Article 1504

Rules with regards to the risk of loss

GENERAL RULE:
 Unless otherwise agreed, the goods remain at the seller’s 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 buyer’s risk whether the actual delivery has been made or not. (this
is based on the principle of res perit domino).
Res perit domino: the loss of property falls upon the owner.
EXCEPTIONS:
 If the ownership of the good is retained by the seller merely to secure the
performance by the buyer of his obligations under the contract, therefore,
the goods are at the buyer’s risk from the time of such delivery.
 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. In this case,
the law punishes party at fault.

LOSS BEFORE PERFECTION

GENERAL RULE:
Before the perfection of the contract, the seller bears the loss because he is still
the owner at that time.
 In case of complete loss, the sale is void because of the absence of the
object.
 In case of partial loss, the buyer may choose between:
1. WITHDRAWAL FROM THE CONTRACT;
2. DEMANDING THE REMAINING PART PAYING IT PROPORTIONATE PRICE.
LOSS AFTER PERFECTION OF THE CONTRACT
EXCEPTION TO THE RULE OF RES PERIT DOMINO:
If the thing is lost after perfection of the contract but before its delivery, the risk
of loss by fortuitous event without the seller’s fault is borne by the buyer.
 Buyer must pay the price
 He cannot recover the thing from the seller
Except in the following cases:
a. When the seller delays
b. When the law provides that the seller shall be liable even in case of
fortuitous event.
c. When the parties have stipulated that the seller shall be liable even in
case of fortuitous event.
d. When the nature of the seller’s obligation requires the assumption of
risk.

Note: Under American law, there is no need for delivery to transfer ownership
insofar as specific goods are concerned if the contract is one of sale, and not a
contract to sell.

ARTICLE 1521
Time and place of delivery of thing sold
Place of delivery depends on:
1. Agreement (express or implied)
2. If no agreement – get the USAGE OF TRADE
3. If no usage – the BUYER must get them at the SELLER’S PLACE or
RESIDENCE.
Exception:
Contract of sale of SPECIFIC GOODS – in the place where the specific goods are
found or that place shall be the place of delivery, in the absence of any agreement
or usage of trade to the contrary.
Note: There is sufficient delivery when a fortuitous event prevents delivery at the
actual place agreed upon, forcing a delivery at a place near the original one.
Further, there is also sufficient delivery when the original place is changed, but
the buyer accepted the goods at a different place without complaint so long as
the seller was in good faith.
Time of delivery
1. Delivery (if to be made by the seller) must be within a REASONABLE TIME (if
no express agreement.)
2. Circumstances to consider to conclude what reasonable time is:
a. Character of the goods
b. Purpose intended
c. Ability of seller to produce the goods
d. Transportation facilities
e. Distance thru which the goods must be carried
f. Usual course of business in that particular trade
3. If a delivery is to be made “at once”, “promptly”, or “as soon as possible”, a
reasonable time must be necessarily given.
4. PREMATURE delivery generally is NOT ALLOWED because a term is for the
benefit of both parties.
Manner of Delivery when Goods are in the Hands of a Third Person
1. Third person should acknowledge that he holds the goods on behalf of the
buyer, otherwise, the seller shall not yet be complied with his duty to
deliver.
Note: the rule does not apply in case a (1) NEGOTIABLE DOCUMENT of title has
been issued and (2) when the goods are still to be manufactured.
Q. Who pays expenses for putting the goods in a deliverable state?
A. The SELLLER, unless otherwise agreed.

Q. When must demand or tender of delivery be made?

A. In the absence of agreement, at a reasonable hour to be effectual.

ARTICLE 1530
Seller’s Right of Stoppage in Transit
 The right of stoppage in transitu is the right of the seller who sold his
goods on credit; to retake or repossess them while they are in transit, that
is, while they are in the possession of a carrier or other middleman who
received them for delivery to the buyer, by reason of the discovery of the
insolvency of the said buyer.
Requisites For The Exercise of The Right of Stoppage in Transit
1. The sale of goods must be in credit;
2. The goods left to the possession of the seller and are in their way for
delivery to the buyer. If they were received already by the buyer, the
seller’s right to repossess ceases. Seller reduced to the status of a mere
ordinary creditor;
3. The seller is an unpaid seller;
4. The buyer is found to be insolvent.
Concept of Insolvency Under Art. 1530
 A person is considered an insolvent if he has ceased to pay his debts in the
ordinary course of business or cannot pay hid debts as they become due,
whether insolvency proceedings have been commenced or not.
Note: the insolvency referred to need NOT be judicially declared. It is enough that
the obligations exceed a man’s assts.
ARTICLE 1537
 Vendor is bound to deliver the thing sold and its accession and accessories
 All the fruits shall pertain to the vendee from the day on when the contract
was perfected. However, a contrary stipulation may be agreed upon, or a
later date may be set.
Note: Accessions are the fruits of a thing; or additions to or improvements upon a
thing such as they young of animals, house or trees on a land, etc., while
accessories are anything attached to a principal thing for its completion,
ornament, or better use such as picture frame, key of a house, etc.

ARTICLE 1544.
Requisites of article 1544:

1. Two or more sales must constitute valid sales.

2. Two or more sales transaction must pertain to exactly the same subject matter.
3. Two or more buyers at odds over the rightful ownership of the subject matter must each
represent a conflicting interest
4. Two or more buyers at odds over the rightful ownership of the subject matter must each have
bought from the very same seller.

Rules as to preference of ownership in case of double sale:

1. IF MOVABLE OR PERSONAL PROPERTY, ownership shall be acquired by the vendee who first take
possession in good faith.
2. IF IMMOVABLE OR REAL PROPERTY, ownership shall belong to:
a. The vendee (buyer) who first register the sale in good faith in the Registry of Property
b. In the absence of registration, the vendee who first take possession in good faith
c. In the absence of both registration and possession, the vendee who represents the
oldest title (who first bought the property) in good faith.

Remedy of the other vendee deprived of ownership: The vendee may sue the vendor for breach of
warranty against eviction.

IN GOOD FAITH:

a. If the vendee bought the property without the knowledge that the same was already sold to
the other person

IN BAD FAITH:

a. it is not required that the 2nd vendee had an actual knowledge of the first sale
b. It is sufficient that the 2nd vendee has the knowledge of facts.
SECTION 3: CONDITIONS AND WARRANTIES
ARTICLE 1545. EFFECT OF NON-FULFILLMENT OF CONDITION
1. Obligation of either party to a contract of sale is subject to any condition which is not
performed, such party may:
a. Refuse to proceed with the contract.
b. Proceed with the contract, waiving the performance of the condition.

2. If the condition is in the nature of a promise that it should happen, non-performance of such
condition may be treated as breach of warranty.

ARTICLE 1546. Meaning of warranty

Warranty is any representation made by the seller with respect to its character, quality, or ownership,
by which he induced the buyer to purchase the same relying on said representation.

KINDS OF WARRANTIES

Warranty may be express or implied

1. Express warranty – any affirmation of facts or any promise by the seller relating to the thing is
an express warranty if the natural tendency of such affirmation or promise is to induce the
buyer to purchase the same and if the buyer purchases relying thereon.
2. Implied warranty – those that are inherent in a contract of sale.
a. Warranty against eviction – implied warranty on the part of the seller that has the right
to sell the thing at the time when ownership is to pass and that the buyer shall from that
time have and enjoy the legal and peaceful possession of the thing.
i. Eviction – judicial process whereby the vendee is deprived of the whole or part
of the thing purchased by virtue of a final judgment based on a right prior to the
sale or an act imputable to the vendor (Article 1548)
b. Warranty against hidden defects – refers to the implied warranty that the thing shall be
free from any hidden faults or defects, or any charge or encumbrance not declared or
known to the buyer.

When implied warranty not applicable

1. “As is and where is” where the vendee takes them in the condition in which that they are found
and from the place where they are located. It is a condition that carries no warranty as to the
quality or workable condition of the goods.
2. Sale of secondhand articles
3. Sale made by virtue of authority in fact or law. Implied warranty does not apply to a sheriff,
auctioneer, mortgagee, pledgee or other persons who sells. No warranty on the part of the state
ARTICLE 1582. (OBLIGATION OF THE VENDEE)
a. Vendee is bound to accept delivery and pay the price of the thing at the time and place
stipulated in the contract.
b. If there is no stipulation, the payment must be made at the time and place of the delivery of
the thing sold.

If no term has been stipulated within which payment should be made, payment is demandable at any
time after delivery, and it is the corresponding duty of the buyer to pay the price immediately upon
demand.

RULES

1. If there is no stipulation as to the time and place of payment and delivery, vendee is bound
to pay at the time and place of delivery.
2. If stipulated, the vendee is bound to accept delivery and to pay at the time and place stated.
3. In the absence also of stipulation, as to the place of delivery, it shall be made wherever the
thing might be at the moment the contract was perfected.
4. If only the time has been fixed, the vendee is required to pay even before the thing is
delivered to him/her.

ARTICLE 1585. What constitutes acceptance.

1. Express acceptance – when the buyer, after delivery of goods, intimates to the seller (told the
seller), verbally or in writing that he has accepted them
2. Implied acceptance
a. The buyer, after delivery, does any act inconsistent with the seller’s ownership, as when
he sells or attempts to sell, or uses them or makes alteration in a manner proper only
for an owner.
b. When the buyer, after the lapse of a reasonable time, retains the goods without
intimating his rejection.

ARTICLE 1586.
In the absence of express or implied agreement of the parties:
- Acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other
legal remedy for breach of warranty in the contract sale.

- But, if after acceptance, buyer fails to give notice to the seller of the breach of any promises of
warranty within reasonable time after the buyer knows or ought to know such breach, the seller shall
not be liable.
ARTICLE 1587. Where buyer’s refusal to accept justified.
Unless otherwise agreed…

1. Duty of buyer to take care goods without obligation to return them.

If the buyer rightfully refuses to accept the goods, he has no obligation to return them to the
seller, but it is sufficient that he notifies the seller that he refuse them.
2. Duty of seller to take delivery of goods.
After notice that the goods have not and will not be accepted, the seller must have the burden
of taking delivery of said goods.
3. Seller’s risk of loss.
Goods remain at the seller’s risk and the buyer is not liable unless he voluntarily constitutes
himself as such.
4. Right of buyer to resell goods.
Buyer may resell the goods if the seller, if the seller after being notified to take delivery, fail to
do so.

ARTICLE 1587. Where buyer’s refusal to accept justified.

RIGHTFUL REFUSAL WITH JUST CAUSE as in the case where goods are not of the kind and quality agreed
upon.

Unless otherwise agreed:

1. Duty of buyer to take care of goods without obligation to return.
2. Duty of seller to take delivery of goods.
- After notice that goods have and will not be accepted, seller must have the burden of taking
delivery of said goods.
3. Seller’s risk of loss
- Buyer is not liable as a depositary, unless he voluntarily constitutes himself.
4. Right of buyer to resell goods.
- When the seller failed to deliver the goods after being notified that the goods will not be
accepted, buyer may resell the goods.

ARTICLE 1588. Effect of buyer’s wrongful refusal.

WRONGFUL REFUSAL IS WITHOUT JUST CAUSE. Delivery to a carrier deemed to be a delivery to buyer,
therefor, risk of loss is borne by the buyer.

EXCEPT:

a. There is a contrary agreement.

b. The seller reserves the ownership as security for the payment of the price.
ARTICLE 1590.
When vendee can suspend the payment of price

1. When vendee is disturbed in the possession or ownership of the thing acquired.

2. When vendee has reasonable grounds to fear that his possession or ownership would be
disturbed by a vindicatory action or foreclosure of mortgage.

When vendee cannot suspend the payment of price

1. When vendor gives security for the return of the price in a proper case.
2. When the parties have stipulated that despite the presence of the disturbance, the vendee will
pay the price.
3. When the vendor has succeeded in eliminating the danger or disturbance.

CHAPTER 6: ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS.

1. Actions available to vendor when there is a breach of contract of sale on the part of the vendee.
a. Action for payment of the price of the goods (article 1595)
b. Actions for damages due to wrongful neglect and refusal to accept and pay the goods.
(article 1596)
c. Action of rescission if the buyer has repudiated (refuse to accept) the contract or has
manifested his inability to perform his obligation (article 1597)
2. If the breach is on the part of the seller, the buyer may pursue any one of the following cases:
a. Action for specific performance when the vendor has failed to deliver the goods (article
1598)
b. Action for damages for breach of warranty but accepting the goods. (article 1599)
c. Action for rescission for breach of warranty where the vendee may validly refuse
acceptance of the goods, or even if the goods had already been received, he may return
them (article 1599)

REMEDIES OF BUYER WHEN SELLER COMMITS BREACH OF WARRANTY (ART. 1599)

1. Recoupment – whereby the buyer accepts the goods but he sets up against the seller the
reduction or extinction of the price.
2. Action for Damages – whereby the buyer may
a. Accept the goods but with damages or
b. Refuse to accept the goods for the breach of warranty but also with damages
3. Rescission – whereby the buyer seeks the cancelation of the sale and as a consequence, there
will be restoration on both sides. The seller returns the price he received and the buyer returns
the goods he received. The contract will be rescinded in its entirety.
ARTICLE 1602. A new provision that provide safeguards and restrictions against the evils of sales
with right to repurchase commonly called pact de retro sales.

EQUITABLE MORTGAGE: making the property the subject of the contract as a security for the fulfillment
of an obligation.

Contract shall be presumed to be an equitable mortgage, in any of the following cases:

1. Price of sale with right to repurchase is unusually inadequate.
2. When the vendor remains in possession as lesee or otherwise (tradition constitutum
possesorium)
3. When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed.
4. When the purchaser retains for himself a part of the purchase price.
5. When the vendor binds himself to pay the taxes on the thing sold’
6. In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

Money, fruits or other benefit to be received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to usury laws.