co. v CIR(Agency) Here, the company retains ownership of the goods even if delivered to Ker for the sale. Likewise, the price and terms of which were subject to the control of Rubber Intl.

SALE Buyer pays the price for the object Buyer becomes owner after delivery There is personal liability arising from the seller(warranty) and buyer(pay the price) A principal contract 2 parties(seller&buyer) Onerous Unenforceable if it involves under Statutes of Frauds AGENCY In agency, agent is not oblige to pay the price but deliver it to the principal Agent does not become owner despite delivery Assumes no personal liability as long as he acts within authority and scope of agency agreement Preparatory contract rd 3 parties (principal,agent,3 person who deals with agent) Presumption: onerous Valid and enforceable in any form Except agency of real property

The transfer of title or agreement for a price is the essence of a sale. This is not present in this case, there is no transfer of title. The essence of agency to sell, delivery to an agent not as his property but the property of principal who remains the owner and has the right to control the sales, fix the price and in turn demands and receive the proceeds less the agents commission upon sales made. Puyat and Sons In agency, agents are exempted from liabilities, provided they act in accordance with the instructions received from principal.

There was here a 10% commission, this does not make the petitioner as agent. This is only an additional price which the respondent bound itself to pay, and it is not incompatible in a contract of purchase and sale. To hold the petitioner an agent of respondent, is incompatible with the admitted fact that petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. It follows that the petitioner as vendor is not bound to reimburse for any price difference. Arco agreed to the price here, whether the price includes commission the fact that there was valid consent on the part of Arco, that price would constitute an element in a contract of sale. Since in this case there was no fraud or misrepresentation. SCHMID v RJL Martinez(Agency) Implied warranty for hidden defects in contract of sale. It is important to know whether Schmid is a vendor or just an agent. SC here used the term indentor, essentially he is the middle man between two parties. He is one for compensation, acts as middleman for foreign supplies and local purchaser. Thus, pag indentor more on international transactions.

Contract of sale is not unilaterally revocable. On the other hand, in agency it is based on trust and confidence. Thus the relationship between principal and agent is fiduciary in nature. General rule in agency is that it is unilaterally revocable.

Quiroga Parsons (Sale) In this case there was even stipulation for commission on sales. Nevertheless the court said this is one of sale. It took into consideration the essential features of contract of sale which are present in this case. There was an obligation on the part of the plaintiff to supply the beds, and to pay the price on the part of the defendants. So these features, exclude the nature of a contract of agency. In agency, the agent does not pay the price, it only delivers to the principal what has been paid to him.

PearlCanada&GloriaArafol

 L a w o n S a l e s Atty.JazzieSarona

So in dacion en pago, property is alienated to the creditor in full satisfaction of a debt in money. Delivery and transmission of the thing by the debtor to the creditor as an accepted equivalent of the performance of obligation and results to extinguishment of an obligation. It is one of the 4 special modes of payment. It is not necessarily another or new contract but it is actually an arrangement between the creditor and the debtor wherein the end thereof is to extinguish an existing obligation. Take note that there should be meeting of the minds between the parties. That the loan or obligation shall be extinguished by dacion en pago.

Side comment/discussion on Letter of Credit: LOC is usually applicable in international transactions. Illustration: X= manufacturer will apply LOC to bank to secure transactions with foreign supplier

Y=(supplier) goods will be supplied to bank

DACION EN PAGO vs PACTUM COMMISSORIUM

Z=agent(bank HSBC) will represent/pay in behalf of X in HK Victorias Milling Co. v CA(Sale) Even if there was letter of authority indicating that it was sold for or in behalf, the SC looked into the circumstances. Remember that the basis for agency is representation. Principal must have actual intention to appoint an agent. Here there was a valid transfer of ownership. It was CSC who filed the specific performance, so CSC is not an agent; agent cannot sue, it must be the principal.
CONTRACT OF SALE V DACION EN PAGO

It is different from pactum commissorium. Pactum is void for being against public policy. Why? Because there is automatic appropriation wherein there is this agreement between the creditor and debtor, in case the debtor fails to pay the obligation, the property of the debtor would automatically, the ownership will be transferred to the creditor. That is void. Essentially, it is unfair for the debtor, most often than not, the property that would be transferred is worth more than the obligation. Because obviously, the creditor would not accept anything that is less than the value. Most probably it would be higher. AS distinguished in dacion en pago, There is already an existing obligation. Subsequently when it is due, the debtor has no cash, the debtor would then offer his property to extinguish his obligation. IT is very different from sale. PNB vs PINEDA No dacion en pago in this case because the repossession of PNB of the machines was not in the intent of extinguishing the obligation. It was more of a security to comply with the agreement. Maam: Does dacion en pago involve a transfer of ownership? In this case was there transfer? A: Yes, But in this case, there was none. In dacion en pago, there should be a meeting of the minds and that the transfer must be so that the obligation can be extinguished. In this case there was no agreement to that effect, thus, no dacion. Take note that we have discussed last time about the letter of credit. In the PNB case, it involves an international transaction. What happened here is that the bank took possession of the imported cement plant machinery equipment pursuant to the trust-receipt agreement between PNB and TCC. Usually the trust-receipt agreement is also involved in letters of credit. So that it would show that whatever subject matter is purchased

Now let us compare the Contract of Sale from other kinds of transactions. We have already distinguished it from barter as well as donation. Take note as well of the distinction between a contract of sale from a contract for a piece of work. We have also the distinction between a contract of sale and that of agency to sell. Another distinction that we have to take note of is that in relation to dacion en pago. This concept of course is not new to you because it has already been discussed in your obligations and contracts. Specifically under article 1245. Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.

PearlCanada&GloriaArafol

 L a w o n S a l e s Atty.JazzieSarona

by the domestic purchaser, the goods will be delivered to the bank and it will be transferred in possession to the debtor merely through a trust-receipt agreement until the payment of the full purchase price. However, take note, in this case, while PNB was in possession of the machinery and equipment, it was only as a form of security for the advances given to TCC under the letter of credit. Possession by PNB cannot be considered as payment of the loan. Payment will result only after PNB will foreclose securities, sold the thing and apply the proceeds to the loan of TCC. Possession by itself does not amount to foreclosure. The Supreme court also held that there was no dacion en pago. Again in dacion en pago, there must be delivery and transmission of ownership by the debtor to the creditor as an accepted form of payment. The purpose here of possession is merely to secure the obligation and not for the purpose of transferring ownership. Take note na sa contract of sale, it would result to a transfer of ownership, ganon din sa dacion en pago. In this case, there was no dacion. acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor The mode of extinguishing of the obligation of Lo to Romero is through compensation. That same defense can be raised against the assignee. There is a valid assignment here, however since there is a breach of warranty of the legality of the credit, LO is liable under the deed of assignment. We have in this case a valid assignment of credit in the nature of a sale of personal property produced the effects of dacion en pago which may extinguish the obligation. What happened here? LO, by executing the deed of assignment is bound to warrant the legality and existence of the credit at the time of the sale of assignment. Since Romero raised the defense of compensation, by breach of that warranty Lo is still liable to KJS.

SSS vs AGP M: Did the SC say that that there was consent here in both parties? Compare the elements of a contract of sale and dacion en pago. Are there similarities? A: Yes, dacion en pago actually partakes the nature of a sale. In dacion, the subject matter is the object which will be given in lieu of the payment of the obligation. Consideration will be the property that will be paid to the creditor. Take a look at the case of SSS, why is it important to determine whether or not we have a dacion en pago in this case. What was the cause of action? Specific performance. An action incapable of pecuniary estimation. Jurisdiction is in RTC. Where was the case filed? Before the SSS. Thats why it is really important to determine whether or not we have dacion en pago here or the basis of the action is dacion en pago. Because again in dacion en pago, your cause of action is specific performance, based on the allegations of AGP, the cause of action is spec. perf. take note that the SC did not categorically say that may dacion en pago ditto, it just emphasized the nature of the dacion en pago, why the action of specific performance is right for this kind of arrangement. Now, the undertaking here between AGP and SSS partakes in one sense in the nature of the sale wherein the creditor is really buying the property from the debtor, payment of which is to be charged against the debtors death, as such the elements of a contract of sale, consent, object certain or cause or consideration must be present. Dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation.

LO VS KJS (no dacion) Elements of dacion en pago: (1) There must be the performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; In the case at bar, the performance is the credit against the third person. (2) There must be some difference between the prestation due and that which is given in substitution (aliud pro alio); (3) There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due.

One of the elements for dacion en pago was missing in this case. M: What is a deed of assignment? Can it be considered as dacion en pago? Assignment of credit? A: An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who

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 L a w o n S a l e s Atty.JazzieSarona

The controversy here lies on the non-implementation of the approved dacion en pago on the part of the SSS, therefore this was a suit for specific performance incapable of pecuniary estimation beyond the competence of the SSS. Again dacion en pago is a special mode of payment where the debtor offers another thing to the creditor to accept it as an equivalent payment of an outstanding debt. It has the effect of totally extinguishing the debt or obligation. Look at the facts of the case, the spouses Tibong admitted that they secured loans from Agripina and the proceeds of the loan were then lent to other borrowers at higher interest rates. They likewise alleged that they executed deeds of assignment in favor of Agripina and that their debtors executed promissory notes in favor of Agripina. In other words they already acknowledged that Agripina is the assignee and instead of paying the debts to the spouses they will pay it to Agripina. They did not anymore raise any defense, walag compensation, walang prescription or other modes of extinguishment of obligation. So that agreement was considered to be valid. All the requisites for a valid dation in payment are present in this case. As gleaned from the deeds, respondent Felicidad assigned to petitioner her credits to make good the balance of her obligation. Felicidad testified that she executed the deeds to enable her to make partial payments of her account, since she could not comply with petitioners frenetic demands to pay the account in cash. Petitioner and respondent Felicidad agreed to relieve the latter of her obligation to pay the balance of her account, and for petitioner to collect the same from respondents debtors. Distinguish this one from the case of Lo, because there the debtor or the assignor had a defense. dito wala.

Yuson Vs Vitan Take note that in this case, the defendant here is a lawyer and the lawyer borrowed money from his client. One proof here that there was no intent that the parties entered in a deed of absolute sale is of the 2 deeds of sale executed. The first one nd was in favor of the spouses and the 2 , pabalik sa lawyer. So, what happened here the lawyer did not really intend to sell and relinquish his ownership over the property. The second deed of sale which reconveyed the property back to the respondent is proof that he had no intention. It could also not be considered as dacion, because there was no intention between the parties that the obligation here of the lawyer would be extinguished. In fact, wala talagang transfer of ownership na nangyari. Take note, both contracts of sale and dacion en pago involve a transfer of ownership. It can be seen from the facts, there was no really intention to transfer of ownership. The true intention of the parties was to use the Bulacan property to facilitate payment. The only made it appear that the property was transferred to the complainant to authorize the latter to sell or mortgage the property. Records however do not show that the proceeds derived from such are sufficient to discharge the oblig of the lawyer. Therefore the lawyer is still liable to the extent of his deficiency. Aquintey vs Tibong M: Was the deed of assignment considered as dacion en pago? A: SC said yes. All the essential requisites of a dacion en pago are present. M: Who was the assignor? A: Felicidad, she assigned her credit in favor of agripina the assignee. Agripina can no longer collect from Fecilidad because there was already extinguishment of obligation. M: How was this different from Lo vs KJS in that case it was also an assignment of credit but the SC said that the assignor is still liable to the assignee but here the assignee can no longer collect from the assignors. Why is that?

Filinvest vs Phil Acetylene The mere return of the mortgaged motor vehicle by the mortgagor does not constitute dation in payment in the absence, express or implied of the true intention of the parties. Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of obligation. In dacion, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtors debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or innovation to have the effect of totally extinguishing the debt or obligation. The element of consent is missing here. The evidence on the record fails to show that the Filinvest consented, or at least intended, that the mere delivery to, and acceptance by him, of the mortgaged motor vehicle be

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 L a w o n S a l e s Atty.JazzieSarona

construed as actual payment, more specifically dation in payment or dacion en pago. The fact that the mortgaged motor vehicle was delivered to him does not necessarily mean that ownership thereof, as juridically contemplated by dacion en pago, was transferred from appellant to appellee. In the absence of clear consent of appellee to the proferred special mode of payment, there can be no transfer of ownership of the mortgaged motor vehicle from appellant to appellee. If at all, only transfer of possession of the mortgaged motor vehicle took place, for it is quite possible that appellee, as mortgagee, merely wanted to secure possession to forestall the loss, destruction, fraudulent transfer of the vehicle to third persons, or its being rendered valueless if left in the hands of the appellant. As to the strength of the Voluntary Surrender with Special Power of Attorney To Sell, it only authorized Filinvest to look for a buyer and sell the vehicle in behalf of the appellant who retains ownership thereof, and to apply the proceeds of the sale to the mortgage indebtedness, with the undertaking of the appellant to pay the difference, if any, between the selling price and the mortgage obligation. Filinvest in essence was constituted as a mere agent to sell the motor vehicle which was delivered not as its property. If it were, he would have full power of disposition of the property, not only to sell it. Take note of the distinctions between dacion en pago
CONTRACT OF SALE V LEASE

Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine years shall be valid. Why do we need to discuss a contract of lease and distinguish it from a contract of sale? This is important so that we can relate it to articles 1484 and 1485.

Art. 1484. RECTO LAW (sale in instalment) 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 to pay; (2) Cancel the sale, should the vendee's failure to pay cover two 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. (1454-Aa)

A. Existence of credit Sale walang pre existing credit, the oblig of the buyer to pay the price arises from the sale itself. Dacion en pago, there should be a pre existing credit, because it extinguishes an obligation. B. As to creation of obligation/ cause/consideration Sale actually gives rise to obligation between seller and buyer. take note that the consideration of the sale is the price Dacion en pago the cause is the extinguishment of the oblig. C. AS to freedom to determine price In sale, there is greater freedom in determining the price Dacion en pago, lesser freedom. Why? because you offer your property in payment of the obligation. D. As to consummation of the contract Sale: Giving the price may end or consummate the sale, Dacion en pago: giving of the obligation will extinguish the obligation either partially or totally depending upon the intention or agreement between the parties.

Art. 1485. The preceding article shall be applied to contracts purporting 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.

Sa Recto law kasi, specific ang remedies available to seller. Tatlo lang yan, foreclosure, cancellation and exact fulfilment. For these sellers to avoid 1484, contract of lease siya, but again take note 1485 ksi applicable pa rin xa depende sa contract of lease. It may be stipulated that the lessee has the option to buy the subject property at a small consideration at the end of the lease provided that rent has been fully paid. Yung rent will be treated as instalments which is governed by 1484, if the rent throughout the term have been paid, at the end of the term, ownership will transfer to the lessee. So what will happen? Such contract will be a conditional sale. Filinvest vs CA Is Filinvest liable since it is a contract of sale? SC said No.

PearlCanada&GloriaArafol

 L a w o n S a l e s Atty.JazzieSarona

SO here we have a scenario wherein there is a document entitled as a contract of lease. But the SC held that what was really involved is a contract of sale on instalments. Look at the real intention of the parties. Nomenclature of the agreement will not change its true essence wherein you can see that its really a sale on instalments. What would happen? That upon completion of the rental payments, the ownership will be changed. Now considering that we have here is really a contract of sale on instalments then what would be the applicable action is Article 1484 in case buyer fails to pay 2 or more instalments. However what happened here is that Filinvest is made liable for the rock crushers failure to produce in accdance with its described capacity. What happened is that hindi sila nagbayad kasi nga there is a defect, what has been delivered is different from what they have expected. Take note however that Filinvest is not to be held liable here because it was the private respondents who chose, inspected and accepted the machinery. It was only after they tested the machinery that respondent sought financial help to that effect. Also one of the stipulations include an express waiver of warranties in favour of Filinvest. So, by signing that, it absolved the petitioner from any liability arising from any defect or deficiency with the machinery they bought. Again it is important to distinguish a contract of sale and lease in relation to the Recto Law as provide by Article 1484 applying Article 1485. DISTINCTION: Remember sa sale, there is an obligation absolutely transfer title of ownership to the thing or subject matter thereof. Lease, no transfer of ownership. What is involved is the use of a thing for a price and to return the same upon the expiration of the period agreed upon. If what you can see in a contract of lease is the intention to eventually transfer title or ownership to the lessee then what you really have is conrtact of sale in instalments. 1484 personal property, if real property is the Maceda Law. cession to take place. The assignment of the property to the creditors does not involve transfer of ownership. It only gives right to the creditors to sell these properties of the debtor and then apply the proceeds thereof to the obligation of the debtor. Different from sale and dacion en pago because in both, there is transfer of ownership of property. It is different from dacion because the latter only involves 1 creditor, payment by cession ALL CREDITORS

CONTRACT OF SALE V CONTRACT TO SELL

Serrano vs Caguiat

SC said that there is a contract to sell. M: How about for the fact that receipt for partial payment here was issued? Isnt that an evidence that there is a contract of sale? A: In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.

Again take note of the distinction between a contract of sale and contract to sell. As discussed in this case,

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price. Now what were the instances that made the SC held that the intention was really a contract to sell? First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price.

CONTRACT OF SALE V CESSION

Art. 1255. The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws. Payment by cession is different from sale and is also different from dacion en pago. In payment by cession, the debtor assigns his property to his creditors. There must be 2 or more creditors for payment by

Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price.

PearlCanada&GloriaArafol

 L a w o n S a l e s Atty.JazzieSarona

Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property. It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks of earnest money given in a contract of sale. Reyes vs Tuparan Why was the breach only considered slight? The court said that Tuparan showed willingness to pay the obligation thus there was no really intent to default on the payment. Remember that here, the SC held that was involved was a contract of sell based on the intention of the parties. 8. That the title and ownership of the subject real properties shall remain with the First Party until the full payment of the Second Party of the balance of the purchase price and liquidation of the mortgage obligation of 2,000,000.00. Pending payment of the balance of the purchase price and liquidation of the mortgage obligation that was assumed by the Second Party, the Second Party shall not sell, transfer and convey and otherwise encumber the subject real properties without the written consent of the First and Third Party. The SC agreed with the RTC and CA that the respondent showed willingness to comply with the obligation when she offered to pay the amount of 700k. purchase price has already been paid. It is right and just to allow Tuparan to pay the unpaid balance of the purchase price.

Granting na pwede ang rescission, granting na applicable ang 1191, there can still be no rescission here for the reason based on the circumstances, there was only slight or casual breach in the full payment of the obligation. Unless, parties stipulated it, rescission is allowed only when the breach of contract is substantial and fundamental to the full payment of the obligation.

9. That upon full payment by the Second Party of the full balance of the purchase price and the assumed mortgage obligation herein mentioned the Third Party shall issue the corresponding Deed of Cancellation of Mortgage and the First Party shall execute the corresponding Deed of Absolute Sale in favor of the Second Party.

Take note that it was deemed to be a contract to sell and that without respondents full payment there could be no breach of contract to speak of because petitioner has no obligation to turn over the title. Respondents failure to pay the purchase price is not the breach of contract contemplated under 1191 which gives the parties the power to rescind but which prevents the petitioner from being bound to convey title to the respondent.

Here considering that the deed of conditional sale was not cancelled and out of the total purchase price of 4.2 M the remaining balance is only 805k so the substantial amt of the

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