Document of Title to Goods
 Documents that are used in the ordinary
course of business in the sale or transfer of
goods, as proof of the possession or control of
the goods, or authorizing or purporting to
authorize the possessor of the document to
transfer or receive either by indorsement or
by delivery, goods represented by such
document.
Goods
 Includes all chattels personal but not things in
action or money of legal tender in the
Philippines. The therm includes growing
fruits/crops.
Order
 Relating to documents of title means an order
by indorsement on the documents.
Quality of Goods
 Includes their state or condition.
Specific Goods
 Means goods identified and agreed upon at a
time a contract of sale is made.
Thing/Chose in Action
 Is any claim/right which may be pleaded in a
suit at law, such as claim of reparation for a
tort or right guaranteed under certain types of
contracts.
Legal tender
 Is that currency which a debtor can legally
compel a creditor to accept in payment of a
debt in money when tendered by the debtor in
the right amount. (both aren’t included in the
term “goods”)
Sale of immovable subject to registration law
 Is the operative act that binds the property
and serves as constructive notice to the public.
Barter
 A contract whereby one person transfers the
ownership of non-fungible things to another
with the obligation on the part of the latter to
give things of the same kind, quantity, and
quality.
Perfection & Consummation of the Contract of
Barter
1) The contract is perfected from the moment
there is a meeting of minds upon things promised
by each party in consideration of the other.
2) It is consummated from the time of mutual
delivery of the contracting parties of things they
promised.
Akin to Usufruct
 It is one that conveyed or transfer goods from
one to the other is only for the use or material
possession or enjoyment of other’s real
property.
Effect of Eviction in a Contract of Barter
 In case of eviction, the injured party is given
the option either:
 To recover the property he has given in
exchange with damages; or
 Only claim an indemnity for damages.
Purpose of Bulk Sales Law
 Is designed to prevent the defrauding of
creditors by the secret sale in bulk of all or
substantially all of a merchant’s stock of
goods.
Specified Formalities to Prevent the
Declaration of Bulk Sales as Fraudulent
1) The demanding & the giving of a list of
creditors
2) The giving of actual/constructive notice to such
creditors.
3) By record and the making of an inventory
Sale or Transfer in Bulk is any Sale, Transfer or
Assignment of:
a) A stock of goods, wares, merchandise,
provisions/materials otherwise than in the
ordinary course of trade & the regular
prosecution of the business;
b) All or substantially all, of the business/trade
c) All or substantially all, of the fixtures &
equipment used in the business of the vendor,
mortgagor, transferor, or assignor.
Sale or Transfer in Bulk not covered by the
Bulk Sales Law
a) If the sale or transfer is in the ordinary course
of trade & the regular prosecution of the
business of the vendor;
b) If it is made by one who produces & delivers a
written waiver of the provisions of the Bulk
Sales Act from his creditors.
c) If it is made by an executor, administrator,
receiver, assignee in insolvency, or public
officer, acting under judicial process.
d) If it refers to properties exempt from
attachment or execution.
Stock
 These are goods in a mercantile house which
are kept for sale.
Merchandise
 Things that are usually bought & sold in trade
by merchants. It is something that is sold
everyday, & is constantly going out of the
store & being replaced by other goods.
Fixtures
 Refers to such articles/merchandise usually
possessed & annexed to the premises
occupied by merchants to enable them to
better to store, handle, & display their wares
& which are commonly as trade fixtures,
although removable without material injury to
the premises at/ before the end of tenacy.
Protection accorded to Creditors by the Law:
A) It requires the seller to deliver to the buyer a
sworn written statement of the names &
addresses of all creditors to whom said vendor
may be indebted together with the amount of
indebtedness due/to become due.
B) It requires the seller at least 10 days before the
sales to make a full detailed inventory showing the
quantity & the cost price of the goods & to notify
every creditor of the price, terms & conditions of
the sale, etc.
Unqualified Creditors to such Protections:
1) A creditor who consents to & participates in a
bulk sale in the expectation that the proceeds
thereof are to be applied to his credits;
2) One who affirms the sale thus making it his
own;
3) One who, after he has been notified of the sale,
states that he will look to the seller for payment &
remains silent for 2 years.
Effect of False Statement in the Schedule of
Creditors
A) Without knowledge of Buyer:
 If the statement is fair upon its face & the
buyer has no knowledge of its incorrectness &
nothing to put him on inquiry about it, he will
be protected in its purchase.
 In such case, the remedy of the creditor isn’t
against the goods but to prosecute the seller
criminally.
 It would be unreasonable to make the buyer
responsible of any incorrectness in the list.
B) With knowledge of Buyer:
 If the buyer has knowledge of the false
statement/ the statement is defective on its
face, the buyer accepts it at his peril. The sale
is valid only between the seller & the buyer
but void as against the creditors.
C) With names of certain creditors without
notice omitted:
 If the list omits to name certain creditors who
aren’t notified, the sale is void as to such
creditors, whether the omission was
fraudulent/not.
Effect of Violation of Law on Transfer
1) As between the parties
 The bulk sales law doesn’t in any way affect
the validity of the transfer as between the
immediate parties thereto. A sale not in
compliance w/ the bulk sales statute is valid
against all persons other than creditors.
2) As against creditors
 A buyer in violation of the law acquires no 1) Commodatum
right in the property purchased as against the  Where the lender delivers to the borrower a
creditors of the seller. non-consumable thing so that the latter may
 His status is that of a trustee, or receiver for use it for a certain time & return the identical
the benefit of all the creditors of the seller. As thing; and
such, he is responsible for the benefit of all the
creditors of the seller. As such, he is 2) Simple Loan/ Mutuum
responsible for the disposition of the  Where the lender delivers to the borrower
property. money/other consumable thing upon the
condition that the latter shall pay the same
Acts Punished by Law amount of the same kind & quality.
1) Knowingly/willfully making/delivering a
statement as required by the Act which doesn’t *A thing is consumable when it’s consumed when
include the names of all the creditors of the used in a manner appropriate to its
vendor w/ the correct amount due & to become purpose/nature.
due or w/c contains any false or untrue statement.
Commodatum vs. Mutuum
2) Transferring title to any stock of goods, wares, Commodatum Mutuum
merchandise, provisions/materials sold in bulk Ordinarily involves The subject matter is
w/o consideration or for a nominal consideration something not money/other
only. consumable consumable thing
Ownership of the thing Owership is
Bulk Sales Law is not applicable to: loaned is retained by transferred to the
 Executors the lender borrower
 Administrators Essentially gratuitous May be gratuitous/it
 Receivers may be onerous (w/
 Assignees in Solvency stipulation to pay
 Public orders interest)
The borrower must The borrower need
*For the registration of each sworn statement
return the same thing only pay the same
containing the names & addresses of all creditors
loaned amount of the same
of the seller/mortgagor is charged with 5 pesos.
kind & quality
(registered in the Bureau of Commerce)
May involve Refers only to personal
real/personal property property
Characteristics of a Contract of Loan:
A) A real contract because the delivery of the A loan for use A loan for consumption
thing is necessary for the perfection of the The bailor may The lender may not
contract; and demand the return of demand its return
the thing loaned before before the lapse of the
B) A unilateral contract because once the subject the expiration of the term agreed upon
matter has been delivered, it creates obligations term in case of urgent
on the part of only one of the parties. need
The loss is suffered by The borrower suffers
Cause/Consideration in a Contract of Loan: the bailor since he is the loss
A) As to the borrower, the acquisition of the the owner
thing; and Purely personal in Not purely personal in
character character
B) As to the lender, the right to demand its return
or its equivalent
Kinds of Loan: Kinds of Commodatum:
A) Ordinary Commodatum - Where the lender
delivers to the borrower a non-consumable thing
so that the latter may use it for a certain time &
return the identical thing
B) Precarium - one whereby the bailor may
demand the thing loaned at will
* Since commodatum and mutuum are real
contracts, it requires the delivery of the subject
matter for their perfection.*
*Delivery is necessary in view of the purpose of
the contract w/c is to transfer wither the use or
ownership of the thing loaned.*
*An accepted promise to make a future loan is a
consensual contract, and, therefore, binding upon
the parties but it is only after delivery, will the real
contract of loan arise.*
Credit Transactions
 Include all transactions involving the
purchase/loan of goods, services, or money in
the present w/ a promise to pay/deliver in the
future.
 By the use of credit, more exchanges are
possible, persons are able to enjoy a thing
today but pay for it later, & through the
banking system, actual money transfer is
eliminated by cancellation of debts & credits.
 Are really contracts of security.
Two Types of Credit Transactions
A) Secured Transactions/Contracts of Real
Security
 Those supported by a collateral/ an
encumbrance of property
B) Unsecured Transactions/Contracts of
Personal Security
 Those the fulfillment of w/c by the principal
debtor is secured/supported only by a
promise to pay/the personal commitment of
another such as a guarantor/surety.
Kinds of Credit Transactions:
- Contracts of Guaranty - Mortgage
- Contracts of Suretyship - Antichresis
- Concurrence & Preference of Credits
- Bailment contracts
Security
 Is something given, deposited, serving as
means to ensure the fulfillment/ enforcement
of an obligation of a person to another,/ of
protecting some interest in property.
Types of Security
A) Personal Security
 When an individual becomes a surety/ a
guarantor.
B) Property/Real Security
 When a mortgage, pledge, antichresis,
charge or lien or other device is used to
have property held, out of which the
person can be compensated for loss.
Secured Creditor - one who holds a security from
his debtor for payment of the latter’s debt.
Promissory Note - is a form of security to answer
for a monetary obligation.
Bailment
 Comes from the French word “bailler”
meaning “to deliver”.
 A contractual relation involving an
agreement between the parties that the
property ultimately is to be returned by
the bailee to the bailor or is to be
delivered to a designated 3rd person.
Creation of Bailment
1) It may be created by operation of law and
agreement of parties is not always necessary.
2) To be legally enforceable, it must contain all the
elements of a valid contract. Whether or not a
bailment exists must be determined from all the
facts & circumstances of the case.
Parties in Bailment
1) Bailor - the giver; the party who delivers the
possession/custody of the thing bailed.
2) Bailee - the recipient; the party who receives
the possession/custody of the thing delivered.
Subject Matter of Bailment
 Bailment involves transfer/possession of
personal/movable or immovable property.
Kinds of Contractual Bailment
1) Different kinds but of same general
character - There are different kinds of bailment
creating different rights & obligations on the part
of the parties although they are of the same
general character.
Note: Bailee - obligation to restore the subject of
the bailment in the same/ in altered form/ to
account.
2) Classification with reference to
compensation - Divided into 3 heads:
a) Those for the sole benefit of the bailor
b) Those for the sole benefit of the bailee
c) Those for the benefit of both parties.
First Kind: belongs to gratuitous deposit &
mandatum (bailment of goods w/o recompense
where the mandatory/person to whom the
property is delivered undertakes to do some act
w/ respect to the same as simply to carry
it/otherwise to do something w/ to it
gratuitously.)
Second Kind: commodatum & gratuitous simple
loan(mutuum)
Third Kind: includes deposit for a compensation,
pledge, and bailments for hire.
Mutual-benefit bailments - bailments involving
business transactions
Commodatum - is essentially gratuitous.
Lease Contract - Thus, the contract ceases to be
commodatum if any compensation is to be paid by
the borrower who acquires the use.
Innominate Contract - if the consideration is the
rendering of some service.
Extent of Bailee’s right of use: Commodatum
 The right to use is limited to the thing loaned
but not to its fruits.
 As owner of the thing loaned, the bailor is
naturally entitled to its fruits.
Purpose of Commodatum
 The use of the thing loaned “for a certain
time”.
 Deposit - when the bailee is not entitled to the
use of the thing
Subject Matter of Commodatum
 Consumable Goods - when the purpose of the
contract is not the consumption of the object
as when it is merely for exhibition.
 Precarium - if no time for use of the land is
specified.
Contract of Commodatum is personal:
A) The death of either the bailor or the bailee
extinguishes the contract.
B) The bailee can neither lend nor lease the object
of the contract to a third person. However, the
members of the bailee’s household may make use
of the thing loaned except:
i. There is stipulation to contrary
ii. The nature of the thing forbids such use
Obligations of the Bailee (Borrower):
 Liability for ordinary expenses - the bailee
is obliged to pay for the ordinary expenses for the
use & preservation of the thing loaned because he
acquires the use of the same and he is supposed to
return the identical thing.
 Liability for the Loss of the thing, even if
it should be through a fortuitous event:
A) If he devotes the thing to any purpose different
from that for which it has been loaned because he
acted in bad faith.
B) If he keeps it longer than the period stipulated,
or after the accomplishment of the use for which
the commodatum has been constituted because he
incurs in delay.

C) If the thing loaned has been delivered w/
appraisal of its value, unless there is a stipulation
exempting the bailee from responsibility in case of
a fortuitous event because he would not have
appraised the thing, if he isn’t liable for its loss.
D) If he lends/leases the thing to a 3 person, who
rd
is not a member of his household because
commodatum is purely personal
E) If, being able to save either the thing
borrowed/his own thing, he chose to save the
latter because he shows his ingratitude after the
thing is gratuitously loaned to him.
 Liability for Deterioration of Thing
Loaned: The bailee is not liable for the
deterioration of the thing loaned due only to the
use thereof and without his fault as it ordinarily
wear and tear.
 Right of Retention of Thing Loaned: He
has no right to retain the thing loaned security for
claims he has against the lender because:
A) Ownership Remains in Bailor - The borrower
acquires only the use of the thing the ownership of
which remains in the lender. The law imposes
upon the bailee the obligation to return the same,
as to not broke the trust of its owner.
B) Only Temporary Use given to Bailee - The
bailee will broke the trust given to him by the
bailor if he return the thing loaned after the
period stipulated expires or the purpose has been
accomplished.
 Liability of Two/More Bailees - when there
are 2 or more bailees to whom thing is loaned
in the same contract, they are liable solidarily
to guarantee the efficacy of the rights of the
lender.
Obligations of the Bailor (Lender):
 Obligation to Respect Duration of Loan:
- The primary obligation of the bailor is to allow
the bailee the use of the thing loaned for the
duration of the period stipulated/until the
accomplishment of the purpose for w/c the
commodatum was constituted.
- The reason behind this is that the bailor is bound
by the terms of the contract of commodatum
which is for a certain time.
 Precarium
 Is a kind of commodatum where the
bailor may demand the thing at will.
 It is a contract by which the owner of the
thing, at the request of another, gives the
latter the thing for use as long as the owner
shall please.
 Cases when Contract is Precarium:
 If neither the duration of the contract
nor the use to which the thing loaned
should be devoted, has been
stipulated
 If the use of the thing is merely
tolerated by the owner.
 Acts that constitute Ingratitude:
1) If the bailee should commit some offenses
against the person, the honor or the property of
the bailor, or of his wife or children under his
parental authority;
2) If the bailee imputes to the bailor any criminal
offense, or any act involving moral turpitude, even
though he should prove it, unless the crime / the
act has been committed against the bailee himself,
his wife/children under his authority;
3) If the bailee unduly refuses the bailor support
when the bailee is legally or morally bound to give
support to the bailor.
 Obligation to Refund Extraordinary
Expenses
1) Extraordinary Expenses for the
Preservation of the Thing Loaned shall be borne
by the bailor because he is the one who profits by
said expenses.

2) Extraordinary Expenses arising on the

Occasion of the Actual Use of the Thing Loaned
shall be borne by the bailor and bailee on a 50:50
basis. The bailee pays one-half because of the
benefit derived from the use of the thing loaned to
him and the bailor pays the other half because he
is the owner and the thing will be returned to him.

*Ordinary Expenses are those incurred for the

preservation of the thing.

 Liability to Pay Damages for Known

Hidden Flaws: Requisites for application

A) There is a flaw/defect in the thing loaned

B) The flaw/defect is hidden
C) The bailor is aware thereof
D) He doesn’t advise the bailee of the same
E) The bailee suffers damages by reason of said
flow/defect