OPTION CONTRACT
An accepted unilateral promise to buy or sell supported by a consideration
distinct from the price. It secures the privilege to buy.
Kinds of Promises
Unilateral promise to sell- promise elects to buy
Unilateral promise to buy- promise elects to sell
Bilateral promise to buy and sell either parties choose to exact fulfillment
ACCEPTANCE
The acceptance referred to which determines consent is the acceptance of the offer,
and not of the goods delivered.
Requisites
o It must be absolute
o Must be plain and unconditional
o To bind the offeror, the offeree must comply with the conditions of the offer.
PERFECTION
Contract of sale is perfected at the moment of the meeting of the minds of the
parties.
From the moment of perfection, parties may reciprocally demand performance
Requirements for Perfection
When parties are face to face, when an offer is accepted without conditions and
without qualifications. If negotiation is made through a phone, it is as if the parties
are face to face.
When contract is through a correspondence or thru telegram, there is perfection
when the offeror receives or has knowledge of the acceptance by the offeree.
When sale is made subject to a suspensive condition, perfection is when from
the moment the condition is fulfilled.
Statute of Frauds
The following transaction must be in writing, otherwise contract is unenforceable.
Unless ratified by failure to object to oral acceptance of benefits under the contract.
o Sale of property at price not less than P500.00
o Sale not to be performs within one year
o Sale of real property or interest therein NOTE: Applicable only to executory
contracts and not to contracts which are totally or partially performed.
Sale by Auction
o Perfected when the auctioneer accepts the bid by the fall off the hammer, gavel,
or in any other customary manner. If the auction is announced "without
reserved", goods cannot be withdrawn from sale after the bid is made.
o By taking part in the auction, the buyer voluntarily submitted to the terms and
condition of the auction.
Sale Of Goods By Description
Seller sells things as being a particular kind, and buyer has not seen the article
sold and relies on the description given by the vendor.
Sale by Sample
Parties contracted solely with reference to the sample, with the understanding
that the bulk was like it. The vendor warrants the thing sold will conform with the
sample in kind, character, and quantity. It is the sole basis or inducement of the
sale.
Effect of Perfection
After perfection, parties must now comply with their mutual obligations. In the
meantime, buyer has personal rather than real right. Hence if seller sells again a
parcel of land to a stranger in good faith, the proper remedy of the buyer would
be to sue for damages for he cannot recover ownership over something he had
never owned before.
CAPACITY TO BUY AND SELL
All persons who can bind themselves by contract have also legal capacity to buy
and sell.
Kinds of Incapacity
Absolute Incapacity- persons cannot bind themselves at all. Like minors, insane
or demented, deaf-mutes who do not know how to write and those suffering from
civil Interdiction
Relative Incapacity- only with regards to certain persons and certain class of
property
DOUBLE SALE
Requisites of Double Sale
Two or more valid contract of sale;
Two or more buyers ;
They must pertain exactly to the same object; and
They must be bought from the same seller.
Rules of Preference
Double Sale of Movables - who first takes possession in good faith
Double Sale of Real Property
•First registrant in good faith
•First possessor in good faith
•Person with oldest title in good faith
CONDITIONS
An uncertain event or contingency on the happening.
Conditions may be:
1.)Waived; or
2.) Considered as warranties
Effect of non-fulfillment of Condition
If the obligation of either party is subjected to any condition and such condition is
not fulfilled, such party may;
•Refuse to proceed with the contract
•Proceed the contract, waiving the performance of the condition
If condition is in nature a promise that it should happen, the nonperformance of
such condition may be treated by the other party as a breach of warranty.
WARRANTIES
It is a promise that a fact is true. In a sale, it is a statement of fact abut the quality or
character of the goods sold to induce the sale relied upon by the buyer. Breach or
violation of it gives rise to a suit for damages. Warranty is enforceable only against the
immediate vendor of the party dispossessed.
Kinds of Warranties
Express Warranty
Implied Warranty
Express Warranties
It is an affirmation of fact or any promise by the seller about the subject matter
where the natural tendency of it is to induce the buyer to purchase the thing and
the buyer purchases the thing relying on such affirmation or promise.
An express warranty can be made by and also be binding on the seller even in
the sale of a second hand article.
Implied Warranties
It is a natural, not an essential element of a contract, and is deemed incorporated
in the contract of sale. It is inherent.
Its reason is to protect naive and unsuspecting buyers from scrupulous sellers
from running away from their wrongful doings.
It may be modified or suppressed by agreement of the parties. Unless waived,
the warranties stay.
Implied Warranties in sale
Warranty as to seller's title
Warrant against hidden defects
Warranty as to fitness or merchantability
When Implied Warranty not Applicable
"As is and where is" sale
Sale of secondhand articles
Sale by virtue of authority in fact or law
Warranty Against Eviction
Vendee is deprived of the whole or part of the thing purchased. (art. 1548)
Seller guarantees that he has the right to sell the thing sold and to transfer
ownership to the buyer who shall not be disturbed in his legal and peaceful
possession thereof. If evicted, vendor is liable thereof.
Elements of Warranty Against Eviction
Vendee has been deprived in whole or in part of the thing purchased
Deprived by virtue of final judgement
Judgement is based on right prior to the sale or act imputable to the vendor.
Vendor was summoned in the suit for eviction at the instance of the vendee
There is no waiver on the part of the vendee
Warranty Against Hidden Defects of, or Encumbrances upon, the Thing Sold
Requisites:
o Defect must be important or serious;
o Must be hidden
o Must exist at the time of sale
o Vendee must give notice of defect to vendor within reasonable time
o Action for rescission or reduction in price must be brought within 6 months from
delivery or 40 days in case of animals
o No waiver of warranty on the part of vendee
RULES IN CASE OF SALE OF ANIMALS
Redhibitory vice or defect
A defect which the seller is bound to warrant in animals, the following special
rules shall apply:
Defect must be hidden
Must be of such nature that expert knowledge is not sufficient to discover
it
Veterinarian is liable if he fails to discover or disclose the hidden defect through
ignoranc or bad faith. (art. 1576)
Seller liable if animal dies within 3 days after its purchase due to a disease that
existed at the time of sale. Limitation of the action:
Redhibitory action must be brought 40 days from the date of their delivery to the
vendee.
(art. 1577)
RULES TO FOLLOW
Vendor not required to deliver the thing sold until the price is paid nor the vendee
to pay the price before the thing is delivered in the absence of an agreement to
the contrary; (art. 1524)
If stipulated, vendee is bound to accept delivery and to pay the price at the time
and place designated;
If there is no stipulation as to the time and place of payment and delivery, the
vendee is bound to pay at the time and place of delivery;
In the absence of stipulation as to the place of delivery, it shall be made
wherever the thing might be at the perfection of the contract (art. 1251);
If only the time for delivery has been fixed the vendee is required to pay even
before the thing is delivered to him; (art. 1524)
