LAW ON SALES, AGENCY, AND CREDIT TRANSACTIONS -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;
CHAPTER 1 the contract shall be null and void.
NATURE AND FORM OF THE CONTRACT
(ARTS. 1458-1637) ARTICLE 1461
SALE OF THINGS HAVING POTENTIAL EXISTENCE
ARTICLE 1458 -future thing not existing at the time the contract is entered into, may be the object of sale
CONCEPT OF CONTRACT OF SALE provided it has a potential or possible existence. It is reasonably certain to come into
-contract of sale is a contract whereby one of the contracting parties existence as the natural increment or usual incident of something in existence already
(SELLER) obligates himself to transfer the ownership and to deliver a determinate thing, and the other belonging to the seller, and the title will vest in the buyer the moment the thing comes
party (BUYER) obligates himself to pay a sum of money or its equivalent (PRICE) into existence. The thing sold, however must be specific and identified and it must be
also owned by the vendor at the time.

CHARACTERISTICS OF A CONTRACT OF SALE SALE OF HOPE OR EXPECTANCY

1. CONSENSUAL- it is perfected by mere consent of the parties. The sale refers to an “expected thing” which is not yet in existence, and not to the hope or
2. BILATERAL- the parties are bound by reciprocal obligations 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,
SELLER- to deliver and transfer ownership of the thing sold in which case the sale is void.
BUYER- to pay the price
ARTICLE 1462
GOODS WHICH MAY BE THE OBJECT OF SALE
Goods which form the subject of a contract of sale may be either:
3. ONEROUS- the thing sold is conveyed in consideration of the price.
a. EXISTING GOODS OWNED OR POSSESSED BY THE SELLER
4. COMMUTATIVE- the thing sold is considered the equivalent of the
ex: the sale of bathroom fixtures currently stored in
the seller’s
price paid
warehouse is a sale of existing goods
(the contract may be ALEATORY- depending on an uncertain
b. FUTURE GOODS OR GOODS TO BE MANUFACTURED,
RAISED OR ACQUIRED
event or contingency)
BY THE SELLER
5. NOMINATE- it has a special name given to it by law namely “SALE”
EXAMPLES:
6. PRINCIPAL- it can exist by itself without being dependent upon
MANUFACTURED- like the sale of milk bottles to be manufactured
another contract.
with the name of the buyer pressed in the glass
RAISED- sale of chickens that may be raised in a poultry farm and sale
ELEMENTS OF A CONTRACT OF SALE
of the future harvest of palays from a ricefield
1. ESSENTIAL ELEMENTS/ REQUISITES
ACQUIRED- sale of definite parcel of land the seller expects to buy
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.

SALE OF FUTURE GOODS

Even though the contract is in the form of present sale, is valid only as an EXECUTORY
-The parties must have legal capacity to give consent and to CONTRACT to be fulfilled by the acquisition and delivery of the goods specified

obligate themselves. ARTICLE 1463

SALE OF UNDIVIDED INTEREST IN A THING
1. BY SOLE OWNER
-when there is an offer of one party, without the acceptance of -the sole owner of a thing may sell the entire thing; or only a specific
the other, portion thereof; or an undivided interest therein and such interest may be designated as an
THERE IS NO CONSENT 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
B. OBJECT OR SUBJECT MATTER -being the owner of his undivided interest therein, can dispose his share
- It refers to the determinate thing which is the object of the even without the consent of the other co-owner/s
contract.
ARTICLE 1464
SALE OF AN UNDIVIDED SHARE OF A SPECIFIC MASS
- If the seller and the buyer differ in regard to the thing sold, FUNGIBLE GOODS
there is no meeting of the minds -refer to interchangeable goods such as grain, oil, etc. that allow one to
therefore, there is no sale 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
C. CAUSE OR CONSIDERATION
THAN the quantity sold the parties shall become co-owners of the mass.
-It refers to the “price certain in money or its equivalent”

b. if the quantity of the mass is LESS THAN the quantity sold, the
2. NATURAL ELEMENTS- those inherent in a contract of sale, which in the absence of stipulation
buyer becomes the owner of the whole mass, with the seller being bound to make good
excluding them, are deemed to exist.
the deficiency from goods of the same kind and quality, unless a contrary intent appears.
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 RISK OF LOSS
payment, and other conditions agreed upon 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
TWO KINDS OF CONTRACT OF SALE in it.
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. SUBJECT MATTER
The subject matter is an incorporeal or intangible right.

ARTICLE 1465
2. CONDITIONAL-where the contract is subject to certain conditions usually the
SALE OF THING SUBJECT TO A RESOLUTORY CONDITION
full payment of the purchase price. The delivery of the thing sold does
-A resolutory condition is an uncertain event upon the happening of which the obligation
not transfer ownership until the CONDITION is fulfilled
(or right) subject to it is extinguished.
ARTICLE 1459
REQUISITES CONCERNING OBJECT
1. THINGS -If the resolutory condition attaching to the object of the contract, which object may
a. determinate thing include things as well as rights should happen, then the vendor cannot transfer the
b. licit or lawful (legal) – it should not be contrary to law, morals, good ownership of what he sold since there is no object.

customs, public order, or public policy. ARTICLE 1466

(if the subject matter is illicit, the contract is void and cannot, therefore be ratified) SALE DISTINGUISHED FROM AGENCY TO SELL
c. not be impossible -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.
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. IN SALE:
(services may be the object of contract but cannot be the object of contract of sale) *the buyer receives the goods as owner
*the buyer has to pay the price
KINDS OF ILLICIT THINGS *the buyer, as a general rule, cannot return the object sold
-illicit per se (of its nature) ex: decayed food unfit for consumption *the seller, warrants the thing sold
-illicit per accidens ( because of some provisions of law declaring it illegal) *the buyer can deal with the thing sold as he pleases, being the owner
Ex: prohibited lottery tickets and prohibited drugs
IN AGENCY TO SELL:
RIGHT OF VENDOR TO TRANSFER OWNERSHIP *the agent receives the goods as the goods of the principal who retains
1. ONE CAN SELL ONLY WHAT HE OWNS his
-it is essential in order for a sale to be valid, he must be the OWNER or ownership over them.
at least must be authorized by the owner of the thing sold. It is a well known principle of *the agent simply to account for the proceeds of the sale he may make
law that nobody can dispose of that which he does not have. on
the principal behalf;
2.SUFFICIENT IF RIGHT EXISTS AT TIME OF DELIVERY *the agent can return the object in case he is unable to sell the same to a
-It is sufficient if he has the right to sell the thing at the time when the
ownership is to pass. 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
ARTICLE 1460 according to the
SUBJECT MATTER MUST BE DETERMINATE instructions of his principal
1. WHEN THING DETERMINATE
-A thing is determinate or specific when it is particularly designated or ARTICLE 1467
physically segregated from all others of the same class. In accordance with the general SALE DISTINGUISHED FROM CONTRACT FOR A PIECE OF WORK
rule that the object of every contract must be determinate as to its kind. -a contract for a piece of work, the contractor binds himself to execute
-it is identified by its individuality a piece of work for the employer, in consideration of a certain price or compensation
Ex: the watch I am wearing, my car
CONTRACT OF SALE
2. SUFFICIENT IF SUBJECT MATTER CAPABLE OF BEING MADE -which the vendor in the ordinary course of business manufactures or
DETERMINATE procures for the general market, whether the same is on hand or not.
 (within the statute of frauds) ARTICLE 1475
CONTRACT FOR A PIECE OF WORK PERFECTION OF CONTRACT OF SALE
-if the goods are manufactured specially for the customer and upon his -a contract of sale is perfected at the moment there is a meeting of minds upon the thing
special order, and not for the general market. which is the object of the contract and upon the price the reciprocal obligations of the
(are not within the statute of frauds) parties arise. But the ownership is not transferred until delivery of the thing.

RISK OF LOSS -in case one of the contracting parties should not comply with what is incumbent upon
Before the delivery is borne by the worker or contractor, not by the him, the injured party sue for FULFILLMENT or RESCISSION with the payment of
employer (the person who ordered) damages in either case.

ARTICLE 1468 RIGHT OF OWNER TO FIX HIS OWN PRICE

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.
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. 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 specified
person or persons.
The last two cases are applicable only when no specific amount has
been stipulated by the parties
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

EFFECT WHEN PRICE FIXED BY THE 3RD PERSON DESIGNATED

EXCEPTIONS SUCH AS:
3. RIGHT OF THE SELLER TO BID IN THE AUCTION
1. WHEN THE 3RD PERSON ACTS IN BAD FAITH OR BY MISTAKE
The seller or his agent may bid in an auction sale provided:
2. WHEN THE 3RD PERSON DISREGARDING SPECIFIC INSTRUCTIONS OR THE
1. such right was reserved
PROCEDURE LAID DOWN BY THE PARTIES
2. notice was given that the sale is subject to a right
to bid in
EFFECT WHERE PRICE NOT FIXED BY THIRD PERSON DESIGNATED
behalf of the seller; and
1. IF THE 3RD PERSON DESIGNATED BY THE PARTIES TO FIX THE PRICES
3. the right to bid by the seller is not prohibited by
REFUSES OR CANNOT FIX
law or
The contract shall become ineffective, as if no price had been agreed
stipulation
upon unless of course, the parties subsequently agree upon the price.
a. WHEN NO NOTICE GIVEN
OF RIGHT TO BID
it shall be
2. IF SUCH 3RD PERSON IS PREVENTED FROM FIXING THE PRICE BY THE unlawful for the seller to bid either
FAULT OF SELLER OR THE BUYER. directly or indirectly or for the
Which consist of a choice between rescission or fulfillment, with auctioneer to employ
damages in either case. If the innocent party chooses fulfillment, the court shall fix the or induce any person to bid on behalf of the seller.
price
The purpose of the notice is to prevent puffing or
secret bidding by
ARTICLE 1470 or on behalf of the seller by people
EFFECT OF GROSS INADEQUACY OF PRICE IN VOLUNTARY SALES who are not
-gross adequacy does not affect a contract of sale, except as it may indicate a defect in the themselves bound
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 b. WHEN NOTICE GIVEN OF
1. GENERAL RULE RIGHT TO BID
Judicial or execution sale is one made by a court with respect to the a right to bid may
property of a debtor for the satisfaction of his unpaid indebtedness. be expressly reserved by or on
behalf of the
2.WHERE PRICE IS SO LOW AS TO BE “SHOCKING TO THE CONSCIENCE” seller. It is, therefore, the secrecy of
A judicial sale, say of real property will be set aside by the court. puffing which renders it a fraud
upon bidding. Where
3.WHERE SELLER GIVEN THE RIGHT TO REPURCHASE there is notice of the intention to bid by the seller,
-the validity of the sale is not necessarily affected where the law gives the bidding in
to the owner the right to redeem, as when a sale is made at public auction, upon the such case would not operate as fraud.
theory that the lesser the price, the easier it is for the owner to buy back the property.
ARTICLE 1477-1478
ARTICLE 1471 OWNERSHIP OF THE THING TRANSFERRED BY DELIVERY
EFFECT WHERE THE PRICE SIMULATED -delivery of the thing sold is essential in a contract of sale, without it the buyer may not
1. IF THE PRICE IS SIMULATED OR FALSE enjoy the thing sold to him. After the delivery of the thing sold that the buyer acquires a
Then the sale is void but the contract shall be valid as a donation real right or ownership over it.
-delivery may be actual or
constructive
2. IF THE CONTRACT IS NOT SHOWN TO BE DONATION OR ANY OTHER ACT
OR CONTRACT TRANSFERRING OWNERSHIP EXCEPTION TO THIS RULE
-because the parties do not bound at all the ownership of the thing is -the parties may stipulate that despite the delivery, the ownership of the thing shall
not transferred. The contract is void and inexistent remain with the seller until the purchaser has fully paid the price.

ARTICLE 1479
ARTICLE 1472 KINDS OF PROMISE TREATED IN ARTICLE 1479
PRICE ON A GIVEN DAY AT PARTICULAR MARKET It applies specifically to a promise “to buy or to sell” it refers to 3 kinds of promise,
-It follows the principle in ARTICLE 1469 that price is considered if it could be namely:
determined with reference to another thing certain 1. AN ACCEPTED UNILATERAL PROMISE TO SELL IN WHICH THE PROMISEE
-“provided said amount be certain” when an amount is fixed ABOVE or BELOW the (acceptor) elects to buy.
price on a given day or in a particular exchange or market, the said amount must be 2. AN ACCEPTED UNILATERAL PROMISE TO BUY IN WHICH THE PROMISEE
certain, otherwise THE SALE IS INEFFICACIOUS because the price cannot be (acceptor) elects to sell.
determined. 3. A BILATERAL promise to buy and sell reciprocally accepted in which either of the
-this article is applicable to fungible things, the prices of which are subject to fluctuations parties chooses to exact fulfillment.
of the market.
EFFECT OF UNACCEPTED UNILATERAL PROMISE
ARTICLE 1473 -a unilateral promise or offer to sell or to buy a thing which is not accepted creates no
FIXING OF PRICE BY ONE OF THE CONTRACTING PARTIES NOT ALLOWED juridical effect or legal bond. Such unaccepted offer is called policitation
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 OPTION
contract cannot be made to depend upon the will of one party -is a privilege existing in one person for which he has paid a consideration which gives
him the right to buy/sell.

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.
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 NATURE OF THE REMEDIES
domino. -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.
SCOPE OF ARTICLE 1480
1. THE 1ST APPLIES TO NON-FUNGIBLE GOODS RIGHT OF VENDOR TO RECOVER UNPAID BALANCE OF PURCHASE PRICE
- the risk of the thing sold passes to the buyer, even though the thing 1.REMEDY OF SPECIFIC PERFORMANCE
has not yet been delivered to him. In other words, the buyer assumes the risk of loss He may still recover from the purchaser the unpaid balance of price, if
caused by fortuitous event, without the fault of the seller. any on the real and personal properties of the buyer
not exempt by law
2. THE 2ND RULE RELATES TO FUNGIBLE THINGS from attachment and execution
-the vendee assumes the risk if he has incurred in delay in receiving the 2. REMEDY OF CANCELLATION
goods sold. The latter can demand only the return of payments already made unless
ARTICLE 1481 there is a
SALE OF GOODS BY DESCRIPTION AND/ OR SAMPLE stipulation about forfeiture
-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. 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
1. SALE BY DESCRIPTION public auction and applying the proceeds to sale to the satisfaction of the claim secured
-where a seller sells things as being of a particular kind, where the by the
purchaser has not seen the article sold and relies on the description given him by the mortgaged.
vendor. If the bulk of the goods delivered do not correspond with the description, the
contract may be rescinded. RECOVER OF DEFICIENCY AFTER FORECLOSURE PROHIBITED
It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale
2. SALE BY SAMPLE for a low price and then bringing suit against the mortgagor for a deficiency judgment
-in a sale by sample, the seller warrants that the thing sold and to be ARTICLE 1485
delivered by him shall conform with the sample in kind, character, and quality. LEASE OF PERSONAL PROPERTY WITH OPTION TO BUY
-on the part of the lessee who takes possession or enjoyment of the property leased are
3. SALE BY DESCRIPTION AND SAMPLE really sales of personal property payable in installments.
-when a sale is made both by sample and by description, the goods -the evident purpose is to prevent vendors from resorting to this form of contract which,
must satisfy all the warranties appropriate to either kind of sale, and it is not sufficient usually, is in reality a contract of sale of personal property payable in installments in contravention of the
that the bulk of the goods correspond with the sample if they do not correspond with the provisions of Article 1484
description and vice versa.
ARTICLE 1486
ARTICLE 1482 STIPULATION AUTHORIZING FORFEITURE OF INSTALLMENTS OR RENTS PAID
MEANING OF EARNEST MONEY -the parties may stipulate that the installments or rents paid are not to be returned. Such a
-is money given by the buyer to the seller to bind the bargain. It is actually a stipulation is valid “insofar as the same may not be unconscionable under the circumstances” otherwise the
partial payment of the purchase price and is considered as a proof of the court has the power to order the return of a portion of the total amount paid in installments or rents.
perfection of the contract.
-advance payment it must be deducted from the total price 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.
EARNEST MONEY AND OPTION MONEY DISTINGUISHED
-expenses incurred subsequent to the transfer of title are borne by the buyer, unless
EARNEST MONEY
caused by the fault of the seller.
-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
ARTICLE 1488
-applies to a sale not yet perfected
EXPROPRIATION OF PROPERTY FOR PUBLIC USE
-while when the would-be buyer gives option money, he is not required
-it covers the procedure for the exercise of the power of eminent domain. Expropriation
to buy.
must be decreed by competent authority and for public use and always upon paymentof just compensation.

BUT OPTION MONEY MAY BECOME EARNEST MONEY, IF THE

______________________________________________________________________________________
PARTIES SO AGREE.
____________________________CHAPTER 2
CAPACITY TO BUY AND SELL
ARTICLE 1483
FORM OF CONTRACT OF SALE
ARTICLE 1489
1. GENERAL RULE
PERSON WHO MAY ENTER INTO A CONTRACT OF SALE
-a contract may be entered into in any form provided
General rule: all persons, whether natural or juridical, who can bind themselves
all the essential requisites for its validity are present.
by contract have also legal capacity
to buy and sell.
2. WHERE CONTRACT COVERED BY STATUTE OF FRAUDS
Exceptions: when the law determines that party suffers from either absolute or
-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
relative incapacity.
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
KINDS OF INCAPACITY
validity, the required form must be observed in order the contract may be both
Absolute incapacity- in the case of persons who cannot bind themselves; and
valid and enforceable.
Relative incapacity- where it exists only with reference to certain persons or a
certain class of
UNDER THE STATUTE OF FRAUDS the ff. contracts must be in
property
writing, otherwise they cannot be enforced in court litigation:
a. sale of personal property at a price not less than
LIABILITY FOR NECESSARIES OF MINOR OR OTHER PERSON WITHOUT CAPACITY TO ACT
500 pesos
“Necessaries” are those things which are needed for sustenance, dwelling, clothing and
b. sale of real property or an interest therein
medical attendance, in keeping with the financial capacity of the family of the incapacitated person.
regardless of the price
-generally, the contracts entered into by a minor and other incapacitated persons are
involved; and
voidable. However, where necessaries are sold and delivered to him (without intervention of the parent or
c. sale of property not to be performed within a year
guardian) he must pay a reasonable price therefor, the contract is valid, but the minor has the right to
from the date thereof regardless
recover any excess above a reasonable value paid by him.
of the nature of the property and the price involved.
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
3. WHERE FORM IS REQUIRED IN ORDER THAT A CONTRACT by them or to seek their annulment.
MAY BE VALID
-where the “applicable statute” requires that the ARTICLE 1490
contract of sale be in certain form for its validity, RELATIVE INCAPACITY OF HUSBAND AND WIFE
the required form must be observed in 1. they are prohibited by the article 1490 from selling property to each other.
order that the contract may be both valid and 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
enforceable 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.

4. WHERE FORM IS REQUIRED ONLY FOR THE REASON FOR PROHIBITION UNDER ARTICLE 1490
CONVENIENCE OF THE PARTIES -the possibility that the husband will induce his wife to engage in ruinous operations. The
-in order that the sale may be registered in the prohibition is primarily for the protection of 3rd person who relying upon supposed property of either
Registry of Deeds to make effective spouse enters into a contract with either of them only to find out that the property relied upon was
as against third persons the right acquired transferred to the other spouse.
under such sale.
PERSONS PERMITTED TO QUESTION SALE
SALE OF REAL PROPERTY OR AN INTEREST 1. the heirs of either spouse, as well as creditors at the time of the transfer, can attack the
-a sale of a piece of land or interest therein when made through an agent is void unless validity of the sale but not creditors who became such only after the transaction
the agent’s authority is in writing. 2. the government
-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 ARTICLE 1491
sale must be in public instrument or document. INCAPACITY BY REASON OF RELATION TO PROPERTY
-the persons who, because of their position and relation with the persons under their
STATUTE OF FRAUDS APPLICABLE ONLY TO EXECUTORY CONTRACTS charge or property under their control, are prohibited from acquiring said property under their control.
-the reason for this rule is that partial performance like the writing, furnishes reliable They are the: guardians, agents, executors and administration, public officers and
evidence of the intention of the parties or the existence of the contract. A contrary rule would result in employees; judicial officers and employees and lawyers and others especially disqualified by law.
injustice or unfairness to the party who has performed his obligation.
REASON FOR PROHIBITION
ARTICLE 1484 -is to prevent frauds on the part of the persons enumerated therein and minimize
REMEDIES OF VENDOR IN SALE OF PERSONAL PROPERTY PAYABLE IN INSTALLMENT temptations to the exertion of undue and improper influence.
(RECTO LAW)
May exercise the ff. remedies: OTHER PERSONS ESPECIALLY DISQUALIFIED
1. elect fulfillment upon the vendee’s failure to pay 1. aliens who are disqualified to purchase private agricultural lands
2. cancel the sale if the vendee shall have failed to pay two or more 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
installments; judgment
3.foreclose the chattel mortgage, if one has been constituted, if the rendered against the owner.
vendee shall have failed to pay
two or more installments 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. SALE ON TRIAL OR APPROVAL- the buyer has an option to purchase the if the
2. by renunciation- a creditor gratuitously abandons his right against his creditor. The goods prove satisfactory. The title shall continue in the seller until the sale has become absolute either by
other terms used by the law are condonation and remission. 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.
ARTICLE 1493
EFFECT OF LOSS OF THING AT THE TIME OF SALE SALE OR RETURN DISTINGUISHED FROM SALE ON TRIAL
1. THING ENTIRELY LOST SALE OR RETURN
-at the time of perfection, the contract is inexistent and void because 1. subject to resolutory condition
there is no object. 2. depends entirely on the will of the buyer
2. THING ONLY PARTIALLY LOST 3. the ownership of the goods passes to the buyer on delivery and
-the vendee may elect between withdrawing from the contract and subsequent return
demanding the remaining part, paying its proportionate price. of the goods reverts ownership in the seller
4. the risk of loss or injury rests upon the buyer
WHEN A THING CONSIDERED LOST
Its existence is unknown or it cannot be recovered. 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
ARTICLE 1494
EFFECT OF LOSS IN CASE OF SPECIFIC GOODS approval or acceptance to the seller
-ARTICLE 1494 applies only to sales of goods, that is, the object of the sale consists of a 4. the risk still remains with the seller
mass of specific goods
2 remedies to the buyer: ARTICLE 1503
1. SALE DIVISIBLE- a contract is DIVISIBLE DELIVERY OF SPECIFIC GOODS SOLD GENERALLY PASSES TITLE
when its consideration is -this article relates to a sale of specific goods
made up of several parts. 1. DELIVERY TO A CARRIER
2. SALE INDIVISIBLE- when the consideration is General rule: the delivery be it only constructive, and
entire and single. The object may delivery to the carrier is deemed to be a delivery to the buyer
be considered as a specific thing. 2. REDELIVERING BY CARRIER TO HIMSELF
If the seller directs the carrier to redeliver the goods
CHAPTER 4 at their destination to the seller himself, or to his order. The ownership still remain in the latter.
OBLIGATIONS OF THE VENDOR

ARTICLE 1495 WHERE SELLER OR HIS AGENT IS CONSIGNEE

PRINCIPAL OBLIGATIONS OF THE VENDOR 1. CARRIER BECOMES BAILEE FOR SELLER
1. to transfer the ownership Where goods are shipped and by the bill of lading the goods are
2. to deliver the thing deliverable to the seller or his agent or to the order of the seller or his agent, the seller thereby reserves the
3. to warrant against eviction and hidden defects ownership in the goods.
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
2. RIGHTS OF THE SELLER
-the seller may not only retain the goods until the buyer performs his obligation under the
ARTICLE 1496 contract.
WAYS OF EFFECTING DELIVERY
1. BY ACTUAL OR REAL DELIVERY WHERE SELLER’S TITLE ONLY FOR PURPOSE OF SECURITY
2. BY CONSTRUCTIVE OR LEGAL DELIVERY 1. FORM OF BILL OF LADING NOT CONCLUSIVE
3. BY DELIVERY IN ANY OTHER MANNER SIGNIFYING AN AGREEMENT -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
WAYS OF EFFECTING CONSTRUCTIVE DELIVERY ownership is simply to secure himself in regard to the performance by the buyer of the latter’s obligation.
1. EQUIVALENT TO ACTUAL DELIVERY
It may be effected in any of the following ways: 2. WHERE OWNERSHIP WOULD HAVE PASSED BUT FOR THE FORM OF BILL
a. by the execution of public instrument OF
b. by symbolica tradition/ tradition symbolica LADING
c. by traditio longa manu -by shipping the goods, the seller has definitely lost all use of them to
d. by tradition brevi manu the buyer. Where the title to the goods is held merely for the purpose of security, the beneficial owner
e. by tradition constitutum possessorium (buyer), not the one who holds for security (seller) bears the risk of loss or deterioration
or
f. by quasi-delivery or quasi-traditio WHERE THE BUYER OR HIS AGENT IS CONSIGNEE BUT SELLER RETAINS THE BILL OF
2. CONTRARY MAY BE STIPULATED
The parties may stipulate that ownership in the thing shall pass to the LADING
buyer only after he has fully paid the price or fulfilled The seller thereby retains a right to the possession of the goods as against the buyer.
conditions. 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
SECTION 2- DELIVERY OF THE THING SOLD
WHERE BILL OF LADING IS SENT FORWARD WITH DRAFT ATTACHED
ARTICLE 1497 -the fact that the bill of lading and bill of exchange are attached together indicates that the
CONCEPT OF TRADITION OR DELIVERY seller intends to make the delivery of the goods conditional upon the payment or acceptance of the draft.
“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 EFFECT OF BUYER’S OBTAINING POSSESSION OF BILL OF LADING WITHOUT HONORING
the same. DRAFT
IMPORTANCE OF TRADITION A purchaser in good faith for value of the bill of lading or goods from the buyer will
Delivery of the thing to enable the buyer to enjoy and make use of the property obtain the ownership of the goods although the bill of exchange has not been honored.
purchased. After delivery, the risk of loss of the thing sold is borne by the buyer.
ARTICLE1504
ACTUAL DELIVERY OF THING SOLD RISK OF LOSS GENERALLY ATTENDS TITLE
1. WHEN DEEMED MADE- it involves the physical delivery of the thing and is usually General rule: if the thing is lost by fortuitous event the risk is borne by the owner of the
done by passing of a movable thing from hand to hand. thing at the time of the loss
Exceptions:
2. NOT ALWAYS ESSENTIAL TO PASSING OF TITLE 1. The ownership is considered transferred to the buyer who, therefore,
The parties to the contract may agree when and on what conditions the assumes the risk from the time of delivery.
ownership in the subject of the contract shall pass to the buyer.
2. Where actual delivery has been delayed through the fault of either
ARTICLE 1498 the buyer or the seller. In this case, the law punishes the party at fault.
EXECUTION OF PUBLIC INSTRUMENT OR DOCUMENT
Public instrument is one which is acknowledged before notary public or any official RISK OF LOSS BY FORTUITOUS EVENT AFTER PERFECTION BUT BEFORE DELIVERY
authorized to administer oath, by the person who executed the same. -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
WHEN THE THING NOT SUBJECT TO CONTROL OF VENDOR from the seller to the buyer even though the buyer has not yet acquired ownership thereof, this conflict can
-a seller cannot deliver constructively if he cannot deliver actually even only be resolved by legislation.
if he wants to.
ARTICLE 1505
SYMBOLIC TRADITION SALE BY THE PERSON NOT THE OWNER
-the parties make use of a token symbol to represent the thing delivered 1. WHERE THE OWNER OF THE GOODS IS, BY HIS CONDUCT, PRECLUDED
FROM DENYING THE SELLER’S AUTHORITY TO SELL
ARTICLE 1499 Where a property is sold by one not the owner or the agent of the
TRADITIO LONGA MANU owner, but the real owner states that he authorized such sale so that the vendor was acquitted of the charge
--it takes place by the mere consent or agreement of the contracting parties as when the against him, a buyer in good faith acquires a valid title to the property as it is not lawful nor permissible for
vendor merely points to thing sold which shall thereafter be at the control and disposal of the vendee said owner to deny or retract his former sworn statement that he had consented to said sale

TRADITIO BREVIE MANU 2. WHERE THE LAW ENABLES THE APPARENT OWNER TO DISPOSE OF THE
-when the vendee has already the possession of the thing sold by virtue of another title as GOODS AS IF HE WERE THE TRUE
when the lessor sells the thing leased to the lessee. OWNER THEREOF
-has no such law as the Factor’s Act. The law referred to here, therefore, must
ARTICLE 1500 be found in the provisions of our
TRADIO CONSTITUTUM POSSESSORIUM Civil Code on Agency.
-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. 3. WHERE THE SALE IS SANCTIONED BY STATUTORY OR JUDICIAL
AUTHORITY
ARTICLE 1501 - one who has lost any movable, or has been unlawfully deprived thereof, may recover it
QUASI-TRADITIO/ QUASI-DELIVERY from the person in possession of the same. If the possessor of a movable lost or of which the owner has
Tradition can only be made with respect to corporeal things. In case of incorporeal things, unlawfully been deprived has acquired it in good faith at a public sale, the owner cannot obtain its return
delivery is effected: without reimbursing the price paid therefore.
1. by the execution of a public instrument 4. WHERE THE SALE IS MADE AT MERCHANT’S STORES, FAIRS, OR
2. by the placing of the titles of ownership in the possession of the vendee, MARKETS
3. by allowing the vendee to use his rights as new owner with the consent of the -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
vendor prevails for a buyer.
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. 5.WHERE THE SELLER HAS A VOIDABLE TITLE WHICH HAS NOT BEEN
AVOIDED AT THE TIME OF SALE
6. WHERE SELLER SUBSEQUENTLY ACQUIRES TITLE
ARTICLE 1502 When a person conveys property to another of which at the time he is
CONTRACTS OF SALE OR RETURN, AND OF SALE ON TRIAL OR APPROVAL OR not the owner, his subsequent acquisition of title validates his previous conveyance.
SATISFACTION
1. SALE OR RETURN- the buyer has an option to purchase or return the ARTICLE 1506
same to the seller instead of paying the price. Without reference to the quality of goods,
SALE BY ONE HAVING A VOIDABLE TITLE WHEN NEGOTIATION NOT IMPAIRED BY FRAUD, MISTAKE, DURESS, ETC.
1. REQUISITES FOR ACQUISITION OF GOOD TITLE BY BUYER -it may be negotiated by even by a thief or finder and the holder thereof would acquire a
-if the seller has only a voidable title to the goods, the buyer acquires a good title thereto if he paid value therefor in good faith without notice of the seller’s defect.
good title to the goods provided he buys them: -it speaks of the theft of the document and not of the goods covered by such document. In
a. before the title of the seller has been avoided the latter case, it needs no argument to show that even a bona fide holder of a document issued over such
b. in good faith for value; and stolen goods cannot acquire title
c. without notice of the seller’s defect of title
ARTICLE 1519
2. BASIS RULE ATTACHMENT OR LEVY UPON GOODS COVERED BY A NEGOTIABLE DOCUMENT
Seems to be based on the principle that where loss has happened which -in the possession of such bailee, the goods cannot be attached or levied under an
must fall on one of two innocent persons, it should be borne by him who is the occasion of the loss. execution unless the document be first surrendered or its negotiation prohibited by law.
ARTICLE 1507 -this provision is for the protection of the bailee since he could be made liable to a
NATURE AND FUNCTION OF DOCUMENTS OF TITLE subsequent purchaser for value in good faith.
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 ARTICLE 1520
CREDITOR’S REMEDIES TO REACH NEGOTIATE DOCUMENTS
2. EVIDENCE OF TRANSFER OF TITLE AND POSSESSION OF GOODS AND -this article expressly gives the court full power to aid by injunction (a restraining order)
CONTRACT BETWEEN THE PARTIES and otherwise a creditor seeking to get a negotiate document covering such goods.
-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 ARTICLE 1521
c. contract betwe0en the parties who are bound by its terms PLACE OF DELIVERY OF GOODS SOLD
1. RULES
MOST COMMON FORMS OF DOCUMENTS OF TITLE a. where there is an agreement, express or implied, the place of delivery
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 is that agreed upon
consignee. (the shipper and consignee may be one and same person) b. where there is no agreement, the place of delivery is that determined

2. DOCK WARRANT- an instrument given by dock owners to an importer of goods warehoused on the by usage of trade.
dock recognizing the importer’s title to the said goods; and c. where there is no agreement and there is also no prevalent usage, the
place of delivery
3.WAREHOUSE RECEIPT- it is a contract or receipt for goods deposited with a warehouseman containing is the seller’s place of business.
the latter’s undertaking to hold and deliver the said goods to a specified person, to order, or to bearer. d. in any other case, the place of delivery is the seller’s residence
(QUEDAN- is a warehouse receipt usually for sugar received by a warehouseman) 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
CLASSES OF DOCUMENTS OF TITLE of delivery in the absence of any agreement or usage of trade to the
1. NEGOTIABLE DOCUMENTS- those by the terms of which the bailee undertakes to deliver the goods contrary.
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 2. PRESUMPTION
a specified person. -it can be seen that the presumption is that the buyer must take goods
from the seller’s place of business or residence rather
ARTICLE 1508 than the seller to deliver them to the buyer.
NEGOTIATION OF NEGOTIABLE DOCUMENT BY DELIVERY
-if the document is specially indorsed, it becomes an order document of title and TIME OF DELIVERY OF GOODS SOLD
negotiation can only be effected by the indorsement of the indorsee. A special indorsement specifies the 1. IF NO TIME IS FIXED BY THE CONTRACT, then the seller is bound to send the
person to whom or to whose order, the goods are to be delivered. goods to the buyer within a
reasonable time.
ARTICLE 1509
NEGOTIATION OF NEGOTIABLE DOCUMENT BY INDORSEMENT 2. IF THE CONTRACT PROVIDES A FIXED TIME FOR PERFORMANCE, the
1. if indorsed in blank or to bearer, the document becomes negotiable by delivery question is whether time is of the essence, and if so whether the
2. if indorsed to a specified person, it may be again negotiated by the indorsement of such correct performance was offered within that time. If time is not of the
person in blank, to bearer, or to another specified person. Delivery alone is not sufficient. essence, the question is whether correct performance was
offered within a reasonable time.

ARTICLE 1510 3. WHERE THE CONTRACT DOES NOT SPECIFY THE TIME FOR DELIVERY
NEGOTIABLE DOCUMENTS OF TITLE MARKED “NON-NEGOTIABLE” -so that delivery is to be made within a reasonable time
-the words “not negotiable”, “non negotiable” and the like when placed upon a document -the buyer cannot make time the essence of the contract without giving
of title in which the goods are to be delivered to “order” or to “bearer” have no effect and the document the seller notice of his intention to cancel unless
continues to be negotiable. delivery is made on or before a fixed time

ARTICLE 1511 DELIVERY OF GOODS IN POSSESSION OR A 3RD PERSON

TRANSFER OF NON-NEGOTIABLE DOCUMENTS -to affect third person, the person holding the goods must acknowledge being the bailee
-a non-negotiable of title cannot be negotiated. It can be transferred or assigned by for the buyer.
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. HOUR OF DELIVERY OF GOODS SOLD
The demand or tender of delivery to be effectual, must be made at a reasonable
ARTICLE 1512
PERSONS WHO MAY NEGOTIATE A DOCUMENT hour
-it will be noticed that the provision does not give a power to negotiate documents of title 1. WHAT IS A REASONABLE HOUR? Where all that is required of the other party
equal to that allowed in the case of bills of exchange and promissory notes under the Negotiable is to receive a payment or performance which can
Instruments Law readily be accepted
-however, if the owner of the goods permits another to have the possession or custody of 2. IN CASE GOODS WHICH ARE BULKY OR NEEDED SPECIAL CARE – an hour
negotiable receipts running to the order of the latter or to bearer, it is a representation or title upon which might be reasonable which would not be so in an ordinary
bona fide purchasers payment of a small amount of money.
-the loss must fall upon him whose misplaced confidence made the loss possible
DUTY OF SELLER TO PUT GOODS IN DELIVERABLE CONDITION
ARTICLE 1513 -the seller bears the expenses to place thing in a deliverable state that is, in such a state
RIGHTS OR PERSON TO WHOM DOCUMENT HAS BEEN NEGOTIATED the buyer would, under the contract, be bound to take delivery of them.
-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 ARTICLE 1522
document of title. Such person acquires: DELIVERY OF GOODS LESS THAN QUANTITY CONTRACTED
1. the title of the person negotiating the document, over the goods covered by the document Where the seller delivers a smaller quantity the buyer may reject the
2.the title of the person (depositor or owner) to whose order by the terms of the document the goods were to goods so
be delivered, over such goods; and delivered. (kulang)
3. the direct obligation of the bailee (warehouseman or carrier) to hold possession of the goods for him, as The buyer may accept the goods in which case he must pay for their:
if the bailee had contracted directly with him 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
ARTICLE 1514 seller is going to be guilty of a breach of contract.
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 DELIVERY OF GOODS MORE THAN QUANTITY CONTRACTED
negotiated) has been transferred or of the transferee of a non-negotiable document. Such person acquires: Where the seller delivers a quantity larger than the contracted, the
1. the title to the goods as against the transferor buyer may accept the quantity contracted for and reject the excess. If he
2. the right to notify the bailee of the transfer thereof accepts all the goods delivered, he
3. the right, thereafter, to acquire the obligation of the bailee to hold the goods for him. makes himself liable for the price of all of them.

RIGHTS OF THE THIRD PERSON TO GOODS WHERE DOCUMENT HAS BEEN TRANSFERRED DELIVERY OF GOODS MIXED WITH OTHERS
1. the transfer does not effect the delivery of the goods covered it. Before notification, the bailee is not -the buyer may accept those which are in accordance with the contract
bound to the transferee whose right may be defeated by a levy of an attachment or execution upon the and reject the rest. And of course, may accept them
goods by the creditor or the transferor all if he so desires

2.if the document is negotiable, the goods cannot be attached or be levied under an execution unless the EFFECT OF INDIVISIBILITY OF SUBJECT MATTER
document be first surrendered to the bailee or its negotiation enjoined. 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
ARTICLE 1515 mention only if the subject matter is indivisible.
TRANSFER OF ORDER DOCUMENT WITHOUT INDORSEMENT
-it specifies the right of a person to whom an order document of title, which may not RULES MAY BE CONTROLLED BY USAGE OF TRADE
properly be negotiated by mere delivery, has been delivered, without indorsement. They are: -permitting evidence of usage of trade, special agreement, or course of dealing
1.the right to the goods against the transferor and between the parties is but a special application of the general rules concerning
2. the right to compel the transferor to indorse the indorsement contracts.
(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 1523
DELIVERY TO CARRIER ON BEHALF OF BUYER
SUBSEQUENT INDORSEMENT OF NEGOTIABLE DOCUMENT TRANSFERRED 1. GENERAL RULE- when the seller is authorized or required to send the goods to
-the negotiation shall take effect as of the time when the indorsement is actually made, the buyer, is that delivery of such goods to the carrier constitutes delivery to
not at the time the document is delivered. The reason is because the negotiation becomes complete only at the buyer, whether the carrier is named by the buyer is not.
the time of indorsement.
2. EXCEPTIONS- the parties did not intend the delivery of the goods to the buyer
ARTICLE 1516 through the carrier.
WARRANTIES ON SALE OF DOCUMENTS
-it treats of the warranties or liabilities of a person negotiating or transferring a document. SELLER’S DUTY AFTER DELIVERY TO CARRIER
The liability is limited only to a violation of the 4 warranties. 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
ARTICLE 1517 circumstances.
INDORSER NOT A GUARANTOR 2. To give notice to buyer regarding necessity to insure goods- the seller must give notice
-the indorsement of a negotiable instrument has a double effect; the indorser will pay the to the buyer as may enable him to insure the goods during their transit. If the seller fails to do so, the risk
instrument if the party primarily liable fails to do so. The indorsement of a document of title amounts will be borne to him.
merely to a conveyance by the indorser, not a contract of guaranty.
DEFINITION OF TRADE TERMS
ARTICLE 1518
 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.