lesson 1 contract of sale part a and b

concept of a contract of sale

articlee 1445 cc a contract of sale exists when one party agrees to deliver a specific thing nd the other agrees to pay a certain price in money or its equivalent

• a sale involves the exchange of a thing for money

• the objective of a sale is the the trasnfer of ownership of a thing in exchange for money

• the buyer becomes the owner only after both title and delivery

alternatively a barter is an exchange of one thing for another with no money involved

• the presence of a monetary price is what legally qualified a contract as a sake; if money isn’t present the contract is a barter

mixed contract for goods and money

• if money in the dominate object it is a sale

• if goods is the dominant object then it is a barter

essential elements

object of the sale= object must be a specific idneitfiable thing

• the thing must be possible

• must be lawful

• must be determined or determinable

  • can be moveable property ie car, immovable ie house or future things ie future harvest

price= certain and expressed in money or its equivalent

• cannot be fake, symbolic (no real intention to pay) and completely undetermined (sellers wills)

• the price doesn’t need to be fixed immediately as an exact amount it can be objectively determinable by market price third party valuation

consent= there must be agreement between the parties

• consent requires offer and acceptance

• both parties must agree on the thing and the price

• without consent no contract exists

characteristics

consensual contract= perfected by mere consent meaning contract becomes valid when parties agree on the object and the price

• delivery is not required for the contract to exist

• payement is not required for the contract to exist

bilateral/synallagmatic= a sale creates reciprocal obligatios

• sellers obligation to deliver; buyers obligation to pay

• each obligation exists because of the other

• each party is both creditor ie can demand performance and debtor ie must perform

• if the seller refuses to deliver the buyer may refuse to pay

onerous= a sale involves economic sacrifice/gain by both parties

• the seller gives up ownership while the buyer gives up money

• both exchange economic value

• different from a gratuitous contract ie donation where only one party sacrifices

freedom of form= a sale does not require a specific form to be valid

• as long as consent object and price exist the contract is valid whether oral written or implied

• EXCEPTIONS= some goods require formalities for registration, proof and enforceability but even without form the contract will still be valid between the parties

trasnfer of ownership

theory of title and mode article 609cc= ownership does not pass automatically when the contract is signed

• title is required= the legal reason for the trasnfer being the contract of sale

  • however the contract creates the obligation to trasnfer but doesn’t trasnfer ownership by itself

• mode is required= the act that actually transfers ownership ie delivery

• before delivery the buyer has a personal right to demand performance from the seller but only after does the buyer acquire a real right/property right of ownership

framework for contracts of sale

civil sales ie one person sells a car to another

• ordinary private sales

• transactions between individuals

• sales that are not commercial or consumer sales

• regulated by civil code

commercial sale ie a shop buys 100 phones from a supplier to RESELL in a store FOR PROFIT

• purchase of moveable goods ie not land or prop

• with the intention of resale (not personal use)

• with the objective of economic profit

• business to business

• regulated by art 325commercial code

consumer sale ie buying a laptop from curry for personal use

• when a trader/professional sells to a private indidual outside of business activity/consumer

• regulated by consumer law trlgdcu offering mandatory rules/guarantees that cannot be waived

  • even if consumer agrees to worse conditions the clause may still be invalid

other specific regulation

Additional laws may apply depending on:

Type of goods

Example:

• Real estate

• Digital content

Parties involved

Example:

• Minors

• Incapacitated persons

Economic sector

Example:

• Financial sector

EU regulations

Some sales are also subject to:

• Administrative rules

• Sector-specific legislation

• Registration requirements (e.g., land)

capacity art 1457

anyone with capacity to bind themselves may enter into a contract of sale

• natural persons who are of legal age and are not legally incapacitated (pre 2021)

  • minors and legally incapacitated have limited or not capacity and may require consent from parent/guardian/representative

• legal persons who are legal entities acting through representatives

  • companies associations and foundations

prohibitions art 1459

even if a person has capacity they may be prohibited from buying certain property and if violated contract may be void

• guardians cannot buy property belonging to the person under guardship= conflict of interest

• agents cannot buy property they are entrusted to sell preventing price manipulation for personal benefit

• executors of wills cannot buy property from the estate they adminster= self dealing and protecting heirs

• public employees cannot buy public property under there adminstration= prevent corruption

• judicial officers cannot buy property involved in legal proceedings under their authority= protect impartibility

obligations of the seller: preservation art 1094cc

preservation art 1094cc

• from perfection of the contract until delivery the seller must preserve the thing and take proper care to the diligence of a good parent

• meaning reasonable and normal prudence not extra ordinary care

• if the seller is negligent they are liable for damage

delivery art 1461 cc

• condition= the thing must be delivered in the same condition as at the time the contract was perfected protecting from deterioration caused by seller

• fruits art 1468= the buyer has the right to fruits from the moment the sale is perfected ie crops or rent

• accessories art 1097cc= the seller must deliver all accessories necessary for use of the thing ie keys when buying a house; remote controls

• timing 1466cc= must occur at the time agreed by the parties or simultaneous with payement

  • special rule for consumer= must occur within 30 days unless agreed otherwise to protect from excessive delay

    • the consumer may demand performance or terminate after additional time

• trasnfer ownership= implied natural obligation from obligation of delivery and good faith principle

  • seller must be the true owner or have power to trasnfer ownership

  • deliver the thing

  • do everything necessary for ownership to pass

  • failure ay result in breach and liability for eviction

    • EXCEPTION= in consumer law art 59 the law expressly states the obligation to trasnfer or undertake to trasnfer ownership

statutory warranty of the seller

protects the buyer automatically even if not written in the contract expressly because the seller knows better, the buyer relies on good faith and sales must be fair and secure

• eviction article 1475cc= when the buyer loses the thing purchased due to final judicial judgement because a third party had a prior legal right before the sale

  • seller is liable even if the seller was unaware of the prior right

  • seller must return the price paid, litigation costs, possible damages and any fruits/income

• hidden defects art 1484= a defect that is not visible upon inspection, existed at the time of the sale and is serious

  • must make the thing unfit for intended use or refuse its value significantly

  • the buyer must not have known= if they are a specialist the defect may not be considered hidden

  • burden of proof is on the buyer to prove it existed at time of sale

  • the buyer may choose recision (cancel contract and money back) or price reduction to keep

  • if the seller knew about defect damages may also be awarded

• hidden encumbrances= a burden on property such as a right of way or legal restriction

  • must be not visible upon inspection, not mentioned in the contract and unknown to the buyer

hidden defects vs defective performance (breach of contract)

warranty for hidden defect= the thing works but imperfectly reducing its value and usefulness

• defect existed before the sale

• the defect was hidden/not apparent to the buyer

• the thing remains usable though imperfectly- still needs to be serious ie leaking oil still works

• defects reduces value and utility

• remedies of recision (return and refund) or reduction of price (keep)

• 6 months limitation period from delivery

beach of contract (defective performance)= the thing does not work for its intended purpose meaning the seller has not properly performed the contract

• defect frustrates the contractual purpose

• the thing cannot perform the function it was purchased for ie broken engine won’t drive

• the seller failed to perform their contractual obligation = non performance as received different to what was agreed

• remedies of damages, right to recission, right to demand performance of the thing with the agreed identity and integrity

• limitation period of 5 years from when performance could be demanded (delivery or performance set date)

consumer guarantee regime trlgdcu

applies when the sale is between a trader and a consumer providing stricter rules than civil code

• conformity of goods art 115=

  • subjective= based on what the parties agreed on in the contract (match description, possess agreed qualities) ie contract said it was red should be red

  • objective=not in contract but based on ordinary use/normal quality and reasonable consumer expectations ie fridge must cool food properly and not be warm

  • can be a minor defect

  • liable for 3 years if new good and 1 year minimum but can be extended by contract for second hand goods

    • burden of proof on seller to prove it didn’t exist at delivery for first 2 years

  • consumer has 5 years from the manifestation of the defect to bring a claim

  • primary remedies= must first request repair and replacement free of charge in reasonable time

    • seller can refuse if impossible or disproportionate

    • secondary remedies if first fail= price reduction pr termination

      • termination not allowed for a minor defect

allocation of risk

risk in civil sales art 1452=

• if the thing is lost due to force majeure, without sellers fault or before delivery then the sellers obligation to deliver ends= risk passes before delivery

• the buyer must pay even without receiving

  • ownership principle= the thing disappear for the owner ie the seller not the buyer

• EXCEPTION= THE SELLER BEARS THE RISK

  • seller negligence causes loss,

  • seller is in delay of delivering the thing,

  • the seller enacted a double sale

risk in consumer sales art 66=

• risk only passes to the consumer/buyer when they receive physical possession

• consumer protected during transport ie thing lost in delivery seller is responsible

  • EXCEPTION= if the consumer chooses their own carrier the risk passes when the carrier receives the goods so if lost in delivery the consumer is responsible

buyers main obligation: payement of price

pay the price art 1500 cc= primary obligation to pay the price

• payement must be made in the agreed place at the agreed time in the contract

  • if contract is silent payement must be made at time and place of delivery

• late payement art 1501= if paid after delivery they must pay the price + interest acrued

  • contractual interest= if expressly agreed in the contract buyer must follow this agreed upon amount

  • unfair enrichment interest= if the thing produces fruits (ie rent or crops) the buyer must pay interest because they are already benefitting

  • default delay interest= if the buyer fails to pay when payement is due interest arises automatically as legal default interest (stat rate)

sellers protective mechanism in deferred payement

when payement is made in instalments the seller risks losing the thing and not receiving the price

• immovable property art 1503=

  • preventative measure= even before full non performance the seller can act preventatively due to financial importance

  • non payement= if the buyer fails to pay they can seek termination and claim damages

    • there is no automatic termination of the contract it requires judicial intervention or formal notice for legal certainty in real estate

• moveable goods ie cars art 1505= stronger protection

  • if a specific delivery date exists and both parties have not performed the buyer is in default

  • automatic termination with no court needed as movables are easier to loose/dispose of so requires quicker remedies

special contracts

earnest money contract art 1454cc= preliminary agreement+ deposit before sale to show serious commitment to a future contract

• if seller withdraws they must return double the deposit

• if buyer withdraws they loose their deposit

• allows withdrawal from a contract but with economic consequences

promise of sale and option to purchase

• promise= seller promises to sell the good but the buyer is not obliged to buy it

• option to purchase= buyer has the right to decide within a agreed upon time whether to purchase

• the buyer can accept and a sale is completed or refuse and there is no sale

  • unilateral obligation= only the seller is bound

• the seller cannot withdraw or sell to others

  • if breached the buyer can claim damges+ force performance of the promise

sale of future goods art 1271 cc= goods that do not yet exist but may ie future crops, building in construction, fish to be caught

• sale of an expected thing= a conditional contract where the buyer pays only if the thing exists ie pay after

  • risk stays with the seller = if it doesn’t exist the buyer never pays ie you agree to buy a house once its constructed but construction was abandoned so you don’t pay

• sale of hope= buyer purchases chance/expectation of existence and must pay even if thing does exist ie pay before

  • risk with the buyer ie you buy a lottery ticket if you win nothing you still paid

    • EXCEPTION= if the seller fails to act properly the buyer is not liable ie fisherman tries but catches nothing you pay vs fisherman didn’t go fishing so buyer doesn’t pay

• expected thing= pay only if it exists; hoped thing= pay even if it doesn’t

retention of title clause

ownership does not trasnfer at delivery it transfers only after full payement

• before full payement the buyer has possession and can use the time but the seller remains owner and can recover the goods if the buyer defaults

• after full payement ownership trasnfer automatically with no new contract needed

• protects sellers in deferred payement/instalments

double sale art 1473 cc

• when a movable good is sold to multiple buyers the buyer who first had possession of the thing in good faith takes ownership

  • if no one had possession its the candidate with the earliest tile ie contract

• when immovable property is sold the buyer who first made registration in good faith takes ownership

  • if none it is who had first possession of the thing and if non who had the earliest title ie contract

• good faith requirement= the buyer must always not know about the other sale or act fraudulently for protection

• justification= ownership in moveables is apparent through physical possession whereas in immovables it must be established through registration

sale of another property

sale of another is a valid but atypical contract

• ownership passes only if the seller is the owner at delivery, there is a valid contract and delivery of the thing

• if the seller is not the owner upon formation but later becomes owner and then delivers= valid trasnfer of ownership

• if the seller delivers without ownership at time of delivery=

  • the buyer can be evicted if the real owner claims the property

    • the buyer gets a refund of the price + damages

  • the buyer may require ownership through good faith possession (didn’t know) and passage of time

• if the seller just never delivers= breach of contractual obligations

  • buyer may demand performance/delivery or terminate the contract with damages