From Atty. Deanabeth C.

Gonzales, Professor Rizal Technological University, CBET

Sept. 13, 2020

For everyone who will get hold of a copy or portions of this material:

This is posted online in the light of the pandemic covid-virus which adversely affect not just the
Philippines but the entire world. It is a privilege for me to teach part-time in a state university for
more than a decade now. I teach subjects in the College of Business and Entrepreneurial
Technology (CBET), subjects which are all part of the Board Exam for CPAs. Being a CPA-
Lawyer, I know for a fact that having a book is a must in studying any law subject. However,
teaching in a school where many students cannot afford to buy a book, my former students in the
past years can attest to the fact that I went out of my way to pay for books in advance and allow
some students to pay me in installments over the entire semester just for them to have a book.
Nevertheless, some students still cannot afford to buy a book, and attended classes by just
walking to school. Being a product of the Public School System in the Philippines, up to college
in PUP Sta. Mesa for Accountancy, I fully understand the money issue in buying books for many
students.

With Social Distancing rules and hygienic issues during this pandemic, students are not
encouraged to make use of the university physical library and the online library is not yet that
fully operational. Hence, I decided to post portions of some books online to help those students
who cannot afford to buy a book, specially now that unemployment in the country has risen at all-
time high.

Portions of the book were copied by former CBET students from the book Law on Sales, Agency
and Bailments by Hector De Leon (definitely not the latest edition) and from other books/sources
(i.e., Law on Sales, Agency, Pledges and Mortgages by Carlos Suarez, Alexander Suarez, 2008
ed.) when they were asked to report in class. I wasn’t too happy to see reports which were
mostly copied from the books but I got the softcopies of their reports anyway sent thru email. In
the end, I found myself having a softcopy of many portions of the books on Law of Sales. There
is no copyright infringement here because it is for educational purposes and only portions of the
book will be posted to help students who cannot afford to buy a book in this pandemic times.

Note that the postings will not cover the entire assignment given for each session or particular
day. Rather, the postings will explain only some portions of the assignment for the day based on
the books previously used by the former CBET students. There is no new Civil Code to date so
that the contents of the books still apply. I will not prescribe any book on Sales for this semester
in view of the financial difficulty for most families. Students can buy (but NO available new stock
of books in Rex Bookstore per my online search as of September 10, 2020 nor in National
Bookstores) or borrow any edition of the book on sales by any author. Each student must
download the proper civil code provisions from the internet, make use of whatever postings
available in the group/class messenger that can be helpful for your classmates or do own
research. The postings are for personal use of the student only and not for mass production.

With no intent to have financial gain, but only to help students from the less privilege sector of
our society during this pandemic times, I hope many will benefit from this posting.

It may seem to be a cliché that “The Youth is the Hope of the Fatherland,” spoken by Dr. Jose
Rizal. Yet, in times like this, we need to give hope and to assist all students who will face more
challenging times ahead.

More power to all Filipinos and to all educators who in this pandemic times make extra efforts to
educate all learners.

May God who made heaven and earth continue to bless us all through Jesus Christ, by
whose blood shed on the cross save us all.

Maraming salamat po.

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LAW ON SALES – Notes 6
Ref. book: Law on Sales, by Hector De Leon.

ART. 1507. A document of title in which it is stated that the goods referred to
therein will be delivered to the bearer, or to the order of any person named in
such document is a negotiable document of title.

Definition of terms.

(1) Document of title to goods. — Includes any bill of lading, dock warrant, “quedan,” or
warehouse receipt or order for the delivery of goods, or any other document used in the
ordinary course of business in the sale or transfer of goods, as proof of the possession or
control of the goods, or authorizing or purporting to authorize the possessor of the document
to transfer or receive, either by indorsement or by delivery, goods represented by such
document. (Art. 1636[1].)

(2) Goods. — Included all chattels personal but not things in action or money of legal
tender in the Philippines. The term includes growing fruits or crops. (ibid.)

(3) Order. — Relating to documents of title means an order by indorsement on the

documents. (ibid.)

Classes of documents of titles.

Documents of title may be either:
(1) Negotiable documents of title or those by the terms of which the bailee undertakes to
deliver the goods to the bearer and those by the terms of which the bailee undertakes to
deliver the goods to the order of a specified person (Art. 1508.);

(2) Non-negotiable documents of title or those by the terms of which the goods
covered are deliverable to a specified person. (Art. 1511.)

ART. 1508. A negotiable document of title may be negotiated by delivery:

(1) Where by the terms of the document the carrier, warehouseman or other
bailee issuing the same undertakes to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier, warehouseman or other
bailee issuing the same undertakes to deliver the goods to the order of a
specified person, and such person or a subsequent indorsee of the document
has indorsed it in blank or to the bearer.
(3) Where by the terms of a negotiable document of title the goods are
deliverable to bearer or where a negotiable document of title has been indorsed
in blank or to bearer, any holder may indorse the same to himself or to any
specified person, and in such case the document shall thereafter be negotiated
only by the indorsement of such indorsee.

Negotiation of negotiable document by delivery.

A negotiable document of title is negotiable by delivery if the goods are deliverable to the
bearer, or when it is indorsed in blank or to the bearer by the person to whose order the
goods are deliverable or by a subsequent indorsee. An indorsement is in blank when the
holder merely signs his name at the back of the receipt without specifying to whom the goods
are to be delivered.
 ART. 1509. A negotiable document of title may be negotiated by the
indorsement of the person to whose order the goods are by the terms of the
document deliverable. Such indorsement may be in blank, to bearer or to a specified
person. 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.
Subsequent negotiations may be made in like manner.

Negotiation of negotiable document by indorsement.

A negotiable document of title by the terms of which the goods are deliverable to a
person specified therein may be negotiated only by the indorsement of such person.
(1) If indorsed in blank or to bearer, the document becomes negotiable by delivery. (Art.
1508)
(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.

ART. 1510. If a document of title which contains an undertaking by a carrier,

warehouseman or other bailee to deliver the goods to bearer, to a specified
person or order of a specified person or which contains words of like import,
has placed upon it the words “not negotiable” “nonnegotiable,” or the like,
such document may nevertheless be negotiated by the holder and is a
negotiable document of title within the meaning of this Title. But nothing in this
Title contained shall be construed as limiting or defining the effect upon the
obligations of the carrier, warehouseman, or other bailee issuing a document of
title or placing thereon the words “not negotiable,” “nonnegotiable,” or the like.

Negotiable documents of title marked “nonnegotiable.”

Under Article 1510, the words “not negotiable,” “nonnegotiable” 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.

When the document of title is to order, the bailee is obliged to take it up before delivering
the goods. Accordingly, he is liable to the holder of an order document if the goods are
delivered to the consignee without surrender of the document even though the latter was
marked “not negotiable.”

ART. 1511. A document of title which is not in such form that it can be
negotiated by delivery may be transferred by the holder by delivery to a purchaser or
donee. A nonnegotiable document cannot be negotiated and the indorsement of such
a document gives the transferee no additional right.
Transfer of nonnegotiable documents.
A nonnegotiable document of title cannot be negotiated. Nevertheless, it can be
transferred or assigned by delivery. In such a 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.

ART. 1512. A negotiable document of title may be negotiated:

(1) By the owner thereof; or
(2) By any person to whom the possession or custody of the document has
been entrusted by the owner, if, by the terms of the document the bailee
issuing the document undertakes to deliver the goods to the order of the
person to whom the possession or custody of the document has been
entrusted, or if at the time of such entrusting the document is in such form that
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 it may be negotiated by delivery.

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 under the Negotiable Instruments Law (Act No. 2031.) in the case of
bills of exchange and promissory notes inasmuch as neither a thief nor a finder is within the
terms of the article.

ART. 1513. A person to whom a negotiable document of title has been duly
negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document to him
had or had ability to convey to a purchaser in good faith for value and also
such title to the goods as the person to whose order the goods were to be
delivered by the terms of the document had or had ability to convey to a
purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold
possession of the goods for him according to the terms of the document as
fully as if such bailee had contracted directly with him.

Rights of person to whom document has been negotiated.

This article specifies the rights of a person to whom a negotiable document of title has
been duly negotiated, either by delivery, in the case of a document of title to bearer, or by
indorsement and delivery, in the case of a document of title to order. 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.

ART. 1514. A person to whom a document of title has been transferred, but
not negotiated, acquires thereby, as against the transferor, the title to the goods,
subject to the terms of any agreement with the transferor.

If the document is nonnegotiable, such person also acquires the right to

notify the bailee who issued the document of the transfer thereof, and thereby to
acquire the direct obligation of such bailee to hold possession of the goods for
him according to the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of a
nonnegotiable document of title, the title of the transferee to the goods and the
right to acquire the obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the transferor, or by a
notification to such bailee by the transferor or a subsequent purchaser from the
transferor of a subsequent sale of the goods by the transferor.

ART. 1516. A person who for value negotiates or transfers a document of

 title by indorsement or delivery, including one who assigns for value a claim
secured by a document of title unless contrary intention appears, warrants:

(1) That 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 document; and
(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.

Warranties on sale of documents.

This article treats of the warranties or liabilities of a person negotiating or transferring a
document. They are similar to those of a person negotiating an instrument by delivery or by a
qualified indorsement under the Negotiable Instruments Law.

The liability is limited only to a violation of the four warranties set forth in Article
1516-1517.

Rights of person to whom document has been transferred.

This article 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 nonnegotiable 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; and
(3) The right, thereafter, to acquire the obligation of the bailee to hold the goods for him.