You are on page 1of 3

Article 1507

Negotiable Document of Title

A document of title is negotiable when:

1. It uses the words showing---- goods are deliverable to BEARER
2. It uses words showing---- goods are deliverable to ORDER of a PERSON

NOTE: 1 and 2 must be ALWAYS future delivery to be negotiable.

Document of Title includes:

1. Any bill of lading
- Issued by common carriers
2. Dock warrant
- Issued by a dock owner
3. Quedan
- Issued for rice and sugar (a special type of warehouse receipt)
4. Warehouse receipt or order
- Issued by a warehouseman
5. Any other document used as:
a. Proof of possession
b. Authority to transfer goods

NOTE: 1-5 are forms of acknowledgment that the owner has goods held in trust by

Art 1508

Negotiation by Delivery

Negotiation by mere delivery of document is ONLY ALLOWED for negotiable

documents deliverable to BEARER

Those deliverable to ORDER of person requires:

a. Indorsement (signing and specifying)
b. Delivery of document

How to make a Deliverable to BEARER Document:

1. Document originally uses deliverable to BEARER clause
2. When deliverable to NONEXISTENT, DEAD or FICTITIOUS persons
3. When deliverable to OBJECTS (cash, rocks, water, etc.)
4. Where document is originally deliverable to ORDER but is indorsed in blank
(simply signing without specifying who shall be the next owner or holder)

Art 1509

Negotiation by Indorsement

Required mode of negotiation for deliverable to ORDER of person

a. Indorsement, and
b. Delivery (of document)

Originally deliverable to ORDER documents may be transformed into deliverable to

BEARER by blank indorsement BUT NOT vice versa.
NOTE: Originally deliverable to Bearer documents, indorsed specifically, may still be
negotiated by mere delivery. The indorsement has no effect at all.

If document is originally deliverable to order, then indorsed in blank, it may still be

reverted back to being deliverable to order by completing the blank indorsement or
making a specific indorsement (a new complete indorsement)

Article 1510

Placing Words Non-Negotiable

It will still be considered negotiable as long as the words, deliverable to order of

person or to bearer are written on the face of the document. (Substance over form)

The words Non-Negotiable may however limit the obligations of the fiduciary as
agreed by the parties. (Intent is considered)

Article 1511

When non-negotiable, delivery is simply a form of transfer or assignment to a

When non-negotiable, indorsement does not give any additional right to that which
a mere assignee or transferee may have

Article 1512

Rights of Person to Whom Negotiated

He acquires the rights to:

1. Title that the owner has to the goods (includes related rights to further convey to
a purchaser)
2. The direct obligation of the bailee

Article 1514

Who Negotiates; Who bears Loss of Unauthorized Negotiation

Persons who may negotiate are:

1. Owner
2. Trustee of the document of title provided
a. Document is deliverable to bearer (does not require indorsement)
b. Document is deliverable to order of the trustee (requires indorsement by
The innocent owner bears loss if negotiation is unauthorized as far as other innocent
parties are concerned.

Article 1513

Negotiation When not Negotiable

Rights of a Transferee or Assignee

Rights include
1. The title to the goods

2. Right to inform the bailee (of the transfer to obtain direct obligation of the
NOTE: Prior to the notification of the bailee, the creditors of the transferor may levy an
attachment upon the goods
Article 1515

Improper Negotiation by Indorsement

When document is deliverable to order of person and was simply delivered without
indorsement, the transferee has the right to compel the transferor to make the

The negotiation will only take effect at the time when the indorsement is actually
made. This determines when the transferee becomes a holder.

Article 1516

Warranties in Negotiation or Transfer

Warranties by holder or transferor:

1. The Document is genuine
2. The legal right to negotiate or transfer
3. No knowledge of fact that will impair the validity/worth of the document
4. Right to transfer the title of the goods (which must be merchantable/fit)

Article 1517

Failure of Bailee or Previous Indorsers to Comply

Present indorsers are not liable to the failure of the previous indorsers or bailee to
comply with their obligations

Indorsers are only liable for their warranties in Article 1516