Regulatory Framework & Legal Issues in Business

MODULE MATERIALS

List of Modules

No. MODULE
MODULE TITLE
CODE

1 Law on Business Transactions FLIB 223-1

2 Kinds of Obligations FLIB 223-2

3 Extinguishment of Obligations FLIB 223-3

4 Contracts FLIB 223-4

5 Defective Contracts FLIB 223-5

6 Sales FLIB 223-6

7 Negotiable Instruments Law FLIB 223-7

8 Law on Credit Transactions FLIB 223-8

9 Special Laws on Credit Transactions FLIB 223-9

10 Partnership FLIB 223-10

11 Corporations FLIB 223-11

Practical applications of Regulatory Frameworks and
12 Business Law FLIB 223-12
 MODULE CONTENT

COURSE TITLE: REGULATORY FRAMEWORK AND LEGAL ISSUES

IN BUSINESS

MODULE TITLE Sales

NOMINAL DURATION: 5 HRS

SPECIFIC LEARNING OBJECTIVES:

At the end of this module, you MUST be able to:
1. Describe the concept of sales and its application
2. Cite the difference between earnest money and option money
3. Discuss awareness on the rights and obligations of vendor and vendee
4. Explain about warranties and other relevant law

TOPICS:
1. Nature of Sales, forms, and requisites
2. Earnest money vs Option money
3. Rights and obligations of vendor and vendee
4. Warranties
5. Other relevant laws (Recto law for personal property vs Maceda law for
real property)

ASSESSMENT METHOD/S:
Multiple Choice

REFERENCE/S:
Soriano, Fidelito R. Notes in Business Law (For Accountancy Students and
CPA Reviewers) 2016 Edition. pp. 328-431

BSAIS Bulacan
Date Developed:
REGULATORY Polytechnic January 2021 Page 2 of 7
FRAMEWORK AND College
LEGAL ISSUES IN Document No. Developed by:
BUSINESS – FLIB 223 Jennet M. Natividad Revision # 00
c/o Admin
 Information Sheet FLIB 223-6

Sales

Learning Objectives:
After reading this INFORMATION SHEET, YOU MUST be able to:
1. Discuss the concept of sales and its application
2. Explain the various elements of a contract of sale

NATURE OF SALES, FORMS, AND REQUISITES

Sales – A contract whereby one of the

contracting parties (known as the seller or
vendor), obligates himself to transfer the
ownership of and to deliver a determinate
thing, and the other party, (known as the
buyer or vendee), obligates himself to pay
therefor a price certain in money or its
equivalent.

Elements of a contract of sale Pictures c/o Google

Essential
elements or It refers to those without which a contract of sale
requisites would not exist

It refers to those inherent in a contract of sale, which

Natural elements in the absence of stipulation excluding them, are
deemed to exist

Accidental They refer to particular stipulations of the parties such

elements as terms, place, and time of payment, and other
conditions agreed upon.

BSAIS Bulacan
Date Developed:
REGULATORY Polytechnic January 2021 Page 3 of 7
FRAMEWORK AND College
LEGAL ISSUES IN Document No. Developed by:
BUSINESS – FLIB 223 Jennet M. Natividad Revision # 00
c/o Admin
Characteristics of a contract of sale
Communi-
Consensual Principal Bilateral Onerous Nominate
cative
•It is •It can exist •The parties •Valuable •The parties •It has a
perfected by itself are bound considerati exchange special
by mere without by ons are almost name given
consent of being reciprocal given by equivalent to it by law
the parties. dependent obligations both values
upon parties to
another acquire
contract rights

Price – is the sum stipulated as the

equivalent of the thing sold, and also every
incident taken into consideration for the
fixing of the same, put to the debit of the
vendee, and agreed to by him.

Picture c/o Google

Rules on price
Gross of
Certainty of inadequacy of Stimulated
price price price
The price is Does not affect If the price is
thing sold must a contract of simulated, the
be certain; sale, except as sale is void, but
otherwise, the it may indicate the act may be
sale is void by a defect in the shown to have
reason of the consent, or that been in reality
absence of the parties a donation, or
meeting of really intended some other act
minds between a donation or or contract.
the parties. some other
contract.

BSAIS Bulacan
Date Developed:
REGULATORY Polytechnic January 2021 Page 4 of 7
FRAMEWORK AND College
LEGAL ISSUES IN Document No. Developed by:
BUSINESS – FLIB 223 Jennet M. Natividad Revision # 00
c/o Admin
 Forms of a contract of sale
Subject to the provisions of the Statute of Frauds and of any other applicable
statute, a contract of sale may be in any of the following forms;
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.
Under the Statute of Frauds, the sale involving the following must be in
writing to be enforceable:
Sale of real property or of any interest therein (regardless of the price)
Sale of goods, chattels or things in action the price of which is
P500.00 or more.
Sale of a price of land through an agent
The authority of the agent to sell a piece of land must be in writing;
otherwise, the sale is void.

EARNEST MONEY VS OPTION MONEY

Earnest money is the Option money is the

money given as part of the consideration paid for the
purchase price and as purchase of holding one
proof of the perfection of Earnest to his promise to buy or
the contract. It is called Money Option sell a determinate thing
“arras” or something of Money for a certain period of
value to show that the time, which consideration
buyer was really in is separate and distinct
earnest, and given to the from the purchase price.
seller to bind the bargain
Earnest money is paid Option money is paid for
upon the perfection of a a sale that is yet to be
contract of sale perfected

Earnest money is part of Option money is separate

the purchase price and distinct from the
purchase price

BSAIS Bulacan
Date Developed:
REGULATORY Polytechnic January 2021 Page 5 of 7
FRAMEWORK AND College
LEGAL ISSUES IN Document No. Developed by:
BUSINESS – FLIB 223 Jennet M. Natividad Revision # 00
c/o Admin
 RIGHTS AND OBLIGATIONS OF VENDOR AND VENDEE
Obligations of the Vendor
- To transfer the ownership of the thing sold
- To deliver the thing sold
- To warrant the thing sold
- To take care of the thing sold with the diligence of a good father of a
family unless the law or the stipulation of the parties requires another
standard of care.

Delivery or tradition – it is a mode of acquiring ownership whereby the

object of the contract is placed in the control and possession of the vendee,
either actually or constructively.

• the ownership of the goods is transferred to the

buyer on delivery, but the buyer has the option
to revest their ownership on the seller by
Sale of return
returning them within the time fixed in the
contract, or if no time has been fixed, within a
reasonable time.

• ownership of the goods remains with the seller

Sale on approval despite delivery but shall be transferred to the
buyer

WARRANTIES
Conditions in a contract of sales - If the obligation of a party is subject to a
condition which is not fulfilled, the other party may choose to do any of the
following;

Refuse to proceed with the contract

Waive the performance of the condition

Picture c/o Google

BSAIS Bulacan
Date Developed:
REGULATORY Polytechnic January 2021 Page 6 of 7
FRAMEWORK AND College
LEGAL ISSUES IN Document No. Developed by:
BUSINESS – FLIB 223 Jennet M. Natividad Revision # 00
c/o Admin
Kinds of Warranties
Express warranties – refers to any affirmation of fact or any promise by the
seller relating to the thing whose natural tendency is to induce the buyer to
purchase the same, and if the buyer purchases the thing relying on such
affirmation or promise.
Implied warranties – are those that are inherent in contracts of sale and
accompany them unless they are suppressed by the parties.
Warranty against eviction
Warranty against hidden defects

Diagram c/o SmartArt

Persons not liable
Sheriff Auctioneer Mortgagee Pledgee for breach of
warranty

Other Relevant Law

- Recto law for personal property
- Maceda law for real property

Remedies of vendor in installment sales of personal property (Recto

Law, Art. 1484), and contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the lessee of the
possession of the thing.

Recto Law

Diagram c/o SmartArt

Maceda
Law

Sale of Real property in installments (R.A. No. 6552, the Maceda Law)
The law is known as the “Realty Installment Buyer Act”. Its objective is
“to protect buyers of real estate on installment payments against onerous
and oppressive conditions.

BSAIS Bulacan
Date Developed:
REGULATORY Polytechnic January 2021 Page 7 of 7
FRAMEWORK AND College
LEGAL ISSUES IN Document No. Developed by:
BUSINESS – FLIB 223 Jennet M. Natividad Revision # 00
c/o Admin