LAW ON SALES, AGENCY, LABOR, AND CREDIT
TRANSACTIONS
I. SALES
Contract of Sale- by the contract of sale one of the
contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the
other to pay therefore a price certain in money or its
equivalent. (Art. 1458)
Characteristics of a Contract of Sale (CoBiCo Pri N' One)
 Consensual- perfected by mere consent
 Bilateral-reciprocal obligations
 Commutative- thing sold is equivalent of the price
 Principal- can stand alone
 Nominate- it has its own name
 Onerous- thing is sold in consideration of the price
Essential Requisites of a Contract of Sale (COC)
 Consent or Meeting of Minds
-parties must have legal capacity to give consent and
to obligate themselves
-mere offer by one, w/o the acceptance of the other,
there is no consent
 Object or Subject Matter
-determinate thing must be the object
-it must be lawful, within the commerce of men and
not impossible
 Cause or Consideration
- price certain in money or its equivalent, as to seller
-deliver thing sold, as to buyer
Object of a Contract of Sale
 Things
-it must be determinate
-it must be licit or lawful
-it must be within the commerce of men
 Rights
-must be transmissible or not personal
-services may not be the object of sale
 Future Things
-it must have potential or possible existence and the
title will be vested to the buyer when it comes to
existence
-sale of a mere hope or expectancy is valid
-sale of a vain hope or expectancy is void
Contract of Sale vs. Contract of Agency to Sell (PROWD)
 Price
S- buyer has to pay the price
A-agent has to account for the proceeds of the sale
 Return
S- generally, buyer cannot return the object sold
A-Agent can return the object if it is unsold
 Ownership
S-buyer receives the goods as owner
A-agent receives the goods as the goods of the
principal who retains ownership
 Warranty
S-seller warrants the thing sold
A-agent makes no warranty as long as he acts within
his authority and in behalf of the seller
 Dealings
S-buyer can deal with the thing sold as he pleases
A-in dealing with the good, agent must act according
to the instructions of his principal
Contract of Sale vs. Contract for a Piece of Work (REF)
 Risk of Loss before Delivery
S-risk of loss before delivery is borne by the buyer
after perfection of contract
P-risk of loss before delivery is borne by the
contractor, not by the employer
 Existence
S- thing transferred is one which would have existed
and been subject to sale to others, even if the order
is not given
P- thing transferred is one which is not in existence or
would have never existed but for the order of the
party desiring to buy it
 Formality
S – within the Statute of Frauds
P – not within the Statute of Frauds
Exchanges, Partly in Money and Partly in Goods
Rule: The nature of the contract shall be characterized by the
intention of the parties.
If intention cannot be ascertained:
-Value of Thing > Money or its Equivalent = Contract of Barter
-Value of Thing < Money or its Equivalent = Contract of Sale
(Refer to Article 1468 for the illustrations and more details)
Rules of Fixing the Price (Article 1469)
Gen. Rule: Fixing of the price can never be left to the
discretion of one of the contracting parties
Exception: Price fixed by one of the parties is accepted by the
other, sale is perfected.
Gen. Rule: Price fixed by a third person specified by the
partied is binding upon them.
Exception:
-When the third person acts in bad faith or by mistake, mere
error in judgment is not sufficient to disregard the price fixed,
in such case, court may fix the price.
-When the third person disregarded the instructions of the
parties and fixed an arbitrary price.
Cases when price considered certain:
a. parties have fixed or agreed upon a definite price
b. certain with the reference to another thing certain
c. determination of price left to the judgment of a specified
person or persons
Sale by Auction (Article 1476)
Withdrawal/ Retraction of Sale by Auction
Gen. Rule: The auctioneer may withdraw or retract the goods
from sale any time before the hammer falls
Exception: The sale has been announced to be without
reserve.
Contract of Sale vs. Sale by Auction (PPC)
 Parties
Sale- seller and buyer
Auction- auctioneer and bidder
 Perfection
Sale- perfected by the consent of the parties
Auction- perfected by the announcement of the
auctioneer followed by the fall of hammer or other
customary manner
 Contract
Sale- object of sale is subject to one contract
Auction- sale by auction by lots, each lot is subject to
separate contract
Promise to Buy and Sell (Article 1479)
Kinds of Promises:
-An accepted unilateral promise to sell in which the acceptor
elects to buy
-An accepted unilateral promise to buy in which the acceptor
elects to sell
-A bilateral promise to buy and sell reciprocally accepted by
either parties chooses to exact fulfillment (As if perfected)
Effect of accepted unilateral promise supported by a
consideration distinct from the price
-binding upon the promisor or the one who promised
Effect of Unaccepted Unilateral Promise (Policitation)
-creates no juridical effect or legal bond
Option Money vs. Earnest Money (PPP)
 Price
E-money is part of the purchase price
O- money is distinct consideration from the price
 Perfection
E- given only when there is already a sale
O-applies when the sale is not yet perfected
 Payment
E- buyer is bound to pay the balance
O- would-be buyer is not required to pay the price unless he
chooses to buy the thing
Risk Loss or Deterioration (Article 1480)
Gen. Rule: The risk of loss or deterioration is borne by the
owner (res perit domino or thing perishes with the owner)
Risk of Loss or Deterioration in Different Stages
 Lost before perfection – borne by the seller
 Lost at the time of perfection- contract is void, loss
borne by the seller
 Lost after perfection but before delivery- borne by
the buyer, exception to res perit domino
Recto Law or Sale of Personal Property by Installment
(Article 1484)
Remedies of Vendor:
1. Exact fulfillment of obligation (At least one installment
payment)
2. Cancel the sale, upon failure to pay two or more
installment payment
3. Foreclose the chattel mortgage on the thing sold, upon
failure to pay two or more installment payment
- Vendor shall have no further action to recover the
unpaid balance of the price to the buyer, any agreement is
void.
Persons with Relative Incapacity to Buy or Sell (Chapter 2)
Husband and Wife
Gen. Rule: Husband and wife cannot sell property to each
other
Exception:
-when a separation of property was agreed upon their
marriage settlements
-when there has been a judicial separation of property
Other Persons with Relative Incapacity to Purchase (GAEPJA)
1. Guardian
2. Agents
3. Executors and administrators
4. Public officers and employees
5. Justices, judges, prosecuting attorneys, clerks of superior
and inferior courts, and other officers and employees
connected with the administration of justice
6. Any others especially disqualified by the law.
Effect:
1-3- Voidable because only private interests are affected,
4-6- Null and void because public interests is involved
Ways of Effecting Constructive Delivery (EQ 4T)
-Execution of public instrument
-Quasi-traditioor quasi-delivery
-Traditio symbolica
-Traditio longa manu
-Traditio brevi manu
-Traditio constitutum possessorium
Extinguishment of Sale (Chapter 7)
Common Causes (PALCON ME CONO)
Special Causes (Law on Sales)
Extra-special Causes (Conventional and Legal Redemption)
Presumed as Equitable Mortgage: (IPERTO)
-price of a sale with right to repurchase is unusually
inadequate
-vendor remains in possession as lessee or otherwise
-upon or after expiration of the right to repurchase another
instrument extending the period of redemption or granting a
new period is executed
 -purchaser retains for himself a part of the purchase price
-vendor binds himself to pay the taxes on the thing sold
-other cases where it may be fairly inferred that the real
intention is that the transaction shall secure payment of a
debt or performance of any other obligation.
Keywords
I – inadequate price of sale
P – possession by the vendor
E – extension of right to repurchase period
R- retaining part of the price
T- taxes paid by vendor
O- other cases inferred as equitable mortgage
Presumption in case of doubt on sale with right to
repurchase:
-Equitable mortgage is favored by the law, whether absolute
or pacto de retro sale and on contracts purporting to be a sale
with right to repurchase.
Legal Redemption (Article 1619 onwards)
-No agreement as to redemption – 4 years
-There is an agreement as to redemption but period is not
specified – 10 years
-There is a specified period of redemption but more than 10
years – 10 years shall prevail
II. AGENCY
Contract of Agency- 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.
Characteristics of a Contract of Agency (PUP NoCon)
Principal- can stand alone
Unilateral- gratuitous or Bilateral- for compensation
Preparatory- entered into as a means to an end
Nominate- has its own name under the law
Consensual- perfected by mere consent
Capacity of Parties
Principal- must be capacitated under the law
Agent- does not have to possess full capacity and must be
competent to bind himself
-absolutely incapacitated by the law cannot be agents
(i.e. insane)
Sale of Land through Agent
Gen. Rule: A sale of land through an agent is void.
Exception: Authority of the agent is made in writing.
Contracts Entered by the Agent not disclosing the Principal
Gen. Rule: The agent who acted in his own name is directly
liable to the person with whom he had contracted.
The principal has no right of action against the third
person, vice versa.
Exception: Where the contract involves things belonging to the
principal.
The principal has right to demand from the agent
damages for his failure to comply with the agency.
Exception to the exception: The principal shall not be held liable
to the third person if the latter is aware of the agent's action
beyond authority.
Obligations of Agent in General
-To act with utmost good faith and loyalty for the furtherance and
advancement of the interests of the principal
-To obey all lawful orders and instructions of the principal within
the scope of agency
-To act with reasonable care, skill and diligence
Substitution (Article 1892-1893)
Rule: The agent may appoint a substitute if the principal does
not prohibited him.
Agent shall be held responsible if:
- he was not given power to appoint
-he was given with such power, but the person appointed was
notoriously incompetent or insolvent.
Extinguishment of Agency (EDWARD)
1. Revocation
2. Withdrawal of agent
3. Death, civil interdiction, insanity or insolvency of the agent
or principal
4. Dissolution of the firm
5. Accomplishment of the purpose of agency
6. Expiration of the period of agency
1-2 – unilateral act of the parties
3-4 – operation of law
5-6 – agreement
Revocation (Article 1920-1927)
Effect of revocation in relation to third parties
1. Agency to contract with specific persons
-The rights of the third parties will not be prejudiced until
notice was given.
-Third persons must be given notice of the revocation unless
the latter know already.
2. Agency to contract with general public
-If the agent had general powers, the rights of the third
parties will not be prejudiced who acted in good faith and
without knowledge of the revocation.
-Notice of revocation in newspaper of general circulation is
a sufficient warning to third persons.
When Agency is Irrevocable:
- The agency is created for the mutual interest of both the
principal and agent.
- The agency is created not only for the interest of the
principal but also for the interest of third persons
III. LABOR

Just Causes for Termination

1. Serious misconduct or willful disobedience by the employee
of the lawful orders of his employer or representative in
connection with his work.
2. Gross and habitual neglect by the employee of his duties
3. Fraud or willful breach by the employee of the trust reposed
in him by his employer or duly authorized representatives
4. Commission of crime or offense by the employee against the
person of his employer or any immediate member of his family
or duly authorized representatives
5. Other causes analogous to the foregoing

Authorized Causes for Termination

1. Installation of labor-saving devices
2. Redundancy
3. Retrenchment to prevent losses
4. The closing or cessation of operation

Philippine National Holidays

Regular Holidays:
New Year's Day - January 1
Araw ng Kagitingan or Day of Valor – April 9
Maundy Thursday
Good Friday
Labor Day – May 1
Indepenedence Day – June 12
National Heroes' Day – last Monday of August
Bonifacio Day – November 30
Christmas Day – December 25
Rizal Day – December 30
Eid'l Fitr – based on Islamic calendar
Eid'l Adha - based on Islamic calendar

Special Non-working Holidays:

Chinese New Year – sometime in January or February
EDSA Revolution Anniversary – February 25 IV. CREDIT TRANSACTIONS
Black Saturday V.
Ninoy Aquino Day – August 21 Commodatum vs. Mutuum (CROP STOR)
All Saints' Day – November 1  Cause
Feast of Immaculate Conception of Mary – December 8 C- gratuitous, otherwise it is a lease
Last Day of the Year – December 31 M- may or may not be gratuitous
 Return
C- the thing to be returned is the exact thing
M- a thing of equal amount of the same kind and quality
 Object
C- object is consumable
M- object is non-consumable
 Purpose
C-use or temporary possession
M-consumption
 Subject matter
C- subject matter may real or personal property
M-only personal property
 Term  Assumption of Liability
C- maybe returned even before the expiration of the term in G- guarantor depends upon an independent agreement to
urgent cases pay if the principal debtor faililyd to do so
M- must be after the expiration of the term S- surety assumes liability as a regular party
 Ownership  Nature of Liability
C- ownership is retained by the bailor G – guarantor is subsidiary or secondarily liable
M- ownership passes to the borrower S- surety is primarily or directly liable
 Risk of loss
C- bailor bears the risk of loss Benefit of Excussion
M- borrower suffers the loss The guarantor cannot be compelled to pay the creditor
unless the latter has exhausted all the property of the
Deposit (Part B, Chapters 1-4) debtor, and has resorted to all the remedies against the
debtor
Judicial vs. Extrajudicial Deposits (PORS)
 Purpose  Exceptions to benefit of excussion (PARIS)
J- security and secure the right of a party to recover in case -if it may be PRESUMED that an execution on the property
of favorable judgment of the debtor would not result in the satisfaction of the
E- custody and safekeeping obligation
 Origin -if debtor has ABSCONDED or cannot be sued within the
J- will of the court Philippines unless he left a manager or representative
E- will of the parties -if the guarantor has expressly RENOUNCED it
 Remuneration -in case of INSOLVENCY of debtor
J- always remunerated (onerous) -if he has bound himself SOLIDARILY with the debtor
E- generally gratuitous but may be compensated Keywords:
 Subject Matter P- presumed that execution of property will be useless
J- either movable or immovable property A- Absconded debtor
E- only movable property R-renunciation of right
I-insolvency of debtor
Voluntary vs. Necessary Deposits S- solidarily liable
VOLUNTARY - the depositor has complete freedom to choose
the depositary Pledge, Mortgage, and Antichresis
NECESSARY - the freedom to choose is not present.

Deposits in Banks Mortgage

Pledge Antichresis
Contract of loan – deposits of money in banks are really loans Real Chattel
to a bank because the bank can use the same for its ordinary Object Movable, Immovable Movable Immovable
transactions and for banking business. incorporeal things, things things
things real rights
Where thing deposited delivered closed and sealed over
 Obligations of Depositary immovable
-return the thing deposited when delivered closed and sealed, things
in the same condition Contract Real Real Real Consensual
-pay for the damages should the seal or lock be broken thru
his fault which is a disputable presumption. Parties Antichretic
Pledgor/ Mortagagor/
-keep the secret of the deposit when seal or lock is broken creditor/
pledgee mortgagee
with or without his fault. debtor
 When depositary justified to open Req. In writing In writing, public In writing
-when there is a presumed authority or necessity to open (contracti instrument and must and public
arises. g parties) be registered instrument
Public
Guaranty (Part C, Chapters 1-3) instru-
ment (3rd
Guaranty vs. Suretyship (PAN) Persons)
 Payment Delivery Must be Not necessary, debtor Must be
G- guarantor binds himself to pay if the principal cannot made to usually retains made to
pay the possession the
S- surety binds himself to pay if the principal does not pay pledgee creditor