Sales Reviewer Adrienne O.

Espares
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OBLIGATIONS OF THE VENDOR

Art. 1495. The vendor is bound to transfer
the ownership of and deliver, as well as
warrant the thing which is the object of the
sale.

Principal obligations of the vendor
1. To transfer the ownership of the
determinate thing sold;
2. To deliver the thing, with its accessions
and accessories, if any, in the condition
in which they were upon the perfection
of the contract (Art.1537);
3. To warrant against eviction and against
hidden defects (Arts. 1495,1547);
4. To take care of the thing, pending
delivery, with proper diligence (see
Art.1163); and
5. To pay for the expenses of the deed of
sale, unless there is a stipulation to the
contrary (Art.1487).

The vendor need not be the owner of the thing at
the time of perfection of the contract; it is
sufficient that he has a right to transfer the
ownership thereof at the time it is delivered.
One who sells something he does not yet
own is bound by the sale when he acquires it
later.
When a property belonging to a person is
unlawfully taken by another, the former has
the right of action against the latter for the
recovery of the property. Such right may be
transferred by the sale or assignment of the
property and the transferee can maintain
such action against the wrongdoer.
The transfer of ownership and the delivery of the
thing sold are not essential to the perfection of
the contract. But if the seller does not deliver at
the time stipulated, the buyer may ask for the
rescission of the contract or fulfillment with the
right to damages in either case.
The purchaser in execution sales, however, is not
entitled to immediate possession of the property
sold. The effective conveyance of the land is
accomplished by the deed which is issued only
after the period of redemption has expired.
In all cases of extra-judicial foreclosure sale,
the mortgagor may redeem the real property
sold within 1 year from the date of
registration of the sale.
In judicial foreclosure of real estate
mortgage, the general rule is that the
mortgagor cannot exercise his right of
redemption after the sale is confirmed by the
court.
The purchaser is entitled to recover the money
paid by him where the contract is set aside by
reason of the mutual material mistake of the
parties as to the identity or quantity of the land
sold. And where the purchaser recovers the
purchase price from a vendor who fails or refuses
to deliver the title, he is entitled, as a general
rule, to interest on the money paid from the time
of payment.

Art. 1496. The ownership of the thing sold is
acquired by the vendee from the moment it is
delivered to him in any of the ways specified
in articles 1497 to 1501, or in any other
manner signifying an agreement that the
possession is transferred from the vendor to
the vendee.

Ways of effecting delivery
The ownership of the thing sold shall be
transferred to the vendee upon the delivery
thereof, which may be effected in any of the
following:
1. By actual or real delivery (Art.1497);
2. By constructive or legal delivery
(Arts.1498-1501); or
3. By delivery in any other manner
signifying an agreement that the
possession is transferred to the vendee
(Arts.1496-1499).

In all the different modes of delivery, the critical
factor which gives legal effect to the act is the
actual intention of the vendor to deliver, and its
acceptance by the vendee. The act, without the
intention, is insufficient. There is no tradition.
Although the transfer of ownership is the primary
purpose of sale, delivery remains an
indispensable requisite as our law does not admit
the doctrine of transfer of ownership of property
by mere consent.
The delivery must be made to the vendee or his
authorized representative. Where the vendee did
not name any person to whom the delivery shall
be made in his behalf, the vendor is bound to
deliver exclusively to him.

Ways of effecting constructive delivery
Constructive delivery is a general term
comprehending all those acts which, although
not conferring physical possession of the thing,
have been held by construction of law equivalent
to acts of real delivery. It may be effected in any
of the following ways:
1. By the execution of a public instrument
(Art.1498,par.1);
2. By symbolical tradition or tradition
symbolica (ibid.,par.2);
3. By tradition longa manu (Art.1499);
4. By tradition brevi manu (ibid);
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5. By tradition constitutum possessorium
(Art.1500); or
6. By quasi-delivery or quasi-traditio
(Art.1501).

The parties, however, may stipulate that
ownership in the thing shall pass to the purchaser
only after he has fully paid the price or fulfilled
certain conditions.

DELIVERY OF THE THING SOLD

Art. 1497. The thing sold shall be understood
as delivered, when it is placed in the control
and possession of the vendee.

Tradition a derivative mode of acquiring
ownership by virtue of which one who has the
right and intention to alienate a corporeal thing,
transmits it by virtue of a just title to one who
accepts the same.

When the thing subject of the sale is placed in
the control and possession of the vendee or his
agent, the delivery is complete and the vendee
cannot avoid liability in case the thing is
subsequently lost without the fault of the vendor.
Where the buyer has not become the owner for
lack of delivery, his action is not accion
reinvindicatoria but one against the vendor for
specific performance or rescission, with damages
in either case.
The delivery of the thing together with the
payment of the price marks the consummation of
the contract of sale.
Perfection of the contract, on the other hand,
relates to the moment when the meeting of minds
between the parties takes place.

Actual delivery of the thing sold
There is actual delivery when the thing sold is
placed in the control and possession of the
vendee. This involves the physical delivery of
the thing and is usually done by the passing of a
movable thing from hand to hand.

The actual or manual delivery of an article sold is
not always essential to the passing of title
thereto. The parties to the contract may agree
when and on what conditions the ownership in
the subject of the contract shall pass to the
buyer.

Art. 1498. When the sale is made through a
public instrument, the execution thereof
shall be equivalent to the delivery of the
thing which is the object of the contract, if
from the deed the contrary does not appear
or cannot clearly be inferred.
With regard to movable property, its
delivery may also be made by the delivery of
the keys of the place or depository where it
is stored or kept.

The execution of a public instrument as a
manner of delivery applies to movable as
well as immovable property since the law
does not make any distinction.
Since the execution of the deed of
conveyance is deemed equivalent to
delivery, prior physical delivery or
possession is not legally required.
Exceptions:
Even if in a public instrument, if
there is no control or not in
possession;
The subject is not under the control
of the seller; and
There is no ability to transfer
ownership
The phrase the execution thereof shall be
equivalent is only a presumptive (not
conclusive) delivery which can be rebutted
by evidence to the contrary.
If it appears from the document or it can be
inferred therefrom that it was not the
intention of the parties to make delivery, no
tradition can be deemed to have taken
place.
Presumptive delivery by execution of public
instrument can also be negated by failure of
the vendee to take material possession of
the land subject of the sale in the concept of
purchaser-owner.
Symbolic delivery by the execution of a
public instrument is equivalent to actual
delivery only where the thing is subject to
the control of the vendor and there is no
impediment that may prevent the passing of
the property from the hands of the vendor
into those of the vendee. Hence, the vendor
who executes said public instrument fails in
his obligation to deliver it, if the vendee
cannot enjoy its material possession
because of the opposition or resistance of a
third person who is in actual possession.
It is not enough to confer upon the
purchaser the ownership and the right of
possession. The thing sold must be
placed in his control in order that it can
be said that delivery has been effected.
If the sale had been made under the
express agreement of imposing upon
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the vendee the obligation to take the
necessary steps to obtain the material
possession of the thing sold and if it
were proven that he knew that the thing
was in the possession of a third person
claiming to have property rights thereon,
such agreement would be perfectly
valid.

Art. 1499. The delivery of movable property
may likewise be made by the mere consent
or agreement of the contracting parties, if the
thing sold cannot be transferred to the
possession of the vendee at the time of the
sale, or if the latter already had it in his
possession for any other reason.

Traditio longa manu
It is the mode of delivery that takes place by the
mere consent or agreement of the contracting
parties as when the vendor merely points to the
thing sold which shall thereafter be at the control
and disposal of the vendee.

Tradition brevi manu
It is the mode of legal delivery that happens
when the vendee has already the possession of
the thing sold by virtue of another title as when
the lessor sells the thing leased to the lessee.
Instead of turning over the thing to the vendor so
that the latter may, in turn, deliver it, all these
are considered done by action of law.

Art. 1500. There may also be tradition
constitutum possessorium.

Tradition constitutum possessorium
This is the opposite of tradition brevi manu. It
takes place when the vendor continues in
possession of the property sold not as owner but
in some other capacity.
Ex. When the vendor stays as a tenant
of the vendee.
In this case, instead of the vendor delivering the
thing to the vendee so that the latter may, in
turn, deliver it back to the vendor, the law
considers that all these have taken place by
mere consent or agreement of the parties.

Art. 1501. With respect to incorporeal
property, the provisions of the first
paragraph of article 1498 shall govern. In any
other case wherein said provisions are not
applicable, the placing of the titles of
ownership in the possession of the vendee
or the use by the vendee of his rights, with
the vendors consent, shall be understood as
a delivery.

Quasi-traditio
It is the mode of delivery of incorporeal things or
rights. It is effected through the following:
1. By the execution of a public instrument;
or
2. When that mode of delivery is not
applicable, by the placing of the titles of
ownership in the possession of the
vendee; or
3. By allowing the vendee to use his rights
as new owner with the consent of the
vendor.
In all forms of delivery, it is necessary that
the act be coupled with the intention of
delivering the thing. The act, without the
intention to deliver it, is insufficient.

Art. 1502. When goods are delivered to the
buyer on sale or return to give the buyer
an option to return the goods instead of
paying the price, the ownership passes to
the buyer on delivery, but he may revest the
ownership in the seller by returning or
tendering the goods within the time fixed in
the contract, or, if no time has been fixed,
within a reasonable time.
When goods are delivered to the
buyer on approval or on trial or on
satisfaction, or other similar terms, the
ownership therein passes to the buyer.
1. When he signifies his approval or
acceptance to the seller r does any
other act adopting the transaction;
2. If he does not signify his approval or
acceptance to the seller, but retains
the goods without giving notice of
rejection, then if a time has been
fixed for the return of the goods, on
the expiration of such time, and, if no
time has been fixed, on the expiration
of a reasonable time. What is a
reasonable time is a question of fact.

The duty of the buyer with regard to the
return of the goods requires, ordinarily, that
they be returned in the same or substantially
the same condition in which they were when
the contract was made. Undoubtedly, if they
are injured or damaged substantially through
negligence or misuse of the buyer, his right
to return is lost and the sale becomes
absolute.

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Sale or return
It is a contract by which property is sold but the
buyer, who becomes the owner of the property
on delivery, has the option to return the same to
the seller instead of paying the price.
The buyer may revest the ownership in
the seller by returning or tendering the
goods within the time fixed in the
contract, or, if no time has been fixed,
within a reasonable time, otherwise, the
sale becomes absolute and the buyer is
liable for the price.
The seller cannot, in this type of sale,
prevent the revesting of title by refusing
to accept the return of the property.
Since title passes to the buyer on
delivery, the loss or destruction of the
property prior to the exercise of the
buyers option to return falls upon him
and renders him responsible to the
seller for the purchase price or such part
thereof as remains unpaid.
The word return itself implies a
previous transfer of title.

Sale on trial or approval
It is a contract in the nature of an option to
purchase if the goods prove satisfactory, the
approval of the buyer being a condition
precedent.
In this contract, the title shall continue in
the seller until the sale has become
absolute either by the buyers approval
of the goods, or by his failing to comply
with the express or implied conditions of
the contract as to giving notice of
dissatisfaction or as to returning the
goods or by his doing any other act
adopting the transaction such as
mortgaging the property or selling it to a
third person.
Since the title to the goods does not
pass and the relationship between the
seller and the purchase is that or bailor
and bailee, the risk of loss or injury to
the article pending the exercise by the
buyer of his option to purchase or return
it, is upon the seller except as the buyer
may be at fault in respect of the case
and condition of the article, or may have
agreed to stand the loss.

Sale or return distinguished from sale on trial
Sale or return Sale on trial
Subject to a resolutory
condition
Subject to a
suspensive condition
Depends entirely on
the will of the buyer
Depends on the
character or quality of
the goods
Ownership of the
goods passes to the
buyer on delivery and
subsequent return of
the goods reverts
ownership in the seller
Ownership remains in
the seller until the
buyer signifies his
approval or
acceptance to the
seller
The risk of loss or
injury rests upon the
buyer
The risk still remains
with the seller

Art. 1503. Where there is a contract of sale of
specific goods, the seller may, by the terms
of the contract, reserve the right of
possession or ownership in the goods until
certain conditions have been fulfilled. The
right of possession or ownership may be
thus reserved notwithstanding the delivery
of the goods to the buyer or to a carrier or
other bailee for the purpose of transmission
to the buyer.
Where goods are shipped, and by the
bill of lading the goods are deliverable to the
seller or his agent, or to the order of the
seller or of his agent, the seller thereby
reserves the ownership in the goods. But if,
except for the form of the bill of lading, the
ownership would have passed to the buyer
on shipment of the goods, the sellers
property in the goods shall be deemed to be
only for the purpose of securing
performance by the buyer of his obligations
under the contract.
Where goods are shipped, and by the
bill of lading the goods are deliverable to the
order of the buyer or of his agent, but
possession of the bill of lading is retained by
the seller or his agent, the seller thereby
reserves a right to the possession of the
goods as against the buyer.
Where the seller of goods draws on
the buyer for the priced and transmits the bill
of exchange and bill of lading together to the
buyer to secure acceptance or payment of
the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor
the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no
added right thereby. If, however, the bill of
lading provides that the goods are
deliverable to the buyer or to the order of the
buyer, or is indorsed in blank, or to the buyer
by the consignee named therein, on who
purchases in good faith, for value, the bill of
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lading, or goods from the buyer will obtain
the ownership in the goods, although the bill
of exchange has not been honored, provided
that such purchaser has received delivery of
the bill of lading indorsed by the consignee
named therein, or of the goods, without
notice of the facts making the transfer
wrongful.

As a general rule, the ownership in the
goods sold passes to the buyer upon their
delivery to the carrier, except:
1. If a contrary intention appears by the
terms of the contract;
2. In the cases provided in the second and
third paragraphs of Article 1523; and
3. In the cases provided in the first,
second, and third paragraphs of Article
1503.
The general rule is that delivery, be it only
constructive, passes title in the thing sold
and delivery to the carrier is deemed to be a
delivery to the buyer. The risk of loss,
therefore, as between the buyer and the
seller, falls upon the buyer.
Where goods are shipped and by the bill of
lading, the goods are deliverable to the
seller or his agent or to the order of the
seller or his agent, the seller thereby
reserved the ownership in the goods and the
carrier is a bailee for him and not the buyer.
This principle is applicable even though the
goods are shipped on the buyers vessel.
The seller may not only retain the goods
until the buyer performs his obligation under
the contract, but he may, even in violation of
the contract, dispose of them to third
persons. If the seller does this, of course, he
is liable for damages to the buyer but the
second purchaser from the seller acquires a
better right.

Significance where title held merely as
security
Risk of loss on buyer
1. The beneficial owner (buyer), not the
one who holds for security (seller), will
be subject to the risk of loss or
deterioration from the time the goods
are delivered to the carrier even though
the legal title remains in the seller. That
the risk should be borne by the buyer if
the seller retains title merely to secure
performance by the buyer of his
obligations under the contract is a
consequence of the theory that such a
bargain is, in effect, although not in
form, a sale to the buyer and a
mortgage back by him of the goods to
secure the price. The title does not pass
to the buyer until he received the order
bill of lading properly indorsed.
Buyers right of action based on ownership
2. The buyer has more than a mere
contract right in regards to the goods.
As beneficial owner, he may, as against
any one except an innocent purchaser
for value of the bill of lading from the
consignee, bring an action based on
ownership on making tender of the
price.

Where buyer or his agent is consignee but seller
retains order bill of lading
Where goods are shipped and by the bill of
lading the goods are deliverable to the order of
the buyer or of his agent, but possession of the
bill of lading is retained by the seller or his
agent, the seller thereby retains a right to the
possession of the goods as against the buyer.

Where a third person who retains the bill if
consignee
Two devices have already been considered by
which the seller of goods retains a hold upon
them by means of the bill of lading after he has
shipped them: first, by consigning the goods to
himself, either by an order bill or a straight bill
and second, by consigning the goods to the
order of the buyer and retaining possession of
the bill of lading.

Distinction in regard to the form of the bill of
lading
1. If the seller has named the buyer as
consignee, the property has passed to
the consignee or at least it seems to
have been so to one who inspects the
document;
2. If the bill of lading, though naming the
seller as consignee, is indorsed by him
to the buyer or in blank, the possession
of the document by the buyer gives him,
if not the actual title, at least an
apparent ownership; and
3. If the bill of lading names the seller or a
third person as consignee and no
endorsement of the document had been
made, possession by the buyer would
not indicate that the buyer had title.

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Where the document gives the buyer apparent
ownership and a third person purchases the
goods relying thereon, it seems clear on broad
principles of justice that since one of two
innocent parties must suffer, he should suffer
whose act has brought about the loss.
Consequently, the seller ought not to be allowed
to recover the goods from the third person.

Art. 1504. Unless otherwise agreed, the
goods remain at the sellers risk until the
ownership therein is transferred to the buyer,
but when the ownership therein is
transferred to the buyer, the goods are at the
buyers risk whether actual delivery has been
made or not, except that:
1. Where delivery of the goods has
been made to the buyer or to a bailee
for the buyer, in pursuance of the
contract and the ownership in the
goods has been retained by the seller
merely to secure performance by the
buyer of his obligations under the
contract, the goods are at the buyers
risk from the time of such delivery;
2. Where actual delivery has been
delayed through the fault of either the
buyer or seller the goods are at the
risk of the party in fault.

Risk of loss generally attends title
If the thing is lost by fortuitous event, the risk is
borne by the owner of the thing at the time of the
loss under the principle of res perit domino,
except:
1. Where the seller reserves the ownership
of the goods merely to secure the
performance by the buyer of his
obligations under the contract, the
ownership is considered transferred to
the buyer who, therefore, assumes the
risk from the time of delivery.
2. Where actual delivery had been delayed
through the fault of either the buyer or
seller, the goods are at the risk of the
party at fault with respect to any loss
which might not have occurred but for
such fault. In this case, the law punishes
the party at fault.

Risk of loss by fortuitous event after perfection
but before delivery
Under Article 1480, if the thing sold is lost after
perfection of the contract but before its delivery,
that is, even before the ownership is transferred
to the buyer, the risk of loss by fortuitous event
without the sellers fault is borne by the buyer as
an exception to the rule of res perit domino.
Consequently, the buyers obligation to pay the
price subsists if he has not yet paid the same or
if he had, he cannot recover it from the seller
although the latters obligation to deliver the
thing is extinguished by its loss. The risk of loss
of the thing after perfection is shifted from the
seller to the buyer even though the buyer has
not yet acquired ownership thereof.

To avoid conflict, to wit: Article 1504 should be
restricted in its application to sale of goods and
Article 1480, to sales of things. This would
make Article 1480 the general rule on risk of
loss and Article 1504, the exception.

Art. 1505. Subject to the provisions of this Title
where goods are sold by a person who is not the
owner thereof, and who does not sell them
under authority or with the consent of the owner,
the buyer acquires no better title to the goods
than the seller had, unless the owner of the
goods is by his conduct precluded from denying
the sellers authority to sell.
Nothing in this title, however, shall
affect:
1. The provisions of any factors acts,
recording laws, or any other provision of
law enabling the apparent owner of
goods to dispose of them as if he were
the true owner thereof;
2. The validity of any contract of sale under
statutory power of sale or under the
order of a court of competent
jurisdiction;
3. Purchases made in a merchants store,
or in fairs, or markets, in accordance
with the Code of Commerce and special
laws.

It is a fundamental doctrine of law that no one
can give what he has not or transfer a greater
right to another than he himself has.
Exceptions:
1. Where the owner of the goods, is by his
conduct, precluded from denying the
sellers authority to sell.
2. Where the law enables the apparent
ownership to dispose of the good as if
he were the true owner thereof.
Our country has no Factors Act.
Such is designed to protect third
persons who (under specified
conditions) deal with an agent
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believing him to be the owner of
goods.
3. Where the sale is sanctioned by
statutory or judicial authority.
According to Art.559 of the CC, the
possession of movable property
acquired in good faith is equivalent
to title. Nevertheless, one who has
lost any movable, or has been
unlawfully deprived therefor, may
recover it from the person in
possession of the same. This refers
to the Doctrine of Ireinvindicatoria.
Exception:
If the possessor of a movable lost or
of which the owner has unlawfully
been deprived has acquired it in
good faith at a public sale, the
owner cannot obtain its return
without reimbursing the price paid
therefor.
4. Where the sale is made at merchants
stores, fairs or markets.
5. Where the seller has a voidable title
which has not been avoided at the time
of the sale.
6. Where seller subsequently acquires title.
when a person conveys property to
another of which at the time he is not
the owner, his subsequent acquisition of
title validates his previous conveyance.

Art. 506. Where the seller of goods has a
voidable title thereto, but his title has not been
avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he
buys them in good faith, for value, and without
notice of the sellers defect of title.

Requisites for acquisition of good title by buyer
If the seller has only a voidable title to the
goods, the buyer acquires a good title to the
goods provided he buys them:
a. Before the title of the seller has been
avoided;
b. In good faith for value; and
c. Without notice of the sellers defect of
title.

Art. 1507. A document of title in which it is stated
that the goods referred to therein will be
delivered to the bearer, or to the order of any
person named in such document is a negotiable
document of title.

Document of title to goods includes any bill
of lading, dock warrant, quedan, or warehouse
receipt or order for the delivery of goods, or any
other document used in the ordinary course of
business in the sale or transfer of goods, as
proof of the possession or control of the goods,
or authorizing or purporting to authorize the
possessor of the document to transfer or
receive, either by indorsement or by delivery,
goods represented by such document.
A document of title is symbol of the
goods covered by it, serving as
evidence of
a. Transfer of title;
b. Transfer of possession; and
c. A contract between the parties who
are bound by its terms.
So far as concerns the transfer of
property between the parties, their
intention would be effectual without the
document, but where third parties rights
are involved, the form of the document
(negotiable or non-negotiable) becomes
important.

3 Most common forms or documents of title
1. Bill of lading It is a contract and a
receipt for the transport of goods and
their delivery to the person named
therein, to order, or to bearer. It involves
the carrier, the shipper, and the
consignee.
2. Dock warrant It is an instrument given
by dock owners to an importer of goods
warehoused on the dock as a
recognition of the importers title to the
said goods, upon production of the bill of
lading.
3. Warehouse receipt It is a contract or
receipt for goods deposited with a
warehouseman containing the latters
undertaking to hold and deliver the said
goods to a specified person, to order, or
to bearer. Quedan is a warehouse
receipt usually for sugar received by a
warehouseman.

Laws governing documents of title
1. The Civil Code;
2. The Warehouse Receipts Law; and
3. The Code of Commerce

Classes of documents of titles
1. Negotiable documents of title those by
the terms of which the bailee undertakes
to deliver the goods to the bearer and
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those by the terms of which the bailee
undertakes to deliver the goods to the
order of a specified person (Art.1508);
or
2. Non-negotiable documents of title
those by the terms of which the goods
covered are deliverable to a specified
person (Art.1511).

Art. 1508. A negotiable document of title may be
negotiated by delivery:
1. Where by the terms of the document the
carrier, warehouseman or other bailee
issuing the same undertakes to deliver
the goods to the bearer; or
2. Where by the terms of the document the
carrier, warehouseman or other bailee
issuing the same undertakes to deliver
the goods to the order of a specified
person, and such person or a
subsequent indorsee of the document
has indorsed it in blank or to the bearer.
Where by the terms of a negotiable
document of title the goods are deliverable to
bearer or where a negotiable document of title
has been indorsed in blank or to bearer, any
holder may indorse the same to himself or to
any specified person, and in such case the
document shall thereafter be negotiated only by
the indorsement of such indorsee.

Negotiation of negotiable document by delivery
A negotiable document of title is negotiable by
delivery if:
1. The goods are deliverable to the bearer;
or
2. When it is indorsed in blank or to the
bearer by the person to whose order the
goods are deliverable or by a
subsequent indorsee.
An indorsement is in blank when the holder
merely signs his name at the back of the receipt
without specifying to whom the goods are to be
delivered.

If the document is specially indorsed, it becomes
an order document of title and negotiation can
only be effected by the indorsement of the
indorsee. A special indorsement specifies the
person to whom or to whose order the goods are
to be delivered.

Art. 1509. A negotiable document of title may be
negotiated by the indorsement of the person to
whose order the goods are by the terms of the
document deliverable. Such indorsement may
be in blank, to bearer or to a specified person. If
indorsed to a specified person, it may be again
negotiated by the indorsement of such person in
blank, to bearer or to another specified person.
Subsequent negotiations may be made in like
manner.

Negotiation of negotiable document by
indorsement
A negotiable document of title by the terms of
which the goods are deliverable to a person
specified therein may be negotiated only by the
indorsement of such person.
1. If indorsed in blank or to bearer, the
document becomes negotiable by
delivery (Art.1508).
2. If indorsed to a specified person, it may
be again negotiated by the indorsement
of such person in blank, to bearer, or to
another specified person. Delivery alone
is not sufficient. (If delivery alone without
indorsement, it is merely a transfer)
3. A party is liable only as guarantor and
not as indorser if his indorsement is
made for the purpose of identification
only.

Art. 1510. If a document of title which contains
an undertaking by a carrier, warehouseman or
other bailee to deliver the goods to bearer, to a
specified person or order of a specified person
or which contains words of like import, has
placed upon it the words not negotiable, non-
negotiable, or the like, such document may
nevertheless be negotiated by the holder and is
a negotiable document of title within the
meaning of this Title. But nothing in this Title
contained shall be construed as limiting or
defining the effect upon the obligations of the
carrier, warehouseman, or other bailee issuing a
document of title or placing thereon the words
not negotiable, non-negotiable, or the like.

Negotiable documents of title marked non-
negotiable
It has no effect and the document continues to
be negotiable.

When the document of title is to order, the bailee
is obliged to take it p before delivering the
goods. Accordingly, he is liable to the holder of
an order document if the goods are delivered to
the consignee without surrender of the
document even though the latter was marked
not negotiable.

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Art. 1511. A document of title which is not in
such form that it can be negotiated by delivery
may be transferred by the holder by delivery to a
purchaser or done. A non-negotiable document
cannot be negotiated and the indorsement of
such a document gives the transferee no
additional right.

A non-negotiable document of title cannot be
negotiated. Nevertheless, it can be transferred
or assigned by delivery. In such a case, the
transferee or assignee acquires only the rights
stated in Art.1514. Even if the document is
indorsed, the transferee acquires no additional
right.

Art. 1512. A negotiable document of title may be
negotiated:
1. By the owner thereof; or
2. By any person to whom the possession
or custody of the document has been
entrusted by the owner, if, by the terms
of the document the bailee issuing the
document undertakes to deliver the
goods to the order of the person to
whom the possession or custody of the
document has been entrusted, or if at
the time of such entrusting the
document is in such form that it may be
negotiated by delivery.

Art. 1513. A person to whom a negotiable
document of title has been duly negotiated
acquires thereby:
1. Such title to the goods as the person
negotiating the document to him had or
had ability to convey to a purchaser in
good faith for value and also such title to
the goods as the person to whose order
the goods were to be delivered by the
terms of the document had or had ability
to convey to a purchaser in good faith
for value; and
2. The direct obligation of the bailee
issuing the document to hold
possession of the goods for him
according to the terms of the document
as fully as if such bailee had contracted
directly with him.

Rights of person to whom document has been
negotiated
1. The title of the person negotiating the
document, over the goods covered by
the document;
2. The title of the person (depositor or
owner) to whose order by the terms of
the document the goods were to be
delivered, over such goods; and
3. The direct obligation of the bailee
(warehouseman or carrier) to hold
possession of the goods for him, as if
the bailee had contracted directly with
him.
One who purchases, therefore, a negotiable
document of title issued to a thief acquires no
right over the goods as the thief has no right to
transfer, notwithstanding that such purchaser is
innocent. But the purchaser acquires a good title
where the owner, by his conduct, is stopped
from asserting his title.

Art. 1514. A person to whom a document of title
has been transferred, but not negotiated,
acquires thereby, as against the transferor, the
title to the goods, subject to the terms of any
agreement with the transferor.
If the document is non-negotiable, such
person also acquires the right to notify the bailee
who issued the document of the transfer thereof,
and thereby to acquire the direct obligation of
such bailee to hold possession of the goods for
him according to the terms of the document.
Prior to the notification to such bailee by
the transferor or transferee of a non-negotiable
document of title, the title of the transferee to the
goods and the right to acquire the obligation of
such bailee may be defeated by the levy of an
attachment of execution upon the goods by a
creditor of the transferor, or by a notification to
such bailee by the transferor or a subsequent
purchaser from the transferor of a subsequent
sale of the goods by the transferor.

Rights of person to whom document has been
transferred
Such person acquires:
1. The title to the goods as against the
transferor;
2. The right to notify the bailee of the
transfer thereof; and
3. The right, thereafter, to acquire the
obligation of the bailee to hold the goods
for him.
The right of the transferee is not absolute as it is
subject to the terms of any agreement with the
transferor.

Attachment of goods covered by document
transferred
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The transfer of a non-negotiable document of
title does not effect the delivery of the goods
covered by it. Accordingly, before notification,
the bailee is not bound to the transferee whose
right may be defeated by a levy of an
attachment or execution upon the goods by the
creditor of the transferor or by a notification to
such bailee of the subsequent sale of the goods.

If the document is negotiable, the goods cannot
be attached or be levied under an execution
unless:
a. The document be first surrendered to
the bailee; or
b. Its negotiation enjoined.

Art. 1515. Where a negotiable document of title
is transferred for value by delivery, and the
indorsement of the transferor is essential for
negotiation, the transferee acquires a right
against the transferor to compel him to indorse
the document unless a contrary intention
appears. The negotiation shall take effect as of
the time when the indorsement is actually made.

Transfer of order document without indorsement
The rights of a person to whom an order
document of title, which may not properly be
negotiated by mere delivery, has been delivered,
without indorsement, are:
1. The right to the goods as against the
transferor (Art.1514); and
2. The right to compel the transferor to
indorse the indorsement,.
If the intention of the parties is that the
document should be merely transferred, the
transferee has no right to require the transferor
to indorse the document.

Rule where document subsequently indorsed
For the purpose of determining whether the
transferee is a purchaser for value in good faith
without notice, the negotiation shall take effect
as of the time when the indorsement is actually
made, not at the time the document is delivered.
The reason is that the negotiation becomes
complete only at the time of indorsement. So, if
by that time the purchaser already had notice
that the title of the seller was defective, he
cannot be considered a purchaser in good faith
though he had no such notice when he bought
the document.

(warranties/liabilities of a person
negotiating/transferring)
Art. 1516. A person who for value negotiates or
transfers a document of title by indorsement or
delivery, including one who assigns for value a
claim secured by a document of title unless
contrary intention appears, warrants:
1. That the document is genuine;
2. That he has a legal right to negotiate or
transfer it;
3. That he has knowledge of no fact which
would impair the validity or worth of the
document; and
4. That he has a right to transfer the title to
the goods and that the goods are
merchantable or fit for a particular
purpose, whenever such warranties
would have been implied if the contract
of the parties had been to transfer
without a document of title the goods
represented thereby.
A person negotiating or transferring a document
could be held liable as when the document was
a forgery, or he had stolen it, or he had
knowledge that the document was invalid for
want of consideration, or that the goods had
been damaged.

Art. 1517. The indorsement of a document of
title shall not make the indorser liable for any
failure on the part of the bailee who issued the
document or previous indorsers thereof to fulfill
their respective obligations.

Double effects of the indorsement of a
negotiable instrument
1. It is a conveyance of the instrument; and
2. A contract of the indorser with the
indorsee that on certain conditions the
indorser will pay the instrument if the
party primarily liable fails to do so.
The indorsement of a document of title amounts
merely to a conveyance by the indorser, not a
contract of guaranty.
Accordingly, an indorser of a document of title
shall not be liable to the holder if, the bailee fails
to deliver the goods because they were lost due
to his fault of negligence.

Art. 1518. The validity of the negotiation of a
negotiable document of title is not impaired by
the fact that the negotiation was a breach of duty
on the part of the person making the negotiation,
or by the fact that the owner of the document
was deprived of the possession of the same by
loss, theft, fraud, accident, mistake, duress, or
conversion, if the person to whom the document
was negotiated or a person to whom the
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document was subsequently negotiated paid
value therefor in good faith without notice of the
breach of duty, or loss, theft, fraud, accident,
mistaken, duress or conversion.

A thief or finder and the holder thereof would
acquire a good title thereto if he paid value
therefor in good faith without notice of the
sellers defect of title.

Art. 1519. If goods are delivered to a bailee by
the owner or by a person whose act in
conveying the title to them to a purchaser in
good faith for value would bind the owner and a
negotiable document of title is issued for them
they cannot thereafter, while in possession of
such bailee, be attached by garnishment or
otherwise or be levied under an execution
unless the document be first surrendered to the
bailee or its negotiation enjoined. The bailee
shall in no case be compelled to deliver up the
actual possession of the goods until the
document is surrendered to him or impounded
by the court.

The bailee cannot be compelled to deliver up the
possession of the goods until the document is
surrendered to him or impounded by the court.
This prohibition is for the protection of the bailee
since he could be made liable to a subsequent
purchaser for value in good faith.

This article do not apply of if the person
depositing is not the owner of the goods (like a
thief) or one who has no right to convey title to
the goods binding upon the owner. Neither does
it apply to actions for recovery or manual
delivery of goods by the real owner nor to case
where the attachment is made before the
issuance of the negotiable document of title.

Art. 1520. A creditor whose debtor is the owner
of a negotiable document of title shall be entitled
to such aid from courts of appropriate jurisdiction
by injunction and otherwise in attaching such
document or in satisfying the claim by means
thereof as is allowed at law or in equity in regard
to property which cannot readily be attached or
levied upon by ordinary legal process.

Creditors remedies to reach negotiable
documents
1. Injunction;
2. Attachment or levy.

Art. 1521. Whether it is for the buyer to take
possession of the goods or for the seller to send
them to the buyer is a question depending in
each case on the contract, express or implied,
between the parties.
Place of delivery of goods sold:
1. Where there is an agreement, express
or implied, the place of delivery is that
agreed upon;
2. Where there is no agreement, the place
of delivery is that determined by usage
of trade;
3. Where there is no agreement and there
is also no prevalent usage, the place of
delivery is the sellers place of business;
4. In any other case, the place of delivery
is the sellers residence; and
5. In case of specific goods, which to the
knowledge of the parties at the time the
contract was made were in some other
place, that place is the place of delivery,
in the absence of any agreement or
usage of trade to the contrary.

The presumption is that the buyer must take the
goods from the sellers place of business or
residence rather than the seller to deliver them
to the buyer.

Where, however, the delivery was not effected
at the place specified in the contract, but the
buyer accepted the goods nevertheless without
complaint, the buyer would be deemed to have
waived the sellers failure to deliver according to
the terms of the contract, and would be liable to
pay the price agreed upon.

Delivery of goods in possession of a third person
The seller can hardly be discharged from his
obligations where the goods are in the
possession of a third person by simply telling the
buyer that they are there or by notifying the
bailee to deliver to the buyer.

Hour of delivery of goods sold
The demand or tender of delivery to be effectual
must be made at a reasonable hour of the day.
What is a reasonable hour is a question of fact.

The buyer is not bound to make tender of
payment until the seller has complied with his
obligations.

Art. 1522.
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Where the seller delivers to the buyer a
quantity of goods less than he
contracted to sell, the buyer may
1. reject them; or
2. if the buyer accepts or retains the
goods so delivered, knowing that
the seller is not going to perform the
contract in full, he must pay for them
at the contract rate.
If, however, the buyer has used or
disposed of the goods delivered before
he knows that the seller is not going to
perform his contract in full, the buyer
shall not be liable for more than the fair
value to him of the goods so received.
Where the seller delivers to the buyer a
quantity of goods larger than he
contracted to sell, the buyer may accept
the goods included in the contract and
reject the rest. If the buyer accepts the
whole of the goods so delivered he must
pay for them at the contract rate.
Where the seller delivers to the buyer
the goods he contracted to sell mixed
with goods of a different description not
included in the contract, the buyer may
accept the goods which are in
accordance with the contract and reject
the rest.
In the preceding two paragraphs, if the
subject matter is indivisible, the buyer
may reject the whole of the goods.
The provisions of this article are subject
to any usage of trade, special
agreement, or course of dealing
between the parties.

Fair value to him the benefit which the buyer
may have received from the goods; it is not
necessarily the market value.

Usage of trade any practice or method of
dealing having such regularity





































































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