LAW ON SALES, AGENCY, AND CREDIT TRANSACTIONS

CHAPTER 1
NATURE AND FORM OF THE CONTRACT
(ARTS. 1458-1637)

ARTICLE 1458
CONCEPT OF CONTRACT OF SALE
-contract of sale is a contract whereby one of the contracting parties (SELLER)
obligates himself to transfer the ownership and to deliver a determinate thing, and the other party
(BUYER) obligates himself to pay a sum of money or its equivalent (PRICE)

CHARACTERISTICS OF A CONTRACT OF SALE

1. CONSENSUAL- it is perfected by mere consent of the parties.
2. BILATERAL- the parties are bound by reciprocal obligations

SELLER- to deliver and transfer ownership of the thing sold

BUYER- to pay the price

3. ONEROUS- the thing sold is conveyed in consideration of the price.

4. COMMUTATIVE- the thing sold is considered the equivalent of the
price paid
(the contract may be ALEATORY- depending on an uncertain
event or contingency)
5. NOMINATE- it has a special name given to it by law namely “SALE”
6. PRINCIPAL- it can exist by itself without being dependent upon
another contract.

ELEMENTS OF A CONTRACT OF SALE

1. ESSENTIAL ELEMENTS/ REQUISITES
A. CONSENT OR MEETING OF THE MINDS
-It refers to the consent on the part of the SELLER to transfer
and deliver and on the part of the buyer to pay the price.

-The parties must have legal capacity to give consent and to

obligate themselves.

-when there is an offer of one party, without the acceptance of

the other, THERE IS NO CONSENT

B. OBJECT OR SUBJECT MATTER

- It refers to the determinate thing which is the object of the
contract.

- If the seller and the buyer differ in regard to the thing sold,
there is no meeting of the minds therefore, there is no sale

C. CAUSE OR CONSIDERATION
-It refers to the “price certain in money or its equivalent”

2. NATURAL ELEMENTS- those inherent in a contract of sale, which in the absence of

stipulation excluding them, are deemed to exist.
 Such as: warranty against eviction, warranty against hidden defects and
encumbrances

3. ACCIDENTAL ELEMENTS- it refers to the stipulation of the parties such as terms, place and
time of payment, and other conditions agreed upon

TWO KINDS OF CONTRACT OF SALE

1. ABSOLUTE- the sale is not subject to any conditions and where title or
ownership passes to the buyer upon the delivery of the thing sold.

2. CONDITIONAL-where the contract is subject to certain conditions usually the full

payment of the purchase price. The delivery of the thing sold does not transfer
ownership until the CONDITION is fulfilled

ARTICLE 1459
REQUISITES CONCERNING OBJECT
1. THINGS
a. determinate thing
b. licit or lawful (legal) – it should not be contrary to law, morals, good
customs, public order, or public policy.
(if the subject matter is illicit, the contract is void and cannot, therefore be ratified)
c. not be impossible

2.RIGHTS- all rights which are not intransmissible or personal may be the object
of sale.
Like: the right of usufruct, the right of conventional redemption.
(services may be the object of contract but cannot be the object of contract of sale)

KINDS OF ILLICIT THINGS

-illicit per se (of its nature) ex: decayed food unfit for consumption
-illicit per accidens ( because of some provisions of law declaring it illegal)
Ex: prohibited lottery tickets and prohibited drugs

RIGHT OF VENDOR TO TRANSFER OWNERSHIP

1. ONE CAN SELL ONLY WHAT HE OWNS
-it is essential in order for a sale to be valid, he must be the OWNER or at least
must be authorized by the owner of the thing sold. It is a well known principle of law that
nobody can dispose of that which he does not have.

2.SUFFICIENT IF RIGHT EXISTS AT TIME OF DELIVERY

-It is sufficient if he has the right to sell the thing at the time when the ownership
is to pass.

ARTICLE 1460
SUBJECT MATTER MUST BE DETERMINATE
1. WHEN THING DETERMINATE
-A thing is determinate or specific when it is particularly designated or physically
segregated from all others of the same class. In accordance with the general rule that the
object of every contract must be determinate as to its kind.
-it is identified by its individuality
Ex: the watch I am wearing, my car
 2. SUFFICIENT IF SUBJECT MATTER CAPABLE OF BEING MADE
DETERMINATE
-it is sufficient that the thing is determinable or capable of being made
determinate without the necessity of a new or further agreement between the parties to
ascertain its identity, quantity, or quality. It cannot be known what may have been sold;
the contract shall be null and void.

ARTICLE 1461
SALE OF THINGS HAVING POTENTIAL EXISTENCE
-future thing not existing at the time the contract is entered into, may be the object of sale
provided it has a potential or possible existence. It is reasonably certain to come into
existence as the natural increment or usual incident of something in existence already
belonging to the seller, and the title will vest in the buyer the moment the thing comes
into existence. The thing sold, however must be specific and identified and it must be
also owned by the vendor at the time.

SALE OF HOPE OR EXPECTANCY

The sale refers to an “expected thing” which is not yet in existence, and not to the hope or
expectancy which is already exists, in view of the condition that the thing will come into
existence, But the SALE OF HOPE OR EXPECTANCY itself is valid even if the thing
hoped or expected does not come into existence, unless the hope or expectancy is VAIN,
in which case the sale is void.

ARTICLE 1462
GOODS WHICH MAY BE THE OBJECT OF SALE
Goods which form the subject of a contract of sale may be either:
a. EXISTING GOODS OWNED OR POSSESSED BY THE SELLER
ex: the sale of bathroom fixtures currently stored in the seller’s
warehouse is a sale of existing goods
b. FUTURE GOODS OR GOODS TO BE MANUFACTURED, RAISED OR
ACQUIRED BY THE SELLER
EXAMPLES:
MANUFACTURED- like the sale of milk bottles to be manufactured with the
name of the buyer pressed in the glass
RAISED- sale of chickens that may be raised in a poultry farm and sale of the
future harvest of palays from a ricefield
ACQUIRED- sale of definite parcel of land the seller expects to buy

SALE OF FUTURE GOODS

Even though the contract is in the form of present sale, is valid only as an EXECUTORY
CONTRACT to be fulfilled by the acquisition and delivery of the goods specified

ARTICLE 1463
SALE OF UNDIVIDED INTEREST IN A THING
1. BY SOLE OWNER
-the sole owner of a thing may sell the entire thing; or only a specific portion
thereof; or an undivided interest therein and such interest may be designated as an aliquot
part of the whole. Such sale shall produce the effect of making the seller and buyer co-
owners of the thing sold.
2. BY CO-OWNER
 -being the owner of his undivided interest therein, can dispose his share even
without the consent of the other co-owner/s

ARTICLE 1464
SALE OF AN UNDIVIDED SHARE OF A SPECIFIC MASS
FUNGIBLE GOODS
-refer to interchangeable goods such as grain, oil, etc. that allow one to be
replaced by another without loss of value.

EFFECT OF SALE
The owner of a mass of goods may sell only an undivided share thereof, provided
the mass is specific or capable of being made determinate.
a. if the quantity i.e., number, weight or measure, of the mass is MORE THAN
the quantity sold the parties shall become co-owners of the mass.

b. if the quantity of the mass is LESS THAN the quantity sold, the buyer becomes
the owner of the whole mass, with the seller being bound to make good the deficiency
from goods of the same kind and quality, unless a contrary intent appears.

RISK OF LOSS
If the buyer becomes co-owner, with the seller, or other owners of the remainder
of the mass, it follows that the whole mass is at risk of all the parties interested in it.

SUBJECT MATTER
The subject matter is an incorporeal or intangible right.

ARTICLE 1465
SALE OF THING SUBJECT TO A RESOLUTORY CONDITION
-A resolutory condition is an uncertain event upon the happening of which the obligation
(or right) subject to it is extinguished.

-If the resolutory condition attaching to the object of the contract, which object may
include things as well as rights should happen, then the vendor cannot transfer the
ownership of what he sold since there is no object.

ARTICLE 1466
SALE DISTINGUISHED FROM AGENCY TO SELL
-a contract of agency, a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter.

IN SALE:
*the buyer receives the goods as owner
*the buyer has to pay the price
*the buyer, as a general rule, cannot return the object sold
*the seller, warrants the thing sold
*the buyer can deal with the thing sold as he pleases, being the owner

IN AGENCY TO SELL:
*the agent receives the goods as the goods of the principal who retains his
ownership over them.
*the agent simply to account for the proceeds of the sale he may make on
the principal behalf;
 *the agent can return the object in case he is unable to sell the same to a
third person; and
*the agent makes no warranty for which he assumes personal liability as
long as he acts within his authority and in the name of the seller;
*the agent in dealing with the thing received, must act and is bound
according to the instructions of his principal

ARTICLE 1467
SALE DISTINGUISHED FROM CONTRACT FOR A PIECE OF WORK
-a contract for a piece of work, the contractor binds himself to execute a piece of
work for the employer, in consideration of a certain price or compensation

CONTRACT OF SALE
-which the vendor in the ordinary course of business manufactures or procures for
the general market, whether the same is on hand or not.
(within the statute of frauds)
CONTRACT FOR A PIECE OF WORK
-if the goods are manufactured specially for the customer and upon his special
order, and not for the general market.
(are not within the statute of frauds)

RISK OF LOSS
Before the delivery is borne by the worker or contractor, not by the employer (the
person who ordered)

ARTICLE 1468
SALE DISTINGUISHED FROM BARTER
-the contract of barter or exchange, one of the parties binds himself to give one thing in
consideration other’s promise to give another thing
-in contract of sale the vendor gives a thing in consideration for a price of in money.

However, where the consideration is partly in money and partly in another thing, the ff.
rules shall be observed to determine whether the contract is sale or barter:
*the contract shall be one of sale or barter depending upon the manifest
intention of the parties
IF THE INTENTION DOES NOT CLEARLY:
Contract is one of barter- if the value of the thing given as part of the
consideration exceeds the monetary consideration
Consideration is one of sale- if the monetary consideration is more than or equal
to the value of the thing given as part of the consideration

ARTICLE 1469
WHEN PRICE CONSIDERED CERTAIN
1. NO SALE IF PRICE NOT CERTAIN OR ASCERTAINABLE
-the price in a contract of sale ought to be settled for there can be NO SALE
WITHOUT A PRICE. It must be certain or capable of being ascertained in money or its
equivalent; and money is to be understood as currency and its equivalent means
promissory notes, checks and other mercantile instruments as representing money.

2. CASES WHEN PRICE CONSIDERED CERTAIN

a. the parties have fixed or agreed upon a definite amount
b. it be certain with reference to another thing certain
c. the determination of the price is left to the judgment of a specified
person or persons.
 The last two cases are applicable only when no specific amount has been
stipulated by the parties

EFFECT WHEN PRICE FIXED BY THE 3RD PERSON DESIGNATED

EXCEPTIONS SUCH AS:
1. WHEN THE 3RD PERSON ACTS IN BAD FAITH OR BY MISTAKE
2. WHEN THE 3RD PERSON DISREGARDING SPECIFIC INSTRUCTIONS OR THE
PROCEDURE LAID DOWN BY THE PARTIES

EFFECT WHERE PRICE NOT FIXED BY THIRD PERSON DESIGNATED

1. IF THE 3RD PERSON DESIGNATED BY THE PARTIES TO FIX THE PRICES
REFUSES OR CANNOT FIX
The contract shall become ineffective, as if no price had been agreed upon unless
of course, the parties subsequently agree upon the price.

2. IF SUCH 3RD PERSON IS PREVENTED FROM FIXING THE PRICE BY THE

FAULT OF SELLER OR THE BUYER.
Which consist of a choice between rescission or fulfillment, with damages in
either case. If the innocent party chooses fulfillment, the court shall fix the price

ARTICLE 1470
EFFECT OF GROSS INADEQUACY OF PRICE IN VOLUNTARY SALES
-gross adequacy does not affect a contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation or some other act or contract.
EFFECT OF GROSS INADEQUACY OF PRICE IN VOLUNTARY OR EXECUTION SALES
1. GENERAL RULE
Judicial or execution sale is one made by a court with respect to the property of a
debtor for the satisfaction of his unpaid indebtedness.

2.WHERE PRICE IS SO LOW AS TO BE “SHOCKING TO THE CONSCIENCE”

A judicial sale, say of real property will be set aside by the court.

3.WHERE SELLER GIVEN THE RIGHT TO REPURCHASE

-the validity of the sale is not necessarily affected where the law gives to the
owner the right to redeem, as when a sale is made at public auction, upon the theory that
the lesser the price, the easier it is for the owner to buy back the property.

ARTICLE 1471
EFFECT WHERE THE PRICE SIMULATED
1. IF THE PRICE IS SIMULATED OR FALSE
Then the sale is void but the contract shall be valid as a donation

2. IF THE CONTRACT IS NOT SHOWN TO BE DONATION OR ANY OTHER ACT

OR CONTRACT TRANSFERRING OWNERSHIP
-because the parties do not bound at all the ownership of the thing is not
transferred. The contract is void and inexistent

ARTICLE 1472
PRICE ON A GIVEN DAY AT PARTICULAR MARKET
-It follows the principle in ARTICLE 1469 that price is considered if it could be
determined with reference to another thing certain
 -“provided said amount be certain” when an amount is fixed ABOVE or BELOW the
price on a given day or in a particular exchange or market, the said amount must be
certain, otherwise THE SALE IS INEFFICACIOUS because the price cannot be
determined.
-this article is applicable to fungible things, the prices of which are subject to fluctuations
of the market.

ARTICLE 1473
FIXING OF PRICE BY ONE OF THE CONTRACTING PARTIES NOT ALLOWED
1. If the consent is essential to a contract of sale, the determination of the price cannot be
left to the discretion of one of the contracting party. The validity or compliance of the
contract cannot be made to depend upon the will of one party

2. The price must be determined by both parties or left to the judgment of a specified
person or persons however, where the price fixed by one party is accepted by the other,
the contract is deemed perfected because in this case, there exists a true meeting of minds
upon the price.

ARTICLE 1474
EFFECT OF FAILURE TO DETERMINE PRICE
1. WHERE CONTRACT EXECUTORY
-if the price cannot be determined in accordance with articles 1469 and 1472 the
contract is without effect. Consequently, there is no obligation on the part of the vendor
to deliver the thing and on the part of the buyer to pay.

2. WHERE DELIVERY HAS BEEN MADE

-if the thing has already been delivered and appropriated by the buyer, the latter
must pay a reasonable price. The reasonable price or value of goods is generally the
market price at the time and place fixed by the contract or by law for the delivery of the
goods.

ARTICLE 1475
PERFECTION OF CONTRACT OF SALE
-a contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price the reciprocal obligations of the
parties arise. But the ownership is not transferred until delivery of the thing.

-in case one of the contracting parties should not comply with what is incumbent upon
him, the injured party sue for FULFILLMENT or RESCISSION with the payment of
damages in either case.

RIGHT OF OWNER TO FIX HIS OWN PRICE

1. it is up to the buyer to accept or reject it. He may even impose a condition hard to
fulfill and name a price quite out of proportion to the real value of the thing offered for
sale
2. He is also well within his right to quote a small or nominal consideration and such
consideration is just as effectual and valuable a consideration as a larger sum stipulated or
paid.
EFFECT OF FAILURE TO PAY PRICE/ ABSENCE OF PRICE
1. PRICE STIPULATED
-the vendor’s remedy in such case is generally to demand specific performance or
rescission with damages in either case.
 2. NO PRICE STIPULATED
-in such case, the sale is void and non-existent as without cause or consideration.
Of course, if there is no stipulation or meeting of minds regarding the purchase price,
there is no contract of sale.

ARTICLE 1476
RULES GOVERNING AUCTION SALES
1. SALES OF SEPARATE LOTS BY AUCTION ARE SEPARATE SALES
Each lot is the subject of a separate contract of sale.

2. SALE PERFECTED BY THE FALL OF THE HAMMER

-the seller is making an invitation to those present to make offers which they do
by making bids, one of which is ultimately accepted. It follows that the bidder may
retract his bid and the auctioneer may withdraw the goods from sale any time before the
hammer falls. However, if the sale has been announced to be without reserve, the
auctioneer cannot withdraw the goods from sale once a bid has been made and the
highest bidder has a right to enforce his bid

3. RIGHT OF THE SELLER TO BID IN THE AUCTION

The seller or his agent may bid in an auction sale provided:
1. such right was reserved
2. notice was given that the sale is subject to a right to bid in
behalf of the seller; and
3. the right to bid by the seller is not prohibited by law or
stipulation
a. WHEN NO NOTICE GIVEN OF RIGHT TO BID
it shall be unlawful for the seller to bid either
directly or indirectly or for the auctioneer to employ
or induce any person to bid on behalf of the seller.
The purpose of the notice is to prevent puffing or
secret bidding by or on behalf of the seller by
people who are not themselves bound

b. WHEN NOTICE GIVEN OF RIGHT TO BID

a right to bid may be expressly reserved by or on
behalf of the seller. It is, therefore, the secrecy of
puffing which renders it a fraud upon bidding. Where
there is notice of the intention to bid by the seller,
the bidding in such case would not operate as fraud.

ARTICLE 1477-1478
OWNERSHIP OF THE THING TRANSFERRED BY DELIVERY
-delivery of the thing sold is essential in a contract of sale, without it the buyer may not
enjoy the thing sold to him. After the delivery of the thing sold that the buyer acquires a
real right or ownership over it.
-delivery may be actual or constructive

EXCEPTION TO THIS RULE

-the parties may stipulate that despite the delivery, the ownership of the thing shall
remain with the seller until the purchaser has fully paid the price.

ARTICLE 1479
KINDS OF PROMISE TREATED IN ARTICLE 1479
 It applies specifically to a promise “to buy or to sell” it refers to 3 kinds of promise,
namely:
1. AN ACCEPTED UNILATERAL PROMISE TO SELL IN WHICH THE PROMISEE
(acceptor) elects to buy.
2. AN ACCEPTED UNILATERAL PROMISE TO BUY IN WHICH THE PROMISEE
(acceptor) elects to sell.
3. A BILATERAL promise to buy and sell reciprocally accepted in which either of the
parties chooses to exact fulfillment.

EFFECT OF UNACCEPTED UNILATERAL PROMISE

-a unilateral promise or offer to sell or to buy a thing which is not accepted creates no
juridical effect or legal bond. Such unaccepted offer is called policitation

OPTION
-is a privilege existing in one person for which he has paid a consideration which gives
him the right to buy/sell.

EFFECT OF ACCEPTED UNILATERAL PROMISE

-a unilateral promise to sell or to buy a determinate thing for a price certain does not bind
the promisor even if accepted and may be withdrawn at any time.

EFFECT OF BILATERAL PROMISE TO BUY AND SELL

-when the promise is bilateral, one party accepts the other’s promise to buy and the latter,
the former’s promise to sell, a determinate thing for a certain price certain. The
concurrence of both acts- the offer and the acceptance- generates a binding contract of
sale.

ARTICLE 1480
RISK OF LOSS OR DETERIORATION
1. IF THE THING IS LOST BEFORE PERFECTION
-the seller bears the loss
2. IF THE THING IS LOST AT THE TIME OF PERFECTION
-the contract is void or inexistent. The legal effect is the same as when the object
is lost before the perfection of the contract of sale.
3. IF THE THING IS LOST AFTER PERFECTION BEFORE ITS DELIVERY
-even before the ownership is transferred to the buyer the risk of loss is shifted to
the buyer as an exception to the rule of res perit domino
4. IF THE THING IS LOST AFTER DELIVERY
-the buyer bears the risk of loss following the general rule of res perit domino.

SCOPE OF ARTICLE 1480

1. THE 1ST APPLIES TO NON-FUNGIBLE GOODS
- the risk of the thing sold passes to the buyer, even though the thing has not yet
been delivered to him. In other words, the buyer assumes the risk of loss caused by
fortuitous event, without the fault of the seller.

2. THE 2ND RULE RELATES TO FUNGIBLE THINGS

-the vendee assumes the risk if he has incurred in delay in receiving the goods
sold.
ARTICLE 1481
SALE OF GOODS BY DESCRIPTION AND/ OR SAMPLE
-the term “bulk of goods” does not designate the greater portion of the goods. It denotes
the goods themselves as distinguished from the sample and/or description with which
they must correspond.
 1. SALE BY DESCRIPTION
-where a seller sells things as being of a particular kind, where the purchaser has
not seen the article sold and relies on the description given him by the vendor. If the bulk
of the goods delivered do not correspond with the description, the contract may be
rescinded.

2. SALE BY SAMPLE
-in a sale by sample, the seller warrants that the thing sold and to be delivered by
him shall conform with the sample in kind, character, and quality.

3. SALE BY DESCRIPTION AND SAMPLE

-when a sale is made both by sample and by description, the goods must satisfy all
the warranties appropriate to either kind of sale, and it is not sufficient that the bulk of the
goods correspond with the sample if they do not correspond with the description and vice
versa.

ARTICLE 1482
MEANING OF EARNEST MONEY
-is money given by the buyer to the seller to bind the bargain. It is actually a partial
payment of the purchase price and is considered as a proof of the perfection of the
contract.
-advance payment it must be deducted from the total price

EARNEST MONEY AND OPTION MONEY DISTINGUISHED

EARNEST MONEY
-is part of purchase price
-is given only where there is already a sale
-when earnest money is given, the buyer is bound to pay the balance
OPTION MONEY
-is the money given as distinct consideration for the option contract
-applies to a sale not yet perfected
-while when the would-be buyer gives option money, he is not required to buy.

BUT OPTION MONEY MAY BECOME EARNEST MONEY, IF THE PARTIES

SO AGREE.

ARTICLE 1483
FORM OF CONTRACT OF SALE
1. GENERAL RULE
-a contract may be entered into in any form provided all the essential
requisites for its validity are present.

2. WHERE CONTRACT COVERED BY STATUTE OF FRAUDS

-the contract of sale should be covered by the Statute of Frauds, the law
does requires that it be in writing subscribed by the party charged, otherwise the
contract cannot be enforced by action and where the ‘applicable statute’ required that
the contract of sale be in certain form for its validity, the required form must be
observed in order the contract may be both valid and enforceable.

UNDER THE STATUTE OF FRAUDS the ff. contracts must be in writing,

otherwise they cannot be enforced in court litigation:
a. sale of personal property at a price not less than 500 pesos
 b. sale of real property or an interest therein regardless of the price
involved; and
c. sale of property not to be performed within a year from the date
thereof regardless of the nature of the property and the price involved.

3. WHERE FORM IS REQUIRED IN ORDER THAT A CONTRACT MAY BE

VALID
-where the “applicable statute” requires that the contract of sale
be in certain form for its validity, the required form must be
observed in order that the contract may be both valid and
enforceable

4. WHERE FORM IS REQUIRED ONLY FOR THE CONVENIENCE OF THE

PARTIES
-in order that the sale may be registered in the Registry of Deeds
to make effective as against third persons the right acquired
under such sale.

SALE OF REAL PROPERTY OR AN INTEREST

-a sale of a piece of land or interest therein when made through an agent is void unless
the agent’s authority is in writing.
-for the sale of real property to be effective against third persons, the sale must be
registered in the Registry of Deeds (or Property) of the province or city where the property is
located. The sale must be in public instrument or document.

STATUTE OF FRAUDS APPLICABLE ONLY TO EXECUTORY CONTRACTS

-the reason for this rule is that partial performance like the writing, furnishes reliable
evidence of the intention of the parties or the existence of the contract. A contrary rule would
result in injustice or unfairness to the party who has performed his obligation.

ARTICLE 1484
REMEDIES OF VENDOR IN SALE OF PERSONAL PROPERTY PAYABLE IN
INSTALLMENT (RECTO LAW)
May exercise the ff. remedies:
1. elect fulfillment upon the vendee’s failure to pay
2. cancel the sale if the vendee shall have failed to pay two or more
installments;
3.foreclose the chattel mortgage, if one has been constituted, if the
vendee shall have failed to pay two or more installments

NATURE OF THE REMEDIES

-where the vendor asks the court to order the vendee to pay the remaining unpaid sum of
the purchase price, the vendor thereby waives the other remedies.

RIGHT OF VENDOR TO RECOVER UNPAID BALANCE OF PURCHASE PRICE

1.REMEDY OF SPECIFIC PERFORMANCE
He may still recover from the purchaser the unpaid balance of price, if
any on the real and personal properties of the buyer not exempt by law
from attachment and execution
2. REMEDY OF CANCELLATION
 The latter can demand only the return of payments already made unless
there is a stipulation about forfeiture

3. REMEDY OF FORECLOSURE
He shall have no further action against the vendee for the recovery of any unpaid
balance of the price and any agreement to the contrary is void. The foreclosure is effected
by selling the mortgaged personal property at public auction and applying the proceeds to
sale to the satisfaction of the claim secured by the mortgaged.

RECOVER OF DEFICIENCY AFTER FORECLOSURE PROHIBITED

It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale
for a low price and then bringing suit against the mortgagor for a deficiency judgment
ARTICLE 1485
LEASE OF PERSONAL PROPERTY WITH OPTION TO BUY
-on the part of the lessee who takes possession or enjoyment of the property leased are
really sales of personal property payable in installments.
-the evident purpose is to prevent vendors from resorting to this form of contract which,
usually, is in reality a contract of sale of personal property payable in installments in
contravention of the provisions of Article 1484

ARTICLE 1486
STIPULATION AUTHORIZING FORFEITURE OF INSTALLMENTS OR RENTS PAID
-the parties may stipulate that the installments or rents paid are not to be returned. Such a
stipulation is valid “insofar as the same may not be unconscionable under the circumstances”
otherwise the court has the power to order the return of a portion of the total amount paid in
installments or rents.

ARTICLE 1487
EXPENSES FOR EXECUTION AND REGISTRATION
-the vendor has the duty to pay not only the expenses for the execution of the sale but
also for the registration of the same in the absence of any agreement between the parties to the
contrary.
-expenses incurred subsequent to the transfer of title are borne by the buyer, unless
caused by the fault of the seller.

ARTICLE 1488
EXPROPRIATION OF PROPERTY FOR PUBLIC USE
-it covers the procedure for the exercise of the power of eminent domain. Expropriation
must be decreed by competent authority and for public use and always upon paymentof just
compensation.

______________________________________________________________________________
____________________________________CHAPTER 2
CAPACITY TO BUY AND SELL

ARTICLE 1489
PERSON WHO MAY ENTER INTO A CONTRACT OF SALE
General rule: all persons, whether natural or juridical, who can bind themselves
by contract have also legal capacity to buy and sell.
Exceptions: when the law determines that party suffers from either absolute or
relative incapacity.
KINDS OF INCAPACITY
Absolute incapacity- in the case of persons who cannot bind themselves; and
Relative incapacity- where it exists only with reference to certain persons or a
certain class of property

LIABILITY FOR NECESSARIES OF MINOR OR OTHER PERSON WITHOUT CAPACITY

TO ACT
“Necessaries” are those things which are needed for sustenance, dwelling, clothing and
medical attendance, in keeping with the financial capacity of the family of the incapacitated
person.
-generally, the contracts entered into by a minor and other incapacitated persons are
voidable. However, where necessaries are sold and delivered to him (without intervention of the
parent or guardian) he must pay a reasonable price therefor, the contract is valid, but the minor
has the right to recover any excess above a reasonable value paid by him.

SALE BY MINORS
-when the minors pretend that they are now in adult age while in fact they have not, the
sale is valid. They cannot be permitted to excuse themselves from compliance with the
obligations assumed by them or to seek their annulment.

ARTICLE 1490
RELATIVE INCAPACITY OF HUSBAND AND WIFE
1. they are prohibited by the article 1490 from selling property to each other.
2. they are also prohibited from making donations to each other during the marriage
except moderate gifts on the occasion of any family rejoicing. If there has been a separation of
property agreed upon in the marriage settlements, or when there has been a judicial separation of
property decreed between them by the court, THE SALES BETWEEN THEM, ARE
ALLOWED.

REASON FOR PROHIBITION UNDER ARTICLE 1490

-the possibility that the husband will induce his wife to engage in ruinous operations. The
prohibition is primarily for the protection of 3rd person who relying upon supposed property of
either spouse enters into a contract with either of them only to find out that the property relied
upon was transferred to the other spouse.

PERSONS PERMITTED TO QUESTION SALE

1. the heirs of either spouse, as well as creditors at the time of the transfer, can attack the
validity of the sale but not creditors who became such only after the transaction
2. the government

ARTICLE 1491
INCAPACITY BY REASON OF RELATION TO PROPERTY
-the persons who, because of their position and relation with the persons under their
charge or property under their control, are prohibited from acquiring said property under their
control.
They are the: guardians, agents, executors and administration, public officers and
employees; judicial officers and employees and lawyers and others especially disqualified by
law.

REASON FOR PROHIBITION

-is to prevent frauds on the part of the persons enumerated therein and minimize
temptations to the exertion of undue and improper influence.
OTHER PERSONS ESPECIALLY DISQUALIFIED
1. aliens who are disqualified to purchase private agricultural lands
2. unpaid seller, having a right of lien or having stopped the goods in transit
3. the officer conducting an execution sale of property to enforce a court
judgment rendered against the owner.

ARTICLE 1492
PROHIBITION IN EXTENDS TO SALE IN LEGAL REDEMPTION
1. COMPROMISE-is a contract whereby the parties, by reciprocal concessions, avoid a
litigation or put an end to one already commenced. It is the amicable settlement of a controversy.
2. by renunciation- a creditor gratuitously abandons his right against his creditor. The
other terms used by the law are condonation and remission.

ARTICLE 1493
EFFECT OF LOSS OF THING AT THE TIME OF SALE
1. THING ENTIRELY LOST
-at the time of perfection, the contract is inexistent and void because there is no
object.
2. THING ONLY PARTIALLY LOST
-the vendee may elect between withdrawing from the contract and demanding the
remaining part, paying its proportionate price.

WHEN A THING CONSIDERED LOST

Its existence is unknown or it cannot be recovered.

ARTICLE 1494
EFFECT OF LOSS IN CASE OF SPECIFIC GOODS
-ARTICLE 1494 applies only to sales of goods, that is, the object of the sale consists of a
mass of specific goods
2 remedies to the buyer:
1. SALE DIVISIBLE- a contract is DIVISIBLE when its consideration is
made up of several parts.
2. SALE INDIVISIBLE- when the consideration is entire and single.
The object may be considered as a specific thing.

CHAPTER 4
OBLIGATIONS OF THE VENDOR

ARTICLE 1495
PRINCIPAL OBLIGATIONS OF THE VENDOR
1. to transfer the ownership
2. to deliver the thing
3. to warrant against eviction and hidden defects
4. to take care of the thing, pending delivery, with proper diligence
5. to pay for the expenses for the execution and registration of the deed of sale,
unless there is a stipulation to the contrary

ARTICLE 1496
WAYS OF EFFECTING DELIVERY
1. BY ACTUAL OR REAL DELIVERY
2. BY CONSTRUCTIVE OR LEGAL DELIVERY
 3. BY DELIVERY IN ANY OTHER MANNER SIGNIFYING AN AGREEMENT

WAYS OF EFFECTING CONSTRUCTIVE DELIVERY

1. EQUIVALENT TO ACTUAL DELIVERY
It may be effected in any of the following ways:
a. by the execution of public instrument
b. by symbolica tradition/ tradition symbolica
c. by traditio longa manu
d. by tradition brevi manu
e. by tradition constitutum possessorium
or
f. by quasi-delivery or quasi-traditio
2. CONTRARY MAY BE STIPULATED
The parties may stipulate that ownership in the thing shall pass to the
buyer only after he has fully paid the price or fulfilled conditions.

SECTION 2- DELIVERY OF THE THING SOLD

ARTICLE 1497
CONCEPT OF TRADITION OR DELIVERY
“tradition” is 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 little to one
who accepts the same.
IMPORTANCE OF TRADITION
Delivery of the thing to enable the buyer to enjoy and make use of the property
purchased. After delivery, the risk of loss of the thing sold is borne by the buyer.

ACTUAL DELIVERY OF THING SOLD

1. WHEN DEEMED MADE- it involves the physical delivery of the thing and is usually
done by passing of a movable thing from hand to hand.

2. NOT ALWAYS ESSENTIAL TO PASSING OF TITLE

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.

ARTICLE 1498
EXECUTION OF PUBLIC INSTRUMENT OR DOCUMENT
Public instrument is one which is acknowledged before notary public or any official
authorized to administer oath, by the person who executed the same.

WHEN THE THING NOT SUBJECT TO CONTROL OF VENDOR

-a seller cannot deliver constructively if he cannot deliver actually even if he
wants to.

SYMBOLIC TRADITION
-the parties make use of a token symbol to represent the thing delivered

ARTICLE 1499
TRADITIO LONGA MANU
--it takes place by the mere consent or agreement of the contracting parties as when the
vendor merely points to thing sold which shall thereafter be at the control and disposal of the
vendee
TRADITIO BREVIE MANU
-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.

ARTICLE 1500
TRADIO CONSTITUTUM POSSESSORIUM
-it takes place when the vendor continues in possession of the property sold as owner but
in some other capacity, as for example, when the vendor stays as a tenant on the vendee.

ARTICLE 1501
QUASI-TRADITIO/ QUASI-DELIVERY
Tradition can only be made with respect to corporeal things. In case of incorporeal things,
delivery is effected:
1. by the execution of a public instrument
2. by the placing of the titles of ownership in the possession of the vendee,
3. by allowing the vendee to use his rights as new owner with the consent of the
vendor
Thus, the delivery to a person of a negotiable document of title in which it is stated that
the goods referred to therein will be delivered to the bearer amounts to delivery of the goods to
such person.

ARTICLE 1502
CONTRACTS OF SALE OR RETURN, AND OF SALE ON TRIAL OR APPROVAL OR
SATISFACTION
1. SALE OR RETURN- the buyer has an option to purchase or return the same to
the seller instead of paying the price. Without reference to the quality of goods,

2. SALE ON TRIAL OR APPROVAL- the buyer has an option to purchase the if the
goods prove satisfactory. The title shall continue in the seller until the sale has become absolute
either by the buyer’s approval of the goods, or by his filing to comply with the express or
implied conditions of the contract as to giving notice of dissatisfaction.

SALE OR RETURN DISTINGUISHED FROM SALE ON TRIAL

SALE OR RETURN
1. subject to resolutory condition
2. depends entirely on the will of the buyer
3. the ownership of the goods passes to the buyer on delivery and
subsequent return of the goods reverts ownership in the seller
4. the risk of loss or injury rests upon the buyer

SALE ON TRIAL
1.subject to suspensive condition
2. depends on the character or quality of the goods
3. the ownership remains in the seller until the buyer signifies his
approval or acceptance to the seller
4. the risk still remains with the seller

ARTICLE 1503
DELIVERY OF SPECIFIC GOODS SOLD GENERALLY PASSES TITLE
-this article relates to a sale of specific goods
1. DELIVERY TO A CARRIER
 General rule: the delivery be it only constructive, and delivery to the
carrier is deemed to be a delivery to the buyer
2. REDELIVERING BY CARRIER TO HIMSELF
If the seller directs the carrier to redeliver the goods at their destination to
the seller himself, or to his order. The ownership still remain in the latter.

WHERE SELLER OR HIS AGENT IS CONSIGNEE

1. CARRIER BECOMES BAILEE FOR SELLER
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 reserves the
ownership in the goods.

2. RIGHTS OF THE SELLER

-the seller may not only retain the goods until the buyer performs his obligation under the
contract.

WHERE SELLER’S TITLE ONLY FOR PURPOSE OF SECURITY

1. FORM OF BILL OF LADING NOT CONCLUSIVE
-the circumstances may be such that were it not for the form of the bill of lading,
the ownership would have passed to the buyer on shipment of the goods. The seller reserves
ownership is simply to secure himself in regard to the performance by the buyer of the latter’s
obligation.

2. WHERE OWNERSHIP WOULD HAVE PASSED BUT FOR THE FORM OF BILL
OF LADING
-by shipping the goods, the seller has definitely lost all use of them to the buyer.
Where the title to the goods is held merely for the purpose of security, the beneficial owner
(buyer), not the one who holds for security (seller) bears the risk of loss or deterioration

WHERE THE BUYER OR HIS AGENT IS CONSIGNEE BUT SELLER RETAINS THE BILL
OF LADING
The seller thereby retains a right to the possession of the goods as against the buyer.
Although the property in the goods will ordinarily pass to the buyer on delivery, the latter is
unable to obtain the goods without the bill

WHERE BILL OF LADING IS SENT FORWARD WITH DRAFT ATTACHED

-the fact that the bill of lading and bill of exchange are attached together indicates that the
seller intends to make the delivery of the goods conditional upon the payment or acceptance of
the draft.

EFFECT OF BUYER’S OBTAINING POSSESSION OF BILL OF LADING WITHOUT

HONORING DRAFT
A purchaser in good faith for value of the bill of lading or goods from the buyer will
obtain the ownership of the goods although the bill of exchange has not been honored.

ARTICLE1504
RISK OF LOSS GENERALLY ATTENDS TITLE
General rule: if the thing is lost by fortuitous event the risk is borne by the owner of the
thing at the time of the loss
Exceptions:
1. The ownership is considered transferred to the buyer who, therefore, assumes
the risk from the time of delivery.
 2. Where actual delivery has been delayed through the fault of either the buyer or
the seller. In this case, the law punishes the party at fault.

RISK OF LOSS BY FORTUITOUS EVENT AFTER PERFECTION BUT BEFORE

DELIVERY
-if the thing is lost after perfection of the contract but before its delivery, even before the
ownership is transferred to the buyer, the risk of loss by a fortuitous event without the seller’s
fault is borne by the buyer. Taken from the American Law on Sales it provides that “Unless
otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred
to the buyer” the risk of loss is shifted from the seller to the buyer even though the buyer has not
yet acquired ownership thereof, this conflict can only be resolved by legislation.

ARTICLE 1505
SALE BY THE PERSON NOT THE OWNER
1. WHERE THE OWNER OF THE GOODS IS, BY HIS CONDUCT, PRECLUDED
FROM DENYING THE SELLER’S AUTHORITY TO SELL
Where a property is sold by one not the owner or the agent of the owner, but the
real owner states that he authorized such sale so that the vendor was acquitted of the charge
against him, a buyer in good faith acquires a valid title to the property as it is not lawful nor
permissible for said owner to deny or retract his former sworn statement that he had consented to
said sale

2. WHERE THE LAW ENABLES THE APPARENT OWNER TO DISPOSE OF THE

GOODS AS IF HE WERE THE TRUE OWNER THEREOF
-has no such law as the Factor’s Act. The law referred to here, therefore, must
be found in the provisions of our Civil Code on Agency.

3. WHERE THE SALE IS SANCTIONED BY STATUTORY OR JUDICIAL

AUTHORITY
- one who has lost any movable, or has been unlawfully deprived thereof, may recover it
from the person in possession of the same. 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 therefore.
4. WHERE THE SALE IS MADE AT MERCHANT’S STORES, FAIRS, OR
MARKETS
-the rule is necessary not only to facilitate commercial sales on movables but also
to give stability to business transactions especially in our country where free enterprise prevails
for a buyer.

5.WHERE THE SELLER HAS A VOIDABLE TITLE WHICH HAS NOT BEEN
AVOIDED AT THE TIME OF 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.

ARTICLE 1506
SALE BY ONE HAVING A VOIDABLE TITLE
1. 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 seller’s defect of title
 2. BASIS RULE
Seems to be based on the principle that where loss has happened which must fall
on one of two innocent persons, it should be borne by him who is the occasion of the loss.
ARTICLE 1507
NATURE AND FUNCTION OF DOCUMENTS OF TITLE
1. RECEIPTS OF, OR ORDEFS UPON A BAILEE OF GOODS REPRESENTED
-documents of title refer to goods and not to money. A different name is given in
popular speech to the document when it is issued by a carrier and when it is issued by a
warehouseman

2. EVIDENCE OF TRANSFER OF TITLE AND POSSESSION OF GOODS AND

CONTRACT BETWEEN THE PARTIES
-A document of title is a symbol of goods covered by it, serving as a evidence of
a. transfer of title b. transfer of possession
c. contract betwe0en the parties who are bound by its terms

MOST COMMON FORMS OF DOCUMENTS OF TITLE

1. BILL OF LADING- it is a contract or receipt for the transport of goods and their
delivery to the person named therein, to order, or to bearer. It usually involves 3 persons: carrier,
shipper, and the consignee. (the shipper and consignee may be one and same person)

2. DOCK WARRANT- an instrument given by dock owners to an importer of goods warehoused

on the dock recognizing the importer’s title to the said goods; and

3.WAREHOUSE RECEIPT- it is a contract or receipt for goods deposited with a warehouseman

containing the latter’s 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)

CLASSES OF DOCUMENTS OF TITLE

1. NEGOTIABLE DOCUMENTS- those by the terms of which the bailee undertakes to deliver
the goods to the bearer and to the order of a specified person.

2. NON-NEGOTIABLE DOCUMENTS- those by the terms of which the goods covered are
deliverable to a specified person.

ARTICLE 1508
NEGOTIATION OF NEGOTIABLE DOCUMENT BY DELIVERY
-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.

ARTICLE 1509
NEGOTIATION OF NEGOTIABLE DOCUMENT BY INDORSEMENT
1. if indorsed in blank or to bearer, the document becomes negotiable by delivery
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.

ARTICLE 1510
NEGOTIABLE DOCUMENTS OF TITLE MARKED “NON-NEGOTIABLE”
 -the words “not negotiable”, “non negotiable” and the like when placed upon a document
of title in which the goods are to be delivered to “order” or to “bearer” have no effect and the
document continues to be negotiable.

ARTICLE 1511
TRANSFER OF NON-NEGOTIABLE DOCUMENTS
-a non-negotiable of title cannot be negotiated. It can be transferred or assigned by
delivery. In such case, the transferee or assignee acquires only the rights stated in Article 1514
-even if the document is indorsed, the transferee acquires no additional right.

ARTICLE 1512
PERSONS WHO MAY NEGOTIATE A DOCUMENT
-it will be noticed that the provision does not give a power to negotiate documents of title
equal to that allowed in the case of bills of exchange and promissory notes under the Negotiable
Instruments Law
-however, if the owner of the goods permits another to have the possession or custody of
negotiable receipts running to the order of the latter or to bearer, it is a representation or title
upon which bona fide purchasers
-the loss must fall upon him whose misplaced confidence made the loss possible

ARTICLE 1513
RIGHTS OR PERSON TO WHOM DOCUMENT HAS BEEN NEGOTIATED
-it specifies the rights of a person to whom a negotiated document of title has been duly
negotiated, in the case of a document of title to bearer, or by indorsement and delivery, in the
case of a document of title. Such person acquires:
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

ARTICLE 1514
RIGHTS OF PERSON TO WHOM DOCUMENT HAS BEEN TRANSFERRED
It refers to the rights of a person to whom a negotiable document of title (not duly
negotiated) has been transferred or of the transferee of a non-negotiable document. Such person
acquires:
1. the title to the goods as against the transferor
2. the right to notify the bailee of the transfer thereof
3. the right, thereafter, to acquire the obligation of the bailee to hold the goods for him.

RIGHTS OF THE THIRD PERSON TO GOODS WHERE DOCUMENT HAS BEEN

TRANSFERRED
1. the transfer does not effect the delivery of the goods covered it. 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 or the transferor

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 enjoined.

ARTICLE 1515
TRANSFER OF ORDER DOCUMENT WITHOUT INDORSEMENT
-it specifies the right of a person to whom an order document of title, which may not
properly be negotiated by mere delivery, has been delivered, without indorsement. They are:
1.the right to the goods against the transferor 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 acquire the transferor to indorse the document)

SUBSEQUENT INDORSEMENT OF NEGOTIABLE DOCUMENT TRANSFERRED

-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 because the negotiation becomes
complete only at the time of indorsement.

ARTICLE 1516
WARRANTIES ON SALE OF DOCUMENTS
-it treats of the warranties or liabilities of a person negotiating or transferring a document.
The liability is limited only to a violation of the 4 warranties.

ARTICLE 1517
INDORSER NOT A GUARANTOR
-the indorsement of a negotiable instrument has a double effect; 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.

ARTICLE 1518
WHEN NEGOTIATION NOT IMPAIRED BY FRAUD, MISTAKE, DURESS, ETC.
-it may be negotiated by 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.
-it speaks of the theft of the document and not of the goods covered by such document. In
the latter case, it needs no argument to show that even a bona fide holder of a document issued
over such stolen goods cannot acquire title

ARTICLE 1519
ATTACHMENT OR LEVY UPON GOODS COVERED BY A NEGOTIABLE DOCUMENT
-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 law.
-this provision is for the protection of the bailee since he could be made liable to a
subsequent purchaser for value in good faith.

ARTICLE 1520
CREDITOR’S REMEDIES TO REACH NEGOTIATE DOCUMENTS
-this article expressly gives the court full power to aid by injunction (a restraining order)
and otherwise a creditor seeking to get a negotiate document covering such goods.

ARTICLE 1521
PLACE OF DELIVERY OF GOODS SOLD
1. RULES
a. where there is an agreement, express or implied, the place of delivery
is that agreed upon
b. where there is no agreement, the place of delivery is that determined
by usage of trade.
c. where there is no agreement and there is also 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. 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.

2. PRESUMPTION
-it can be seen that the presumption is that the buyer must take goods
from the seller’s place of business or residence rather than the seller to
deliver them to the buyer.

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, the

question is whether time is of the essence, and if so whether the correct
performance was offered within that time. If time is not of the essence, the question is
whether correct performance was offered within a reasonable time.

3. WHERE THE CONTRACT DOES NOT SPECIFY THE TIME FOR DELIVERY
-so that delivery is to be made within a reasonable time
-the buyer cannot make time the essence of the contract without giving
the seller notice of his intention to cancel unless delivery is made on or
before a fixed time

DELIVERY OF GOODS IN POSSESSION OR A 3RD PERSON

-to affect third person, the person holding the goods must acknowledge being the bailee
for the buyer.

HOUR OF DELIVERY OF GOODS SOLD

The demand or tender of delivery to be effectual, must be made at a reasonable
hour
1. WHAT IS A REASONABLE HOUR? Where all that is required of the other party
is to receive a payment or performance which can readily be accepted
2. IN CASE GOODS WHICH ARE BULKY OR NEEDED SPECIAL CARE – an hour
might be reasonable which would not be so in an ordinary payment of a small
amount of money.

DUTY OF SELLER TO PUT GOODS IN DELIVERABLE CONDITION

-the seller bears the expenses to place thing in a deliverable state that is, in such a state
the buyer would, under the contract, be bound to take delivery of them.

ARTICLE 1522
DELIVERY OF GOODS LESS THAN QUANTITY CONTRACTED
Where the seller delivers a smaller quantity the buyer may reject the
goods so delivered. (kulang)
The buyer may accept the goods in which case he must pay for their: price
at the contract rate if he knew that no more were to be delivered or the
fair value of the goods, if he did not know that the seller is going to be
guilty of a breach of contract.

DELIVERY OF GOODS MORE THAN QUANTITY CONTRACTED

Where the seller delivers a quantity larger than the contracted, the buyer
may accept the quantity contracted for and reject the excess. If he
 accepts all the goods delivered, he makes himself liable for the price of all of
them.

DELIVERY OF GOODS MIXED WITH OTHERS

-the buyer may accept those which are in accordance with the contract
and reject the rest. And of course, may accept them all if he so desires

EFFECT OF INDIVISIBILITY OF SUBJECT MATTER

It can be inferred form our law that the buyer has the right of rejecting
the whole of the goods delivered in the 2 cases mention only if the subject
matter is indivisible.

RULES MAY BE CONTROLLED BY USAGE OF TRADE

-permitting evidence of usage of trade, special agreement, or course of dealing
between the parties is but a special application of the general rules concerning
contracts.

ARTICLE 1523
DELIVERY TO CARRIER ON BEHALF OF BUYER
1. GENERAL RULE- when the seller is authorized or required to send the goods to
the buyer, is that delivery of such goods to the carrier constitutes delivery to the
buyer, whether the carrier is named by the buyer is not.

2. EXCEPTIONS- 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- the
seller must make such contract with the carrier on behalf of the buyer as may be reasonable
under the circumstances.
2. To give notice to buyer regarding necessity to insure goods- the seller must give notice
to the buyer as may enable him to insure the goods during their transit. If the seller fails to do so,
the risk will be borne to him.

DEFINITION OF TRADE TERMS

1. C.O.D. –“collect on delivery” the carrier acts for the seller in collecting the purchase
price. The buyer must pay for the goods before he can obtain possession. They are solely
intended as security for the purchase price

2. F.O.B.-“free on board” means that the goods are to be delivered free of expenses to the
buyer to the point where they are F.O.B. In general, the point F.O.B. either the point of shipment
or the point of destination, determines when the ownership passes.

3. C.I.F.- “cost insurance and freight” signify that the price fixed covers not only the cost
of goods, but the expenses of freight and insurance to be paid by the seller up to the point
especially named.

4. F.A.S.-“free alongside vessel” (named port of shipment). Under this term, the seller
pays all charges and bear the risk until the goods are placed alongside overseas vessel and within
reach of its loading tackle

5. Ex factory, Ex Warehouse, etc. (named point of origin) – 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.
 6.Ex dock-(named port of importation) – the seller quotes a price including the cost of
goods on the dock at the named port of importation

ARTICLE 1524
DELIVERY SIMULTANEOUS WITH PAYMENT OF PRICE
General rule: the obligation to deliver the thing of a contract arises from the moment its
perfection and from that time the obligation may enforced.
Exception: if the vendee does not pay the price, the consideration for the obligation of the
vendor is absent and if the consideration is absent, the obligation likewise does not exist or at
least is suspended.

WHEN DELIVERY MUST BE MADE BEFORE PAYMENT OF THE PRICE

It contain an exception: the rule is that the thing shall not be delivered unless the price is
paid; and the exception is that the thing must be delivered though the price be not first paid, if a
time for such payment has been fixed in the contract.

ARTICLE 1525
MEANING OF UNPAID SELLER
-is 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.

WHERE WHOLE OF THE PRICE HAS NOT BEEN PAID

1. TENDER OF PAYMENT OF BUYER
-bring an action subsequently for the price, which he has refused, yet tender
destroys the seller’s lien. Accordingly, so far as concerns his rights to the goods, he is not unpaid
seller after the tender of price.

2. PAYMENT OF PART OF PRICE

-the seller remains an unpaid seller even if title has passed to the buyer.

3. PAYMENT BY NEGOTIABLE INSTRUMENT

-“the delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been cashed or
when through the fault of the creditor they have been impaired”

ARTICLE 1526
REMEDIES OF UNPAID SELLER
-if the unpaid seller still retains the ownership in the goods, he cannot be said to have a
lien (on his goods) but he does have, in addition to his other remedies, right of withholding
delivery.

BASIC RIGHTS OF UNPAID SELLER

-is allowed a lien and kindred remedies in inherent injustice of depriving him of goods
with which he has not finally parted where it is evident that he has not been or will not be paid
the price for them when it is due.

ARTICLE 1527
WHEN UNPAID SELLER’S POSSESSORY LIEN MAY BE EXERCISED
1. SALES WITHOUT STIPULATION AS TO CREDIT
-the seller binds himself to give the goods over to the buyer without
receiving at that time payment for them. Where there is “stipulation as to
 credit’ a period for payment of price has been fixed in the contract. The
seller has always a lien upon the goods which he sells until the payment or
tender of the entire price.

2. EXPIRATION OF TERM OF CREDIT

-but if he fails to exercise his right until the term of credit has expired
and the price becomes due, he loses the right which he theretofore had.

3. INSOLVENCY OF THE BUYER

-this doctrine is applies only an application of a general principle in the
law of contracts that when one party to a bilateral contract is
incapacitated from performing his part of the agreement, the other party
also is excused from performing his part

ARTICLE 1528
LIEN NOT GENERALLY LOST BY PART DELIVERY
-if the part delivery of the goods is intended as symbolical delivery of the
whole, and therefore, a waiver of any right of retention as to remainder,
the lien is lost.

ARTICLE 1529
WHEN UNPAID SELLER LOSSES POSSESSORY LIEN
1. DELIVERY TO AGENT OR BAILEE OF BUYER
-it is true that the seller may stop the goods while on their way to the
buyer after delivery to a bailee for the buyer but it cannot be said that
the seller has still any lien upon him.

2. POSSESSION BY BUYER OR HIS AGENT

-it is plain that when the ownership is transferred the seller has no lien
simply because he has no possession necessary for a lien.

3. WAIVER OF LIEN
-the seller may lose his lien by express agreement to surrender it. The
seller could no longer assert a lien.

ARTICLE 1530
RIGHT OF SELLER TO STOP GOODS IN TRANSITU
-he may resume possession of the goods while they are in transit, when the buyer is or
becomes insolvent. The right is exercised either by obtaining actual possession of the goods or
by giving notice of his claim to the carrier or other bailee in possession.