IX.

LOSS, DETERIORATION, FRUITS, AND OTHER BENEFITS

A. Loss of Generic Things (Art. 1263)

Article 1263.
In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the
obligation.

B. Loss of Determinate Things

1. Before Perfection
2. At the Time of Perfection (Arts. 1493 and 1494)

ART. 1493.
If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the
contract shall be without any effect.

But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and
demanding the remaining part, paying its price in proportion to the total sum agreed upon.
(1460a)

ART. 1494.
Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in
part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer
may at his option treat the sale:
(1) as avoided; or
(2) as valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay
the agreed price for the goods in which the ownership will pass, if the sale was divisible. (n)

Effect of loss in case of specific goods.

Article 1493 applies to a sale of specific thing. Article 1494, on the other hand, applies to sales of goods, that is, the
object of the sale consists of a mass of “specific goods” which means “goods identified and agreed upon at the time a
contract of sale is made.”

Both articles have actually the same essence providing two alternative remedies to the buyer in case of deterioration or
partial loss of the object prior to the sale, namely: to rescind or withdraw from the contract or to give it legal effect,
paying the proportionate price of the remaining object.

(1) Sale divisible. — The second option is available only if the sale is divisible. (Art. 1494, par. 2.) A contract is divisible
when its consideration is made up of several parts. (see Art. 1420.) When the consideration is entire and single, the
contract is indivisible.

(2) Sale indivisible. — Suppose the sale is not divisible, what price is the buyer to pay for the remaining goods if he
elects to continue with the sale? It is believed that the buyer should be made to pay only the proportionate price of the
remaining goods as provided for in paragraph 2 of the preceding article. If the sale is indivisible, the object thereof may
be considered as a specific thing.

3. After Perfection but Before Delivery (Arts. 1164, 1189 and 1262)

Article 1164.
The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall
acquire no real right over it until the same has been delivered to him.
Article 1189.
When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of
the condition:

(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing
is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or
it cannot be recovered;

(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and
its fulfillment, with indemnity for damages in either case;

(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;

(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.
(1122)

Article 1262.
An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before he has incurred in delay.

When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires
the assumption of risk. (1182a)

a. General Rule
Delivery of a determinate thing is extinguished if it should be lost or destroyed without the fault of the debtor, and before
he has incurred in delay.

Exceptions : when it is stated by law or stipulation, obligor, seller is liable even for fortuitous events.

b. Loss by Fault of a Party (Arts. 1480, 1504 and 1538)

ART. 1480.
Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of
the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262.

Article 1163. Every person obliged to give something is also obliged to take care of it with the proper
diligence of a good father of a family, unless the law or the stipulation of the parties requires another
standard of care.

Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right
granted him by article 1170, may compel the debtor to make the delivery.

If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of
the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have
the same interest, he shall be responsible for any fortuitous event until he has effected the delivery.
(1096)

This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of
their weight, number, or measure.

Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to
the vendee until they have been weighed, counted, or measured, and delivered, unless the latter has incurred in delay.
(1452a)
Risk of loss or deterioration.
Four rules may be given regarding risk of loss:

(1) If the thing is lost before perfection, the seller and not the one who intends to purchase it bears the loss in
accordance with the principle that the thing perishes with the owner (res perit domino);

(2) If the thing is lost at the time of perfection, the contract is void or inexistent. (Art. 1409[3].) The legal effect is the
same as when the object is lost before the perfection of the contract of sale (see Art. 1493.);

(3) If the thing is lost after perfection but before its delivery, that is, 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 (Arts. 1480, pars. 1 and 2,
1538, 1189, and 1269.); and

(4) If the thing is lost after delivery, the buyer bears the risk of loss following the general rule of res perit domino.

Article 1504.
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 actual delivery has
been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract
and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the time of such delivery;

(2) 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. (n)

Article 1537.
The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were
upon the perfection of the contract.

All the fruits shall pertain to the vendee from the day on which the contract was perfected. (1468a)

Article 1538.
In case of loss, deterioration or improvement of the thing before its delivery, the rules in article 1189 shall be observed,
the vendor being considered the debtor.

Seller is the debtor

c. Loss by Fortuitous Event (Arts. 1480, 1163, 1164, 1165, 1504, 1538, and 1189)
d. Deterioration (Arts. 1480, 1163-1165, 1189 and 1538)

Article 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good
father of a family, unless the law or the stipulation of the parties requires another standard of care. (1094a)

Article 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he
shall acquire no real right over it until the same has been delivered to him. (1095)

Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by article
1170, may compel the debtor to make the delivery.

e. Fruits or Improvements from Time of Perfection Pertain to the Buyer (Arts. 1480, 1537-1538)
ART. 1480.
Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of
the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262.

Article 1163. Every person obliged to give something is also obliged to take care of it with the proper
diligence of a good father of a family, unless the law or the stipulation of the parties requires another
standard of care.

Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right
granted him by article 1170, may compel the debtor to make the delivery.
 If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of
the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have
the same interest, he shall be responsible for any fortuitous event until he has effected the delivery.
(1096)

This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of
their weight, number, or measure.

Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to
the vendee until they have been weighed, counted, or measured, and delivered, unless the latter has incurred in delay.
(1452a)

Risk of loss or deterioration.

Four rules may be given regarding risk of loss:

(1) If the thing is lost before perfection, the seller and not the one who intends to purchase it bears the loss in
accordance with the principle that the thing perishes with the owner (res perit domino);

(2) If the thing is lost at the time of perfection, the contract is void or inexistent. (Art. 1409[3].) The legal effect is the
same as when the object is lost before the perfection of the contract of sale (see Art. 1493.);

(3) If the thing is lost after perfection but before its delivery, that is, 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 (Arts. 1480, pars. 1 and 2,
1538, 1189, and 1269.); and

(4) If the thing is lost after delivery, the buyer bears the risk of loss following the general rule of res perit domino.

Article 1537.
The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were
upon the perfection of the contract.

All the fruits shall pertain to the vendee from the day on which the contract was perfected. (1468a)

Article 1538.
In case of loss, deterioration or improvement of the thing before its delivery, the rules in article 1189 shall be observed,
the vendor being considered the debtor.

4. After Delivery (Art. 1504)

Article 1504.
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 actual delivery has
been made or not, except that:

● Gaisano Cagayan Inc v. Insurance Company of North America, G.R. No. 147839, June 8, 2006.