Professional Documents
Culture Documents
Law On Sales
Law On Sales
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)
- 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
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)
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.
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. 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.
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
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.
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.
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
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.
OPTION
-is a privilege existing in one person for which he has paid a consideration which gives him the right to
buy/sell.
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.
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.
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
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.
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.
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
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.
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
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.
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.
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.
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
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.
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.
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
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 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.
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
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.
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. 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)
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)
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.
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
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.
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.
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.
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.
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.
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.
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.