Understanding Sales Contracts: Key Elements & Obligations
The contract of sale involves one party, the seller, undertaking to deliver a specific item to another party, the purchaser, who agrees to pay a price in money or its equivalent (CC Article 1445).
Key Characteristics of Sales Contracts
- Bilateral: Obligations arise for both parties, encompassing both buying and selling.
- Consensual: Completion of the contract requires agreement on the item and the price.
- Required: Duplication of obligations; the seller conveys the item, and the buyer pays the agreed price.
- Switch: Each party provides something in exchange for something else.
Essential Elements of a Sales Contract
Parties Involved
A sales contract involves two parties: the seller and the buyer. These parties must have the legal capacity to assume obligations (CC Art 1459). Minors and individuals with disabilities require the intervention of a legal guardian. Both natural persons and legal entities can engage in buying and selling.
Real Elements: Object and Price
The core elements of a sales contract are the object and the price.
- Object: Includes items and rights, provided they are transferable. Certain rights, such as use or occupancy, and items outside of commerce are excluded.
- Price: Must be determined and can be in the form of money or its equivalent.
Formal Elements
Civil law allows freedom of form, not requiring a specific format. A sales contract can be documented in private or public documents (involving a notary). Everyday purchases in stores are often verbal, but sellers increasingly provide receipts. If delivery or payment isn’t immediate, a written agreement is advisable for clarity.
In some cases, a deed is necessary, especially for Land Registry transactions, as private documents are not accepted. Legally, a sale by public deed equates to delivery, symbolically transferring the property.
Effects of Sale: Seller’s Obligations
- Property Transfer: The seller’s primary obligation is to deliver the sold item and maintain custody until delivery, provided the price has been paid, unless payment is deferred.
- Obligation to Sanitation: The seller ensures the buyer’s legal and peaceful possession and is responsible for hidden defects, unless otherwise agreed.
- Sanitation for Eviction: If a buyer is legally deprived of the item due to a third party’s prior right, the seller must compensate for eviction, provided there’s no contrary agreement and the buyer notified the seller of the lawsuit.
- Supply or Transfer Costs: Unless otherwise specified, the seller covers the costs to place the item in the agreed location and the deed’s cost. The buyer pays for the first and subsequent copies, unless otherwise agreed. Capital gains tax on urban properties is typically the seller’s responsibility.
In practice, it’s common for the buyer to assume the writing costs and all taxes resulting from the transmission, including those payable by the seller.
Obligations of the Buyer
The buyer must pay the agreed price at the specified place and date. They are also responsible for statutory interest for non-payment, taxes, and registration fees, depending on the asset.