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    Formation of A Contract of Sale

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    Jica Gula
    The formation of a contract of sale involves three phases: (1) negotiation, (2) perfection of the contract upon a meeting of the minds regarding an offer and acceptance, and (3) consummation through performance of the contract. This process can sometimes take years as parties conduct due diligence like examining physical assets of the property. Advertisements are merely invitations to offer rather than offers, and an offer can be amended by the offeror before acceptance. A counteroffer arises if the offeree proposes different terms. Option money given during negotiations allows certain privileges but does not require purchase, while earnest money paid after a sale binds the buyer to pay the balance.

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    Formation of A Contract of Sale

    Uploaded by

    Jica Gula
    221 views3 pages
    The formation of a contract of sale involves three phases: (1) negotiation, (2) perfection of the contract upon a meeting of the minds regarding an offer and acceptance, and (3) consummation through performance of the contract. This process can sometimes take years as parties conduct due diligence like examining physical assets of the property. Advertisements are merely invitations to offer rather than offers, and an offer can be amended by the offeror before acceptance. A counteroffer arises if the offeree proposes different terms. Option money given during negotiations allows certain privileges but does not require purchase, while earnest money paid after a sale binds the buyer to pay the balance.

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    FORMATION OF A CONTRACT OF SALE

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    The formation of a contract of sale involves three phases: (1) negotiation, (2) perfection of the contract upon a meeting of the minds regarding an offer and acceptance, and (3) consummation through performance of the contract. This process can sometimes take years as parties conduct due diligence like examining physical assets of the property. Advertisements are merely invitations to offer rather than offers, and an offer can be amended by the offeror before acceptance. A counteroffer arises if the offeree proposes different terms. Option money given during negotiations allows certain privileges but does not require purchase, while earnest money paid after a sale binds the buyer to pay the balance.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    221 views3 pages

    Formation of A Contract of Sale

    Uploaded by

    Jica Gula
    The formation of a contract of sale involves three phases: (1) negotiation, (2) perfection of the contract upon a meeting of the minds regarding an offer and acceptance, and (3) consummation through performance of the contract. This process can sometimes take years as parties conduct due diligence like examining physical assets of the property. Advertisements are merely invitations to offer rather than offers, and an offer can be amended by the offeror before acceptance. A counteroffer arises if the offeree proposes different terms. Option money given during negotiations allows certain privileges but does not require purchase, while earnest money paid after a sale binds the buyer to pay the balance.

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    © All Rights Reserved
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    FORMATION OF A CONTRACT OF SALE

    Negotiation phase -> perfection of the contract (meeting of the minds or that an offer certain is met by
    an absolute acceptance) (birth of the contract) -> Consummation (performance of the contract)

    *it can be a protracted process

    due diligence exercise/ process – the buyer will visit the site, examine the buildings and other physical
    assets; basically a very long process upto the negotiations

    * there are cases that the process can take a lot of years but ends up badly and fell apart with both
    parties not gaining anything or failure of negotiations

    Advertisements are less than offers. They are mere invitations

    Before acceptance, an offer is subject to the will of the offeror (the offeror can bend the offer)

    What happens if the offeree offers a different price?

    - There arises a counter-offer

    In order that a unilateral promise may be binding upon the promisor, Article 1479, Civil code, requires
    the concurrence of the condition that the promise

    What is the distinction between an earnest money and option money?

    Option money (talked during the negotiation phase) – given in order to be entitled of a certain privilege

    - Distinct consideration (different consideration from the main consideration of the contract of
    sale)
    - Applies to a sale not yet perfected
    - Potential buyer is not required to buy; may even have the amount forfeited

    *if the main consideration is 500,000 and you pay 100,000 as option money, you still need to pay
    the whole 500,000; unlike with earnest money, u just have to pay the balance

    Earnest money (talked during the perfection stage, when there is already a sale)

    - Part of the purchase price


    - Given when there is already a sale
    - When given, buyer is bound to pay the balance
    An option contract is

    - An onerous contract
    - A consensual contract – perfected by the meeting of the minds
    - Subject matter of the option contract is not the subject matter of the sale

    Consideration in an option contract may be anything of value, unlike in sale where it must be the price
    certain in money or its equivalent

    - Implication is that it can be of any value not necessarily money in order to have a certain
    privilege

    When the option contract does not contain a period, it cannot be presumed that the exercise thereof
    can be made indefinitely, otherwise it would render uncertain the status of the subject matter

    Option Right of first refusal


    Requires a clear certainty on both the object and Object is determinate but the exercise of the
    the consideration rights would depend not only on the grantors
    original intention to enter into a binding juridical
    relation but also on the other terms such as the
    price which are yet to be firmed up
    Breach is governed by various provisions on Breach results in recovery for damages (at best)
    contracts under Art 19 under human relations

    Important: cannot be subject of an action for


    specific performance because of lack of
    agreement on the price

    The prevailing doctrine therefore, is that a right of first refusal means identity of terms and conditions to
    be offered to the lessee and all other prospective buyers and a contract of sale entered into in violation
    of a right of first refusal of another person, while valid, is rescissible

    In order for an acceptance to have the effect of converting an offer to sell into a perfected contract, it
    must be plain and unconditional, and it will not be so, if it involves any new proposition

    There was a perfected sale that arose from the exchange of correspondences, even if literally, there was
    a correction or modification contained in the acceptance, the changes were not substantial, but merely
    clarificatory

    Statue of frauds – devised to protect the parties..


    REQUISITES of a valid subject matter:

    - Must be existing, or having potential existence, a future thing, or contingent or subject to a


    resolutory condition
    - Licit
    - Determinate, or at least determinable

    Ended in meliza case

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