Civil Law Review Ii: Sales, Lease, Agency, Partnership, Trust and Credit Transactions
Civil Law Review Ii: Sales, Lease, Agency, Partnership, Trust and Credit Transactions
Civil Law Review Ii: Sales, Lease, Agency, Partnership, Trust and Credit Transactions
CIVIL
LAW REVIEW II
Sales, Lease, Agency, Partnership, Trust and Credit Transactions
Atty. Crisostomo Uribe
SALES
Articles / Laws to Remember: 1458, 1467, 1477
transfer of ownership, 1505, 559 who can transfer
xxx, 1504, 1544, 1484 Recto Law, R.A. 6552,
1602, 1606, 1620, 1623, Redemption xxx
Q: A obliged himself to deliver a certain thing
to B. Upon delivery, B would pay a sum of
money to A. Is that a contract of sale?
A: Not necessarily. Even if there is an obligation to
deliver, if there is no obligation to transfer
ownership, it will not be a contract of sale. It may
be a contact of lease.
Memorize: Art. 1458
Note: Sale is a contract, so the general principles
in oblicon are applicable to sale but note that there
are provisions which are contrary.
Characteristics of Contract of Sale (COS)
1. Consensual (1475) COS is consensual, it is
perfected by mere meeting of the minds of the
parties as to the object and price.
Note: There is 1 special law which requires a
particular form for the validity of a contract of sale
in that sale, it can be said that kind of sale is a
formal contract Cattle Registration Decree. In a
sale of large cattle, the law provides that the
contract of sale of large cattle must be: in a public
instrument, registered and a certificate of title
should be obtained in order for the sale to be valid.
But otherwise, the other contracts are perfected by
mere consent or mere meeting of the minds.
2. Principal sale is a principal contract, it can
stand on its own. It does not depend on other
contracts for its existence and validity.
3. Bilateral (1458) necessarily in a COS, both
parties will be obligated. It is not possible that only
1 party is obligated because a contract of sale is
essentially onerous.
4. Onerous (1350) COS is essentially onerous.
Otherwise, it may be another contract or any other
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Distinctions
1. Deed of Absolute Sale (DAS) vs. Conditional
Sale (CS) vs. Contract to Sell (CTS)
2. Dation in Payment (DIP) vs. COS
3. Contract for a Piece of Work (CPW) vs. COS
4. Barter vs. COS
5. Agency to Sell (ATS) vs. COS
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1. As to Nature
DIP a special form of payment
COS - it is a contract
2. As to Requisites
DIP with a pre-existing obligation
COS not a requirement
3. As to Effect
DIP to extinguish the obligation either wholly or
partially.
COS obligation will arise instead of being
extinguished.
Contract for a Piece of Work (CPW) vs. COS
BE: A team if basketball players went to a store
to buy shoes and out of the 10 members, 5 of
them were able to choose the shoes. They
agreed to pay the price upon delivery. The
other 4 members were able to choose but the
shoes were not available at that time but they
are normally manufactured. The last member
could not find shoes that could fit his 16 inches
feet and therefore he has to order for such kind
of shoes. What transactions were entered into
by these players?
SA: 1467 the first 2 transactions involving a total
of 9 players would be considered a COS because
the shoes which they ordered are being
manufactured or procured in the ordinary course of
business for the general market. However, the last
transaction which will be manufactured only
because of the special order of the player and is
not ordinarily manufactured for the general market
will be considered a CPW which is known as the
Massachusetts rule.
Massachusetts rule rule in determining whether
the contract is a COS or a CPW.
Barter vs. COS
Q: A obliged himself to deliver a determinate
car with a market value of P250,000.00. B
obliged himself to deliver his watch and
P150,000.00 in cash. What kind of contract?
A: First, you have to consider the intention of the
parties. They may want this transaction to be
considered as a sale or barter and that will prevail.
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Note:
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PERFECTION
OF
THE
Auction Sale
Auction sale is perfected upon the fall of the
hammer or any other customary manner. Thus,
before the fall of the hammer in an auction sale,
the bidder even if he has already made a bid, he
can still withdraw the bid as long as he would do
that before the fall of the hammer. Otherwise, (if
after the fall of the hammer), there is already a
perfected sale.
Q: Can the auctioneer withdraw the goods
before the fall of the hammer?
A: As a rule, yes because the sale has not been
perfected at the moment unless the bidding or
auction has been announced to be without reserve.
Note: Before perfection, there is one contract
which maybe perfected. Before perfection meaning
in the negotiation stage this contract is known
as the option contract.
Option Contract
Sanchez vs. Rigos
Facts: Mrs. Rigos offered to sell her land to
Sanchez for a certain price. Rigos gave Sanchez 2
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6.
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1.
2.
Obligation to transfer
Obligation to deliver
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2.
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a.
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LEASE
Notes:
Read the Definition of Lease under Articles
1643, 1644, 1713.
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4.
5.
Nominate
Principal.
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AGENCY
Definition 1868, 1874 and 1878 - formalities
Because a form is required for the validity or for
the enforceability of the contract entered by the
agent-1878, 1874
1892 - pertain to appointment of the substituteeffect- may the agent nonetheless be held liable for
the loss that incurred by the principal as the result
of the appointment of the substitute.
Other provisions pertain to the right and obligations
of commission agent or more importantly the
guaranty commission agent 1907 - 1908
Effect of death -1919, 1930 and 1931
Either of the agent or principal
Revocation - kind of agency - agency coupled with
interest - 1927
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CHARACTERISTICS OF A CONTRACT OF
AGENCY
Q: Real? Formal?
A: Definitely it is not a real contract and also not a
formal contract.
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Another Example
An agency to buy a parcel of land before the Mt.
Pinatubo eruption. During that time, agents all over
Luzon, will buy a parcel of land not only in Metro
Manila but also in Pampanga and South
CALABARZON but if the agent was given authority
and he bought parcels of land immediately after the
eruption somewhere in Porac / Bacolor Pampanga,
mukhang you can be held liable for buying those
parcels of land. That it would be a valid sale?
A: Yes, that would be a valid and binding sale as
far as the 3rd person is concerned. If nakita naman
na puro lahar, nakita mo pa binili mo pa, the agent
can be held liable because the act definitely would
result in loss or damage to the principal at least for
about 15 years.
2. In carrying out the agency, there are 2
obligations of the agent, he should always
remember:
(a) To act within the scope of authority
(b) To act in behalf of the principal or in
representation of the principal.
(a) To act within the scope of authority
Q: How would you know if the agent was acting
within the scope of authority?
A: You will be guided by the power of authority. In
fact, as a 3rd person, you can demand the power of
attorney, so that you will know whether in fact he
had authority to enter into a contract. But sa totoo
lng there are some SPAs which would be subject
of the case up to the SC pertaining to the scope of
authority of the agent.
Linal vs. Puno
Q: Was Puno authorized to sell the land or
merely authorize to administer the land?
A: There was a dissenting opinion.
Atty. Uribe: Mas magaling ang dissenting opinion.
Sa phraseology ng authority ni Puno he was only
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Partnership
BE: Chato, using all his savings in the total
amount of 2,000, decided to establish a
restaurant. Faye, however, gave 4,000 as
financial assistance with the agreement that
Faye will have 22% share of the profits of the
business. After 22 years, Faye filed an action to
compel Chato to deliver to her the share in the
profits claiming that she was a partner. Chato
denied that Faye was her partner. Is Faye a
partner of Chato?
A: Yes, Faye was a partner in the business
because there was a contribution of money to a
common fund and there was an agreement to
divide the profit among themselves.
Atty. Uribes Comment: I do not agree with the
answer. Id rather agree with the alternative
answer. WHY? In the alternative answer as can be
seen from the facts, Faye gave 4,000 only as a
financial assistance. It was not a contribution to a
common fund. As such, she actually became a
creditor of Chato. Therefore, she did not contribute
to a common fund.
Q: What about the stipulation that Faye will
have 22% share of the profits?
A: The law on partnership is very clear that a
sharing in the profits does not necessarily result in
a partnership contract because the sharing of the
profits may only be a way of compensating the
other person, in fact that can be a mode of
payment of the loan. Kasi yung loan, supposedly
pwede payable every month with a fixed amount.
But mas maganda ang agreement na ito, 22% of
the profits, so that if walang profit sa isang taon,
wala munang bayad. Di ba thats reasonable
agreement. Only kung may profit, saka lang
babayaran. Kumbaga, friendly loan ito. The sharing
in the profits as expressly provided by law does not
necessarily result in a partnership contract. Thus, it
can be said that really Faye was not a partner but
is actually a creditor of Chato.
DEFINITION OF PARTNERSHIP
Q: What if two or more persons agreed to put
up a partnership but they never intended to
divide the profits among themselves, would
that still be considered a valid partnership
contract?
A: Yes, under the second paragraph of the article,
two or more persons can form a partnership for the
exercise of a profession.
Partnership vs. Co-ownership
Consider the essential features:
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Creation:
Partnership is obviously created by agreement. Coownership may be created by agreement, but it
may also be created by operation of law. In fact, by
express provision of the law, the fact that there is
co-ownership does not necessarily mean that there
is a partnership existing between two persons.
Example: Two persons may inherit a property from
their father or mother, and under the law, they may
be considered as co-owners of the same property.
Purpose:
Partnership: either to divide profits or exercise a
profession.
Co-ownership: Common enjoyment of the thing or
right owned in common; merely to enjoy the
property, thus they may have different purposes.
A very important feature of partnership in relation
to co-ownership: it has a juridical personality,
separate and distinct from the individual partner
which is obviously not present in co-ownership. In
co-ownership, they have their respective
personalities and no new personality will be
created.
Powers of the Members:
Partnership: Unless otherwise agreed upon, each
partner is an agent of the other partners and of the
partnership.
Co-ownership: As a rule, a co-owner cannot act as
an agent of the other co-owners unless otherwise
agreed upon between the co-owners.
PROFITS:
Co-owner: Mas malaki ang profits, mas malaki ang
interest. But not necessarily in partnership,
because the sharing in the profits may be
stipulated upon by the parties. Pero kung walang
stipulation, it may be based on the capital
contribution.
Q: Will death extinguish co-ownership?
A: No, Kapag namatay ang isang co-owner, his
heirs will be the co-owners of the surviving coowners at pwedeng tulou-tuloy lang yan. However
in partnership, if it is a general partnership, if one of
the partners dies, the partnership is dissolved.
ESSENTIAL ELEMENTS OF PARTNERSHIP
Like any other contract, it should have the three
essential requisites:
1.) Consent
2.) Object: to engage to a lawful activity,
whether a business or profession.
3.) Cause or consideration: the promise of
each partner to contribute money, property
or industry
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FORMALITIES:
Q: If the agreement of the parties to a contract
of partnership was only a verbal agreement,
would that be a valid and binding contract? Will
there be a juridical personality created?
A: As a rule, yes. Even if under Art. 1772, the law
provides that every contract of partnership, having
a capital of more than Php3,000 or more, shall be
in a public instrument and must be registered with
the SEC.
The 2nd paragraph of Art. 1772 provides
that despite failure to comply with the requirements
in the preceding paragraph, this is without
prejudice to the liability of the partnership and the
individual partners to third persons. From that
article alone, it is clear that despite non-compliance
with the requirements of the law as to form, there is
a partnership created, because this is without
prejudice to the liability of the partnership (kung
may partnership). But more directly, Art. 1768, the
law provides, the partnership has a juridical
personality separate and distinct from that of each
if the partners, even in case of failure to comply
with the requirements of Art. 1772, par.1.
After all, a verbal partnership contract is valid and
binding between the parties.
Q: Is there a partnership agreement which
would require a particular form for the validity
of the partnership agreement?
A: Yes. There is only one scenario here: if one of
the contracting parties promised to contribute an
immovable, there has to be an inventory of such
immovable and signed by the contracting parties. If
there is no inventory, the law is very clear, the
partnership is void.
Q: What if there was an agreement to
contribute an immovable and there was an
inventory signed by all the partners, however,
the partnership agreement itself was not put
into writing, what is the status of that
partnership contract?
Atty. Uribe: I agree with the position of Professors
Agbayani and Bautista that, despite Art. 1771, as
long as there is an inventory of such immovable,
the partnership agreement is valid and binding and
the juridical personality will be created.
Why?: As ruled by the SC consistently, like in the
case of Dauden-Hernaez vs. delos Angeles, for a
contract to be void for non-compliance with the
requirements of the law as to form, the law itself
must provide for the nullity of the contract. If the
law only required a form, but the law itself did not
provide for the nullity of the contract, if the parties
failed to comply with that form, then that form is not
necessary for the validity. It may be necessary for
the enforceability of the contract or greater efficacy
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PROPERTY RIGHTS
3 Major property rights of a partner:
1.) Right in specific partnership property;
2.) Interest in the partnership; and
3.) The right of the partner to participate in the
management of the business of the partnership.
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B. Property:
If a partner promised to contribute
property, it must be determined as to what was
really contributed: was it the property itself or the
use of the property.
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of the partnership, then the contributing partnerowner will bear the loss.
EXCEPTIONS:
1.) When the thing contributed is fungible;
2.)
or it cannot be kept without
deteriorating;
3.) If contributed by the partner to be sold;
and
4.) When it has an appraised value of such
property.
In all these circumstances, it is the partnership
which will bear the loss if the thing was lost or
destroyed while in the possession of the
partnership.
Again, if the contributing partners fails to make
good his promise to contribute property, he will be
treated as a debtor of the partnership, thus specific
performance will likewise be a remedy.
C. Industry
If a partner fails to render service as
promised, will specific performance be a remedy?
Ans.: Definitely not. It would be a violation of his
rights against involuntary servitude. The remedy
would be to demand for the value of the service
plus damages. It can be easily done because there
is an industry rate.
2. Fiduciary Duties:
The duty to observe utmost good faith, honesty,
fairness, integrity in being with each other. This
duty commences even during the negotiation
stage.
Test to determine whether there was a violation
of this duty:
Whether the partner has an advantage himself at
the expense of the partnership. If he has such
advantage at the expense of the partnership, then
there is a breach of the fiduciary duty. There need
not be a proof of evil motive so long as he has this
advantage at the expense of the partnership.
This duty lasts, normally,
termination of the partnership.
until
the
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executed only
partnership.
after
the
termination of
the
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TRUST
2 KINDS:
1.) Express;
2.) Implied.
Implied Trust: 2 Kinds:
1.) Resulting trust;
2.) Constructive trust
The classification of trust into two kinds
(express and implied) and implied trust into two
kinds (resulting and constructive) would be relevant
in two concepts:
1.)
Applicability of the parole evidence
rule; and
2.)
Prescription, specifically, acquisitive
prescription.
Note: An express trust over an immovable may not
be proven by parole evidence. This means that
implied trust over an immovable may be proven by
parole evidence or express trust over a movable,
may be proved by parole evidence.
EXPRESS TRUST
Q: May an express trust over an immovable be
proven by mere testimony of the witness?
A;Yes, if the lawyer of the other party did not object
to the presentation of the witness.
BE: In an agreement between A and B, a
property of A was to be registered in the name
of B, with an agreement the B will reconvey the
property to As son upon the graduation of the
said son (As son). This agreement was entered
into in 1980. The property was in fact registered
in the name of B the following yea, 1981. In
1982, A died. In 1983, As son graduated.
Despite that fact, B did not reconvey the
property. He had no knowledge of this
agreement until 1993, when accidentally, the
son of A discovered such instrument pertaining
to the agreement of A and B. Thus, he
demanded that the land be conveyed to him. B
refused raising the defense of prescription. Is
this claim tenable?
A: Definitely not. This pertains to an express trust.
In an express trust, trustee will be holding the
property only in the name of the beneficiary or the
cestui que trust, therefore, he cannot acquire the
said property by acquisitive prescription unless
there would be adverse possession over the
property.
Q: When would there be adverse possession?
A: It may only start with repudiation. Without
repudiation, the period for acquisitive prescription
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Credit transactions
Q: Why credit transactions?
A: Because these transactions all involved credit
meaning there is a belief in the capacity of one of
the parties to perform his obligation in the future.
Note: Credit transactions ang tawag but they are
not all contracts. There can be legal relationship
even without an agreement examples legal
pledge, judicial deposit. But the others are
contracts there are contractual deposit and
pledge by agreement.
Transactions:
A. Kinds of Loans
1. Mutuum
2. Commadatum
B. Kind of Deposits
1. Judicial
2. Extrajudicial
C. Guaranty
D. Suretyship
E. Real Guaranty favorite in the bar exams
1. Pledge
2. Chattel Mortgage (CM)
3. Real Estate Mortgage (REM)
4. Antichresis
Focus on the following provisions:
1933, 1962, 2047, 2132, 2140
Obligations of the bailee 1942
Obligations of depositary - 1979
Right to demand for interest 1956
Requisites of pledge and mortgage - 2085
Pactum Commissorium 2088
Indivisibilty Principle
Right to recover the deficiency / excess 2115
Mutuum vs. Commodatum
1. C a thing is delivered to the bailee for the use
of the property and therefore ownership is not
transferred.
M a consumable thing is delivered and therefore
ownership thereof is transferred to the bailee or
borrower.
2. M only consumables are the object
C may be immovables (house, rice field)
Usufruct vs. Commodatum
1. U is a right to enjoy the property which means
that the usufructuary will not only have the right to
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Deposit
Q: Are checking accounts, savings account,
dollar accounts irregular deposits?
A: No. They are not deposits under the law
because they are governed by the rules on
mutuum (loan). The bank is the debtor. SC called
these deposits in the nature of irregular deposits
but not irregular deposits because the banks use
the money that is why it is in the nature of irregular
deposits.
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