1517 – Indorsement of a negotiable instrument has 2 effects (similar to Sec.

45 of WRL)
1. It is the same time a conveyance of the instrument and contract of the indorser with the indorsee which in any case if the
primary party liable fails to pay the instrument the indorser will be the one to pay.
2. The indorsement of a document of title amounts to a conveyance by the indorser and not a guaranty. An indorser of a
document shall not be liable to the holder. (e.g. bailee fails to deliver the goods because they were lost due to his fault or
negligence.
1518 – Validity of negotiation of a document of title not impaired by fraud, mistake, duress, loss, theft, accident, mistake or
conversion
1. A negotiable document of title may be negotiated by any person even by a thief or finder and the holder would acquire good
title if he paid value therefore in good faith without notice of seller’s defect of title.
a. This is in contradiction to Art. 1512 which states that neither a thief nor a finder may negotiate a negotiable document
of title.
b. This is because 1518 speaks of theft of the document and not of the goods by such document.
1519 – Negotiable documents of title be attached or garnished or levied under an execution
1. Mercantile theory of documents of title – the negotiable document of title represents the goods and a person may deal safely
with the document on that assumption. Thus, a sale of goods while the document is outstanding is invalid against a
subsequent purchaser who obtains the document. The attachment or levy upon the goods is also invalid when the documents
are outstanding.
2. If it is a non-negotiable document of title, the transfer does not prevent the bailor’s creditors from causing the levy or
attachment of the goods.
3. The bailee has the direct obligation to hold possession of the goods for the original owner or to the person to whom the
negotiable document of title has been duly negotiated.
a. The goods cannot be attached or levied under an execution unless the document be first surrendered, or negotiation
is prohibited by the court
b. 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. It is for the protection of the bailee since he could be made liable to a subsequent
purchaser for value in good faith.
4. If the depositor of the goods is not the owner, Art. 1519 does not apply. One who deposits who is not the owner has no right to
convey title to the goods binding upon the owner.
a. It also does not apply to actions for recovery or manual delivery of goods by the real owner nor to cases where the
attachment is made before the issuance of the negotiable document of title.
b. The rights acquired by attaching creditors cannot be defeated by the issuance of a negotiable document of title
thereafter.
1520 – Remedies of creditors to claim negotiable instrument
1. Art. 1520 gives creditors remedies to creditors to come to courts for aid by injunction to acquire negotiable documents.
1521 – Formalities on the transfer of the goods
A. Place of delivery
1. Rules according to Art. 1521
a. There can be an agreement, express or implied
b. If no agreement, it is determined by usage of trade
c. No agreement and no usage trade - determined by the seller’s place of business
d. Seller’s residence
e. In case of specific goods, which the knowledge of the parties at the time of the contract was made were in some
other place
2. It is presumed that the buyer must take the goods from the seller’s place of business or residence rather than the
seller take them to the buyer.
 3. Both parties acquire a right of action by being ready and willing at the place to perform his legal duty, if the other
party is not there present or even if present, is not prepared to perform in a proper manner with what is incumbent
upon him.
4. If the delivery was not effected at the place specified in the contract but the buyer accepted the goods without
complaint, the buyer would be deemed to have waved the seller’s failure to deliver according to the terms of the
contract, and would be liable to pay the price agreed upon.
B. Time of delivery
1. The time of delivery is also determined by the agreement of the parties or, if none was agreed upon, by the usage of
trade.
2. If no time is fixed by the contract, then the seller is bound to send the goods to the buyer within a reasonable time.
a. “Reasonable Time” – a question of fact as it is dependent upon the circumstances of the purchase and
transaction (e.g. nature of goods, purpose, ability of seller to produce the goods, facilities available for
transportation, distance).
3. Contract provides a fixed time for performance
a. If the contract specifically provides a fixed time for performance, it is a question of whether time is of the
essence, and if so, whether correct performance was offered within that time.
b. If time is not of the essence, the question is whether correct performance was offered within a reasonable
time.
4. Contract does not specify the time for delivery
a. If the contract does not specify the time for delivery so that the delivery is to be made within a reasonable
time, time is not of the essence.
b. In this case, the buyer cannot make time the essence of the contract without notifying the seller of his
intention to cancel unless delivery is made on or before a fixed time.
C. Delivery of goods in possession of a third person
a. It is not enough that the seller be discharged from his obligation to deliver where the goods are in the possession
of a third person just by notifying the buyer or by notifying the bailee to deliver such goods. To make effect, the
third person holding the goods must acknowledge being the bailee for the buyer.
D. Hour of delivery of goods sold
a. The demand or delivery must be made at a reasonable hour of the day
i. “Reasonable Hour” – a question of fact largely dependent upon the circumstances. However, if all that
is required of the other party is to receive a payment or performance, it is probable that any hour when
the debtor could find the creditor would be reasonable for that purpose.
ii. In case of goods that are bulky or need special care, an hour might be unreasonable which would not
be so in an ordinary payment of a small sum of money.
iii. Where the question is not only of tender but demand, reasonableness will depend on the justifiable
expectation that the hour is reasonable for giving as well as receiving.
b. Duty of seller to put goods in deliverable condition
i. The seller bears the expenses to place the thing in a deliverable state unless otherwise agreed upon.
ii. The buyer is not bound to make tender of payment until the seller has complied with his obligations.
1522- Quantity of the Goods Deliverable
1. Where the seller is under a contract to deliver specific quantity of goods and he delivers a smaller quantity as the full
performance of his obligation, the buyer may reject.
a. However, the buyer may accept in which case he must pay for their: (1) price at the contract rate if he knew that
no more were to be delivered, or (2) the fair value to him of the goods if he did not know that the seller is going to
be guilty of a breach of contract.
b. Fair value to him means the extent of the benefit which the buyer might have received from the said goods. It is
not necessarily the market value.
2. Where the seller delivers a quantity larger that stipulated in the contract, the buyer may accept the quantity agreed upon and
may reject the excess. However, if he accepts all the goods, he is liable for the price of all of the goods.
3. Where the goods delivered are mixed with goods of different description not included with the contract, the buyer may accept
those which are in accordance with the contract and reject the rest. Buyer may still accept if he desires so.
 4. If the subject matter of the sale is indivisible, in case of delivery of a larger quantity of goods or mixed goods, the buyer may
reject the whole of the goods.
5. Usage of Trade is any practice or method dealing having such regularity of observance in a place, vocation or trade as to
justify an expectation that it will be observed with respect to the transaction in question.
6. Course of dealing refers to a sequence of previous conduct between the parties to a particular transaction which is fairly
regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
1523 – Delivery of goods to carrier in behalf of buyer
1. The general rule is delivery of the goods to the carrier constitutes delivery to the buyer whether the carrier is named by the
buyer or not. The delivery of goods to the carrier partakes the nature of actual delivery so as to render the risk or loss of goods
to the buyer.
a. Exceptions:
i. Art. 1503, (1), (2), (3) – when a contrary intent appears, the parties did not intend the delivery of goods to
the buyer through the carrier. The seller is not responsible for the misdelivery of the carrier where the carrier
was chosen and authorized by the buyer.
b. The shipment by the carrier is one of the last acts which the seller is to perform where the goods are put out of his
control.
c. The seller must have acted in conformity with the authority given by him by the buyer. If the goods sent are not of
those kind and quality ordered, ownership shall not pass.
i. The rule that delivery to the carrier by the seller is sufficient delivery of title presupposes that there was no
agreement, usage of trade or intention to the contrary, that the goods are shipped according the stipulations
of the contract.
2. The fact that the ownership in the goods may have passed to the buyer does not mean that the seller has already fulfilled his
duty to the buyer.
a. The seller must make a contract with the carrier in behalf of the buyer as may be reasonable under the
circumstances. If the seller does not, the buyer may decline to treat the delivery to the carrier as delivery to himself in
case the goods are lost or damaged or the buyer can hold the seller liable.
b. The seller must give notice to the buyer as may enable him to insure the goods during their transit if under the
circumstances it is usual to insure them. If the seller fails to do so, he is liable. However, the seller would not be liable
for the loss if the buyer had all the information necessary to insure.
3. Shipping Terms
a. C.O.D. – Collect on Delivery
i. The carrier acts for the seller in collecting the purchase price. The buyer must pay for the goods before he
can obtain possession.
b. F.O.B – Free on Board
i. Goods are to be delivered free of expense to the buyer to the point they where they are free on board
ii. The point of shipment or the point of destination determines when the ownership passes
iii. Ownership passes at the moment of delivery to a carrier when the goods are place on board cars or a
vessel
c. C.I.F. – Cost, Insurance, and Freight
i. Price fixed not only covers the cost of the goods, but the expense of freight and insurance to be paid by the
seller
ii. Title passes to the buyer at the moment of delivery to the point named
d. F.A.S – Free Alongside Vessel (port of shipment)
i. Seller pays all charges and bear the risk until the goods are placed alongside overseas vessel within reach
of tis loading tackle
e. Ex factory, Ex Warehouse – point of origin
i. The price quoted applies only at the point of origin, and the seller agrees to place the goods at the disposal
of the buyer at the agreed place on the date within the period fixed
f. Ex Dock – port of importation
i. The seller quotes a price including the cost of the goods on the dock at the named port of importation
 4. Presumption arising from payment of freight
a. If the buyer is to pay the freight, it is reasonable to suppose that he does so because the goods become his at the
point of shipment. The title transfers to buyer upon shipment or delivery to the carrier.
b. If the seller is to pay the freight, the inference is equally strong that the duty of the seller is to have the goods
transported to their ultimate destination and that the title does not pass until the goods have reached their
destination.
1524 – Reciprocal Obligation of Vendee and Vendor
1. Delivery of the goods is simultaneous to the payment of the price
a. As a general rule, the obligation to deliver the thing subject matter of a contract, arises from the moment of its
perfection and from the time the obligation may be enforced.
b. The contract of purchased and sale is bilateral and from it arises not only to deliver the thing but also paying of the
price
2. Payment before delivery
a. The vendee takes the first step by paying the purchase price; the vendor is not bound to deliver the thing if the
vendee has not paid the purchase price
3. Delivery before payment
a. When a vendor continues to effect sales and deliveries to vendee without getting paid, is considered to have sold on
credit
4. Period for Payment has been fixed
a. The rule is that the thing shall not be delivered unless the price be paid; the exception is that the thing must be
delivered through the price be not first be paid, if time for such payment has been fixed in the contract
i. If the period is fixed, not withstanding such period has not terminated, price has not been collected, seller is
obliged to deliver the thing
ii. Even if a period is fixed for the payment of the price, vendor is not bound to deliver in case vendee has lost
the right to make use of the period and still has not paid the price (Art. 1536)
1525 – Unpaid Seller
1. Who is an unpaid seller?
a. One who has not been paid or tendered the whole price or who has received a bill of exchange or other negotiable
instrument as conditional payment and the condition on which it was received has been broken by reason of the
dishonor of the instrument
b. The unpaid seller is within the scope of Arts. 1525 – 1535 which includes:
i. The agent of the seller
ii. Consignor or agent who has himself paid or is directly responsible for the price
iii. Any other person in the position of the seller
2. Whole price has not been paid
a. Tender of payment by buyer –
b. Payment of part of price
c. Payment by negotiable instrument
1526 – Rights of the seller for non-payment of buyer
1. Art. 1526 provides for remedies to the unpaid seller but does not include an action for the purchaser price
a. A lien on the goods or right to retain them for the price while seller is in possession
b. A right of stopping the goods in transit in case of insolvency of the buyer
c. A right of resale
d. A right to rescind the sale