You are on page 1of 6


Rights of person to whom document has been negotiated
1. Title of the person negotiating the document, over the goods covered by the document
2. Title of the person to whose order by the term of the document the goods were to be
delivered, over such goods
3. Direct obligation of the bailee to hold of the goods for him, as if the bailee has directly
contracted directly with him

ART. 1514
Rights of person to whom document has been transferred
1. Title to goods as against transferor
2. In addition
a. The right to notify the bailee of the transfer thereof
b. The right, thereafter, to acquire the obligation of the bailee to hold the goods for
3. Right of assignee – merely steps into the shoes of the transferor
Rights of third person to goods where document has been transferred
1. The transfer of a non-negotiable document of title does not effect the delivery of the
goods covered by it
2. If the document is negotiable, the goods cannot be attached or be levied under an
execution unless the document be first surrendered to the bailee or its negotiation

ART. 1515
Transfer of order document without indorsement
1. The right to the goods as against the transferor
2. The right to compel the transferor to indorse the indorsement

ART. 1516
Warranties on sale of documents
1. 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
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

ART. 1517
Indorser not a guarantor
The indorsement of a negotiable instrument has a double effect
1. The indorser will pay the instrument if the party primarily liable fails to do so
2. Amounts merely to a conveyance by the indorser, not a contract of guaranty

ART. 1518
When negotiation not impaired by fraud, mistake, duress, etc
It may be negotiated even by 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 seller’s defect of

ART. 1519
Attachment or levy upon goods covered by a negotiable instrument
1. While in the possession of such bailee, the goods cannot be attached or levied under an
execution unless the document be first surrendered or its negotiation prohibited by the
2. The bailee cannot be compelled to deliver the possession of the goods until the document
is surrendered

ART. 1520
Creditor’s remedies to reach negotiable documents
This article expressly gives the court full power to aid by injunction and otherwise a
creditor seeking to get a negotiable document covering such goods
However, if an injunction is issued but the negotiable document of title is negotiated to an
innocent person, the transfer is nevertheless effectual

ART. 1521
Place of delivery of goods sold
1. Rules
a. Where there is agreement, express or implied, the place of delivery is that agreed
b. Where there is no agreement, the place of delivery is that determined by usage of
c. Where there is no agreement and there is no prevalent usage, the place of delivery
is the seller’s place of business
d. In any other case, the place of delivery is the seller’s residence
e. In case of specific goods, which to the knowledge of the parties at the time the
contract is made were in some other place, that place is the place of delivery
Time of delivery of goods sold
1. If no time is fixed by the contract, then the seller is bound to send the goods to the buyer
within a reasonable time
2. If the contract provides a fixed time for performance
3. Where the contract does not specify the time for delivery so that delivery is to be made
within a reasonable time
Delivery of goods in possession of a third person
It is not enough to discharge the seller that the bailee has become the agent for the buyer.
To affect third persons, the person holding the gods must acknowledge being the bailee for the
Hour of delivery of goods sold
1. What is the reasonable hour is a question of fact largely dependent upon the
2. In case of goods which are bulky or needed special care, an hour might be reasonable
which would not be so n an ordinary payment of a small amount of money
Duty of the seller to put goods in a deliverable condition
The seller bears the expenses to place the thing in a deliverable state, unless otherwise

ART. 1522
Delivery of goods less than quantity contracted
1. Reject the goods
2. Accept the goods and pay for
a. Price at contract rate (knowledge of the buyer)
b. Fair value
Delivery of gods more than quantity contracted
1. Accept he quantity contracted for and reject the excess
2. Accept all and pay all of them
Delivery of goods mixed with others
1. Accept what is contracted for and reject the rest
2. Accept all and pay for all of them

ART. 1523
Delivery to carrier on behalf of buyer
GR. Delivery of such goods to the carrier constitutes delivery to the buyer, whether the
carrier is named by the buyer or not
EX. Provided for in paragraph 1,2 and 3 of art. 1503 and when a contrary intent appears,
that is, the parties did not intend the delivery of the goods to the buyer through the carrier
Seller’s duty after delivery to carrier
1. To enter on behalf of buyer into such contract reasonable under the circumstances
2. To give notice to buyer regarding necessity to insure goods
Definition of trade terms
1. C.O.D. – “collect on delivery”
2. F.O.B. – “free on board”
3. C.I.F. – ‘cost insurance and freight”
4. F.A.S. – “free alongside vessel” (named port of shipment)
5. Ex factory, Ex Warehouse, etc. – (named point of origin0
6. Ex Dock – (named port of importation)

ART. 1524
Delivery simultaneous with payment of price
The contract of purchase and sale is bilateral and from it arises not only the obligation to
deliver the thing but also that of paying the price.
When delivery must be made before payment of price
The thing must be delivered through the price be not first paid, if a time for such payment
has been fixed in the contract

ART. 1525.
Meaning of unpaid seller
One who has not been paid or tendered the whole price or who has received a bill of
exchange or other negotiable instrument as condition on which it was received has been broken
by reason of the dishonor of the instrument
Where whole of the price has not been paid
1. Tender of payment by buyer
2. Payment of part of price
3. Payment by negotiable instrument


and 1537, 1480)
When the contract does not provide for the measuring or weighing of a sold specific mass, and
the price agreed upon was not based on such measurement, then ―[t]he subject matter of the
sale is, therefore, a determinate object, the mass, and not the actual number of units or tons
contained therein, so that all that is required of seller was to deliver in good faith to his buyer all
of those found in the mass, notwithstanding that the quantity delivered is less than the amount
estimated in the contract.‖ xGaite v. Fonacier, 2 SCRA 831 (1961).

a. Rules on Delivery to Carrier (Art. 1523)

(i) FAS Sales – ―The seller pays all charges and is subject to risk until the goods are placed
alongside the vessel‖. xA. Soriano Y Cia. v. Collector, 97 Phil. 505 (1955).

(ii) FOB Sales – In mercantile contracts of American origin, ―F.O.B.‖ stand for the words
―Free on Board,‖ i.e., that the seller shall bear all expenses until the goods are delivered
according as to whether the goods are to be delivered ―F.O.B.‖ at the point of shipment or at the
point of destination determines the time when property passes. √Behn Meyer & Co. v. Yangco,
38 Phil. 602, 606 (1918).91

(iii) CIF Sales √General Foods v. NACOCO, 100 Phil. 337 (1956).
―C.I.F.‖ found in British contracts stand for costs, insurance, and freight; they signify that the
price fixed covers not only the costs of the goods, but the expense of freight and insurance to be
paid by the seller. √Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
Under an arrangement ―c.i.f. Pacific Coast‖ (destination), ―the vendor is to pay not only the
cost of the goods, but also the freight and insurance expenses, and, as it was judicially
interpreted, this is taken to indicate that the delivery is to be made at the port of destination.‖
√Pacific Vegetable Oil Corp. v. Singzon, Supreme Court Advance Decisions, 29 April 1955.

b. Sale on Approval, Trial or Satisfaction (Art. 1502)

In a ―sale or return,‖ the ownership passes to the buyer on delivery pursuant to a perfected
contract of sale; and the subsequent return of the goods reverts ownership back to the seller. In
such case, tradition as a mode of acquiring ownership must be in consequence of a contract.
xVallarta v. CA, 150 SCRA 336 (1987).

In a ―sale on approval‖ (also called ―sale on acceptance, ―sale on trial‖ or ―sale on

satisfaction‖), the delivery of the object does not transfer ownership to the buyer since the
delivery was not for purposes of transferring ownership, since the prestation to effect a meeting
of the minds to give rise to a valid contract is incumbent on the buyer. xVallarta v. CA, 150
SCRA 336 (1987).

For a sale to be a ―sale or return‖ or a ―sale on approval,‖ there must be a clear agreement to
either of such effect, otherwise, the provisions of Art. 1502 of Civil Code governing such sales
cannot be invoked by either party to the contract. xIndustrial Textile Manufacturing Co. v. LPJ
Enterprises, Inc., 217 SCRA 322 (1993).

c. Sale by Description and/or Sample (Art. 1481)

There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of
the bulk, which is not present and there is no opportunity to inspect or examine the same; and the
parties treated the sample as the standard of quality and that they contracted with reference to the
sample with the understanding that the product to be delivered would correspondent with the
sample. xMendoza v. David, 441 SCRA 172 (004)

Even in sales by description and/or sample, buyer will not be released from his obligation to
accept and pay for the goods by deviations on the part of the seller from the exact terms of the
contract, if buyer had acquiesced to such deviations after due notice thereof. xEngel v. Mariano
Velasco & Co., 47 Phil. 115 (1924).

When the machine delivered is in accordance with the description stated in the sales contract, the
buyer cannot refuse to pay the balance of the purchase price and the cost of installation if it
proves that the machine cannot be used satisfactorily for the purposes for which he bought it
when such purpose was not made known to the seller. xPacific Commercial Co. v. Ermita
Market & Cold Stores, 56 Phil. 617 (1932).

d. Buyer's Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when carrier
delivers COD.

2. In Case of Immovables
a. Where Sold Per Unit or Number (Arts. 1539 and 1540)
In a unit price sale, the statement of the area of immovable is not conclusive and the price may
be reduced or increased depending on the area actually delivered. If the vendor delivers less than
the area agreed upon, the vendee may oblige the vendor to deliver all that is stated in the contract
or demand for the proportionate reduction of the purchase price if delivery is not possible. If the
vendor delivers more than the area stated in the contract, the vendee has the option to accept only
the amount agreed upon or to accept the whole area, provided he pays for the additional area at
the contract rate. √Rudolf Lietz, Inc. v. CA, 478 SCRA 451 (2005).92
b. Where Sold for a Lump Sum [―A cuerpo cierto or por precio alzado”] (Art. 1542)
In a contract of sale of land in a mass, the specific boundaries stated in the contract must control
over any statement with respect to the area contained within its boundaries. Salinas v. Faustino,
566 SCRA 18 (2008).

In a lump sum sale, when the land delivered to the buyer is exactly as that described in the deed
and covered within the boundaries designated, the difference in actual area (34 versus 10
hectares) will not authorize the buyer to rescind the contract because the seller has complied with
delivering the subject matter agreed upon. xTeran v. Villanueva, 56 Phil. 677 (1932); this is the
rule when evidence shows that the parties never gave importance to the area of the land in fixing
the price (97 versus 60 hectares). xAzarraga v. Gay, 52 Phil. 599 (1928).
Where the parties agreed on a sale at a rate of a certain price per unit of measure and not one for
a lump sum, it is Article 1539 and not Article 1542 which is the applicable law—the buyer is
entitled to the relief afforded to him under Article 1529, that is, either a proportional reduction of
the price or the rescission of the contract. xCebu Winland Dev. Corp. v. Ong Siao Hua, 588
SCRA 120 (2009).

EXCEPT: A buyer of land, when sold in gross or with the description ―more or less‖ or similar
words in designating quantity covers only a reasonable excess of deficiency. In the case at bar an
area of ―644 square meters more‖ is not reasonable excess or deficiency, to be deemed included
in the deed of sale. xRoble v. Arbasa, 362 SCRA 69 (2001);√Rudolf Lietz, Inc. v. CA, 478
SCRA 451 (2005).93

EXCEPTION TO EXCEPTION: When buyer, who has been occupying the land for two years as
lessee, actually is deemed to take risk on the actual size of the property bought at lump sum.
xGarcia v. Velasco, 72 Phil. 248 (1941).