51955217 Reviewer in Sales

7/28/2019 51955217 Reviewer in Sales

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Sales Reviewer Adrienne O. Espares

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OBLIGATIONS OF THE VENDOR

Art. 1495. The vendor is bound to transferthe ownership of and deliver, as well aswarrant the thing which is the object of thesale.

Principal obligations of the vendor1. To transfer the ownership of the

determinate thing sold;2. To deliver the thing, with its accessions

and accessories, if any, in the conditionin which they were upon the perfectionof the contract (Art.1537);

3. To warrant against eviction and againsthidden defects (Arts. 1495,1547);

4. To take care of the thing, pendingdelivery, with proper diligence (see

Art.1163); and5. To pay for the expenses of the deed of

sale, unless there is a stipulation to thecontrary (Art.1487).

The vendor need not be the owner of the thing atthe time of perfection of the contract; it issufficient that he has a right to transfer theownership thereof at the time it is delivered. One who sells something he does not yet

own is bound by the sale when he acquires itlater.

When a property belonging to a person isunlawfully taken by another, the former hasthe right of action against the latter for therecovery of the property. Such right may be

transferred by the sale or assignment of theproperty and the transferee can maintainsuch action against the wrongdoer.

The transfer of ownership and the delivery of thething sold are not essential to the perfection ofthe contract. But if the seller does not deliver atthe time stipulated, the buyer may ask for therescission of the contract or fulfillment with theright to damages in either case.

The purchaser in execution sales, however, is notentitled to immediate possession of the propertysold. The effective conveyance of the land isaccomplished by the deed which is issued onlyafter the period of redemption has expired. In all cases of extra-judicial foreclosure sale,

the mortgagor may redeem the real propertysold within 1 year from the date ofregistration of the sale.

In judicial foreclosure of real estatemortgage, the general rule is that themortgagor cannot exercise his right ofredemption after the sale is confirmed by thecourt.

The purchaser is entitled to recover the moneypaid by him where the contract is set aside byreason of the mutual material mistake of the

parties as to the identity or quantity of the landsold. And where the purchaser recovers thepurchase price from a vendor who fails or refusesto deliver the title, he is entitled, as a generalrule, to interest on the money paid from the timeof payment.

Art. 1496. The ownership of the thing sold isacquired by the vendee from the moment it isdelivered to him in any of the ways specifiedin articles 1497 to 1501, or in any othermanner signifying an agreement that thepossession is transferred from the vendor tothe vendee.

Ways of effecting deliveryThe ownership of the thing sold shall betransferred to the vendee upon the deliverythereof, which may be effected in any of thefollowing:

1. By actual or real delivery (Art.1497);2. By constructive or legal delivery(Arts.1498-1501); or

3. By delivery in any other mannersignifying an agreement that thepossession is transferred to the vendee(Arts.1496-1499).

In all the different modes of delivery, the criticalfactor which gives legal effect to the act is theactual intention of the vendor to deliver, and itsacceptance by the vendee. The act, without theintention, is insufficient. There is no tradition.

Although the transfer of ownership is the primary

purpose of sale, delivery remains anindispensable requisite as our law does not admitthe doctrine of transfer of ownership of propertyby mere consent.

The delivery must be made to the vendee or hisauthorized representative. Where the vendee didnot name any person to whom the delivery shallbe made in his behalf, the vendor is bound todeliver exclusively to him.

Ways of effecting constructive deliveryConstructive delivery is a general termcomprehending all those acts which, althoughnot conferring physical possession of the thing,have been held by construction of law equivalentto acts of real delivery. It may be effected in anyof the following ways:

1. By the execution of a public instrument(Art.1498,par.1);

2. By symbolical tradition or traditionsymbolica (ibid.,par.2);

3. By tradition longa manu (Art.1499);4. By tradition brevi manu (ibid);


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5. By tradition constitutum possessorium(Art.1500); or

6. By quasi-delivery or quasi-traditio(Art.1501).

The parties, however, may stipulate thatownership in the thing shall pass to the purchaser

only after he has fully paid the price or fulfilledcertain conditions.

DELIVERY OF THE THING SOLD

Art. 1497. The thing sold shall be understoodas delivered, when it is placed in the controland possession of the vendee.

Tradition a derivative mode of acquiringownership by virtue of which one who has theright and intention to alienate a corporeal thing,transmits it by virtue of a just title to one who

accepts the same.

When the thing subject of the sale is placed inthe control and possession of the vendee or hisagent, the delivery is complete and the vendeecannot avoid liability in case the thing issubsequently lost without the fault of the vendor.

Where the buyer has not become the owner forlack of delivery, his action is not accionreinvindicatoria but one against the vendor forspecific performance or rescission, with damagesin either case.

The delivery of the thing together with thepayment of the price marks the consummation ofthe contract of sale.

Perfection of the contract, on the other hand,relates to the moment when the meeting of mindsbetween the parties takes place.

Actual delivery of the thing soldThere is actual delivery when the thing sold isplaced in the control and possession of thevendee. This involves the physical delivery ofthe thing and is usually done by the passing of amovable thing from hand to hand.

The actual or manual delivery of an article sold isnot always essential to the passing of titlethereto. The parties to the contract may agree

when and on what conditions the ownership inthe subject of the contract shall pass to thebuyer.

Art. 1498. When the sale is made through apublic instrument, the execution thereofshall be equivalent to the delivery of thething which is the object of the contract, if

from the deed the contrary does not appearor cannot clearly be inferred.

With regard to movable property, itsdelivery may also be made by the delivery ofthe keys of the place or depository where itis stored or kept.

The execution of a public instrument as amanner of delivery applies to movable aswell as immovable property since the lawdoes not make any distinction.

Since the execution of the deed ofconveyance is deemed equivalent todelivery, prior physical delivery orpossession is not legally required. Exceptions:

Even if in a public instrument, ifthere is no control or not inpossession;

The subject is not under the control

of the seller; and There is no ability to transfer

ownership The phrase the execution thereof shall be

equivalent is only a presumptive (notconclusive) delivery which can be rebuttedby evidence to the contrary.

If it appears from the document or it can beinferred therefrom that it was not theintention of the parties to make delivery, notradition can be deemed to have takenplace.

Presumptive delivery by execution of public

instrument can also be negated by failure ofthe vendee to take material possession ofthe land subject of the sale in the concept ofpurchaser-owner.

Symbolic delivery by the execution of apublic instrument is equivalent to actualdelivery only where the thing is subject tothe control of the vendor and there is noimpediment that may prevent the passing ofthe property from the hands of the vendorinto those of the vendee. Hence, the vendorwho executes said public instrument fails inhis obligation to deliver it, if the vendee

cannot enjoy its material possessionbecause of the opposition or resistance of athird person who is in actual possession. It is not enough to confer upon the

purchaser the ownership and the right ofpossession. The thing sold must beplaced in his control in order that it canbe said that delivery has been effected.

If the sale had been made under theexpress agreement of imposing upon


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the vendee the obligation to take thenecessary steps to obtain the materialpossession of the thing sold and if itwere proven that he knew that the thingwas in the possession of a third personclaiming to have property rights thereon,such agreement would be perfectlyvalid.

Art. 1499. The delivery of movable propertymay likewise be made by the mere consentor agreement of the contracting parties, if thething sold cannot be transferred to thepossession of the vendee at the time of thesale, or if the latter already had it in hispossession for any other reason.

Traditio longa manuIt is the mode of delivery that takes place by themere consent or agreement of the contracting

parties as when the vendor merely points to thething sold which shall thereafter be at the controland disposal of the vendee.

Tradition brevi manuIt is the mode of legal delivery that happenswhen the vendee has already the possession ofthe thing sold by virtue of another title as whenthe lessor sells the thing leased to the lessee.Instead of turning over the thing to the vendor sothat the latter may, in turn, deliver it, all theseare considered done by action of law.

Art. 1500. There may also be traditionconstitutum possessorium.

Tradition constitutum possessoriumThis is the opposite of tradition brevi manu. Ittakes place when the vendor continues inpossession of the property sold not as owner butin some other capacity.

Ex. When the vendor stays as a tenantof the vendee.

In this case, instead of the vendor delivering thething to the vendee so that the latter may, inturn, deliver it back to the vendor, the law

considers that all these have taken place bymere consent or agreement of the parties.

Art. 1501. With respect to incorporealproperty, the provisions of the firstparagraph of article 1498 shall govern. In anyother case wherein said provisions are notapplicable, the placing of the titles ofownership in the possession of the vendeeor the use by the vendee of his rights, with

the vendors consent, shall be understood asa delivery.

Quasi-traditioIt is the mode of delivery of incorporeal things orrights. It is effected through the following:

1. By the execution of a public instrument;or

2. When that mode of delivery is notapplicable, by the placing of the titles ofownership in the possession of thevendee; or

3. By allowing the vendee to use his rightsas new owner with the consent of thevendor.

In all forms of delivery, it is necessary thatthe act be coupled with the intention ofdelivering the thing. The act, without theintention to deliver it, is insufficient.

Art. 1502. When goods are delivered to thebuyer on sale or return to give the buyeran option to return the goods instead ofpaying the price, the ownership passes tothe buyer on delivery, but he may revest theownership in the seller by returning ortendering the goods within the time fixed inthe contract, or, if no time has been fixed,within a reasonable time.

When goods are delivered to thebuyer on approval or on trial or onsatisfaction, or other similar terms, theownership therein passes to the buyer.

1. When he signifies his approval oracceptance to the seller r does anyother act adopting the transaction;

2. If he does not signify his approval oracceptance to the seller, but retainsthe goods without giving notice ofrejection, then if a time has beenfixed for the return of the goods, onthe expiration of such time, and, if notime has been fixed, on the expirationof a reasonable time. What is areasonable time is a question of fact.

The duty of the buyer with regard to thereturn of the goods requires, ordinarily, thatthey be returned in the same or substantiallythe same condition in which they were whenthe contract was made. Undoubtedly, if theyare injured or damaged substantially throughnegligence or misuse of the buyer, his rightto return is lost and the sale becomesabsolute.


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Sale or returnIt is a contract by which property is sold but thebuyer, who becomes the owner of the propertyon delivery, has the option to return the same tothe seller instead of paying the price.

The buyer may revest the ownership inthe seller by returning or tendering thegoods within the time fixed in thecontract, or, if no time has been fixed,within a reasonable time, otherwise, thesale becomes absolute and the buyer isliable for the price.

The seller cannot, in this type of sale,prevent the revesting of title by refusingto accept the return of the property.

Since title passes to the buyer ondelivery, the loss or destruction of theproperty prior to the exercise of thebuyers option to return falls upon himand renders him responsible to the

seller for the purchase price or such partthereof as remains unpaid.

The word return itself implies aprevious transfer of title.

Sale on trial or approvalIt is a contract in the nature of an option topurchase if the goods prove satisfactory, theapproval of the buyer being a conditionprecedent.

In this contract, the title shall continue inthe seller until the sale has becomeabsolute either by the buyers approval

of the goods, or by his failing to complywith the express or implied conditions ofthe contract as to giving notice ofdissatisfaction or as to returning thegoods or by his doing any other actadopting the transaction such asmortgaging the property or selling it to athird person.

Since the title to the goods does notpass and the relationship between theseller and the purchase is that or bailorand bailee, the risk of loss or injury tothe article pending the exercise by the

buyer of his option to purchase or returnit, is upon the seller except as the buyermay be at fault in respect of the caseand condition of the article, or may haveagreed to stand the loss.

Sale or return distinguished from sale on trial

Sale or return Sale on trial

Subject to a resolutorycondition

Subject to asuspensive condition

Depends entirely onthe will of the buyer

Depends on thecharacter or quality of

the goods

Ownership of thegoods passes to the

buyer on delivery and

subsequent return ofthe goods revertsownership in the seller

Ownership remains inthe seller until thebuyer signifies his

approval oracceptance to theseller

The risk of loss orinjury rests upon the

buyer

The risk still remainswith the seller

Art. 1503. Where there is a contract of sale ofspecific goods, the seller may, by the termsof the contract, reserve the right ofpossession or ownership in the goods untilcertain conditions have been fulfilled. Theright of possession or ownership may bethus reserved notwithstanding the deliveryof the goods to the buyer or to a carrier orother bailee for the purpose of transmissionto the buyer.

Where goods are shipped, and by thebill of lading the goods are deliverable to theseller or his agent, or to the order of theseller or of his agent, the seller therebyreserves the ownership in the goods. But if,except for the form of the bill of lading, theownership would have passed to the buyeron shipment of the goods, the sellersproperty in the goods shall be deemed to beonly for the purpose of securing

performance by the buyer of his obligationsunder the contract.

Where goods are shipped, and by thebill of lading the goods are deliverable to theorder of the buyer or of his agent, butpossession of the bill of lading is retained bythe seller or his agent, the seller therebyreserves a right to the possession of thegoods as against the buyer.

Where the seller of goods draws onthe buyer for the priced and transmits the billof exchange and bill of lading together to thebuyer to secure acceptance or payment of

the bill of exchange, the buyer is bound toreturn the bill of lading if he does not honorthe bill of exchange, and if he wrongfullyretains the bill of lading he acquires noadded right thereby. If, however, the bill oflading provides that the goods aredeliverable to the buyer or to the order of thebuyer, or is indorsed in blank, or to the buyerby the consignee named therein, on whopurchases in good faith, for value, the bill of


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lading, or goods from the buyer will obtainthe ownership in the goods, although the billof exchange has not been honored, providedthat such purchaser has received delivery ofthe bill of lading indorsed by the consigneenamed therein, or of the goods, withoutnotice of the facts making the transferwrongful.

As a general rule, the ownership in thegoods sold passes to the buyer upon theirdelivery to the carrier, except:1. If a contrary intention appears by the

terms of the contract;2. In the cases provided in the second and

third paragraphs of Article 1523; and3. In the cases provided in the first,

second, and third paragraphs of Article1503.

The general rule is that delivery, be it only

constructive, passes title in the thing soldand delivery to the carrier is deemed to be adelivery to the buyer. The risk of loss,therefore, as between the buyer and theseller, falls upon the buyer.

Where goods are shipped and by the bill oflading, the goods are deliverable to theseller or his agent or to the order of theseller or his agent, the seller therebyreserved the ownership in the goods and thecarrier is a bailee for him and not the buyer.This principle is applicable even though thegoods are shipped on the buyers vessel.

The seller may not only retain the goodsuntil the buyer performs his obligation underthe contract, but he may, even in violation ofthe contract, dispose of them to thirdpersons. If the seller does this, of course, heis liable for damages to the buyer but thesecond purchaser from the seller acquires abetter right.

Significance where title held merely assecurityRisk of loss on buyer

1. The beneficial owner (buyer), not the

one who holds for security (seller), willbe subject to the risk of loss ordeterioration from the time the goodsare delivered to the carrier even thoughthe legal title remains in the seller. Thatthe risk should be borne by the buyer ifthe seller retains title merely to secureperformance by the buyer of hisobligations under the contract is aconsequence of the theory that such a

bargain is, in effect, although not inform, a sale to the buyer and amortgage back by him of the goods tosecure the price. The title does not passto the buyer until he received the orderbill of lading properly indorsed.

Buyers right of action based on ownership2. The buyer has more than a mere

contract right in regards to the goods.As beneficial owner, he may, as againstany one except an innocent purchaserfor value of the bill of lading from theconsignee, bring an action based onownership on making tender of theprice.

Where buyer or his agent is consignee but sellerretains order bill of ladingWhere goods are shipped and by the bill oflading the goods are deliverable to the order of

the buyer or of his agent, but possession of thebill of lading is retained by the seller or hisagent, the seller thereby retains a right to thepossession of the goods as against the buyer.

Where a third person who retains the bill ifconsigneeTwo devices have already been considered bywhich the seller of goods retains a hold uponthem by means of the bill of lading after he hasshipped them: first, by consigning the goods tohimself, either by an order bill or a straight billand second, by consigning the goods to the

order of the buyer and retaining possession ofthe bill of lading.

Distinction in regard to the form of the bill oflading

1. If the seller has named the buyer asconsignee, the property has passed tothe consignee or at least it seems tohave been so to one who inspects thedocument;

2. If the bill of lading, though naming theseller as consignee, is indorsed by himto the buyer or in blank, the possession

of the document by the buyer gives him,if not the actual title, at least anapparent ownership; and

3. If the bill of lading names the seller or athird person as consignee and noendorsement of the document had beenmade, possession by the buyer wouldnot indicate that the buyer had title.


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Where the document gives the buyer apparentownership and a third person purchases thegoods relying thereon, it seems clear on broadprinciples of justice that since one of twoinnocent parties must suffer, he should sufferwhose act has brought about the loss.Consequently, the seller ought not to be allowedto recover the goods from the third person.

Art. 1504. Unless otherwise agreed, thegoods remain at the sellers risk until theownership therein is transferred to the buyer,but when the ownership therein istransferred to the buyer, the goods are at thebuyers risk whether actual delivery has beenmade or not, except that:

1. Where delivery of the goods hasbeen made to the buyer or to a baileefor the buyer, in pursuance of thecontract and the ownership in the

goods has been retained by the sellermerely to secure performance by thebuyer of his obligations under thecontract, the goods are at the buyersrisk from the time of such delivery;

2. Where actual delivery has beendelayed through the fault of either thebuyer or seller the goods are at therisk of the party in fault.

Risk of loss generally attends titleIf the thing is lost by fortuitous event, the risk isborne by the owner of the thing at the time of the

loss under the principle ofres perit domino,except:

1. Where the seller reserves the ownershipof the goods merely to secure theperformance by the buyer of hisobligations under the contract, theownership is considered transferred tothe buyer who, therefore, assumes therisk from the time of delivery.

2. Where actual delivery had been delayedthrough the fault of either the buyer orseller, the goods are at the risk of theparty at fault with respect to any loss

which might not have occurred but forsuch fault. In this case, the law punishesthe party at fault.

Risk of loss by fortuitous event after perfectionbut before deliveryUnder Article 1480, if the thing sold is lost afterperfection of the contract but before its delivery,that is, even before the ownership is transferredto the buyer, the risk of loss by fortuitous event

without the sellers fault is borne by the buyer asan exception to the rule ofres perit domino.

Consequently, the buyers obligation to pay theprice subsists if he has not yet paid the same orif he had, he cannot recover it from the selleralthough the latters obligation to deliver thething is extinguished by its loss. The risk of lossof the thing after perfection is shifted from theseller to the buyer even though the buyer hasnot yet acquired ownership thereof.

To avoid conflict, to wit: Article 1504 should berestricted in its application to sale of goods and

Article 1480, to sales of things. This wouldmake Article 1480 the general rule on risk ofloss and Article 1504, the exception.

Art. 1505. Subject to the provisions of this Titlewhere goods are sold by a person who is not theowner thereof, and who does not sell them

under authority or with the consent of the owner,the buyer acquires no better title to the goodsthan the seller had, unless the owner of thegoods is by his conduct precluded from denyingthe sellers authority to sell.

Nothing in this title, however, shallaffect:

1. The provisions of any factors acts,recording laws, or any other provision oflaw enabling the apparent owner ofgoods to dispose of them as if he werethe true owner thereof;

2. The validity of any contract of sale under

statutory power of sale or under theorder of a court of competent

jurisdiction;3. Purchases made in a merchants store,

or in fairs, or markets, in accordancewith the Code ofCommerce and speciallaws.

It is a fundamental doctrine of law that no onecan give what he has not or transfer a greaterright to another than he himself has.Exceptions:

1. Where the owner of the goods, is by his

conduct, precluded from denying thesellers authority to sell.2. Where the law enables the apparent

ownership to dispose of the good as ifhe were the true owner thereof. Our country has no Factors Act.

Such is designed to protect thirdpersons who (under specifiedconditions) deal with an agent


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believing him to be the owner ofgoods.

3. Where the sale is sanctioned bystatutory or judicial authority. According to Art.559 of the CC, the

possession of movable propertyacquired in good faith is equivalentto title. Nevertheless, one who haslost any movable, or has beenunlawfully deprived therefor, mayrecover it from the person inpossession of the same. This refersto the Doctrine of Ireinvindicatoria.Exception:If the possessor of a movable lost orof which the owner has unlawfullybeen deprived has acquired it ingood faith at a public sale, theowner cannot obtain its returnwithout reimbursing the price paid

therefor.4. Where the sale is made at merchants

stores, fairs or markets.5. Where the seller has a voidable title

which has not been avoided at the timeof the sale.

6. Where seller subsequently acquires title. when a person conveys property toanother of which at the time he is notthe owner, his subsequent acquisition oftitle validates his previous conveyance.

Art. 506. Where the seller of goods has a

voidable title thereto, but his title has not beenavoided at the time of the sale, the buyeracquires a good title to the goods, provided hebuys them in good faith, for value, and withoutnotice of the sellers defect of title.

Requisites for acquisition of good title by buyerIf the seller has only a voidable title to thegoods, the buyer acquires a good title to thegoods provided he buys them:

a. Before the title of the seller has beenavoided;

b. In good faith for value; and

c. Without notice of the sellers defect oftitle.

Art. 1507. A document of title in which it is statedthat the goods referred to therein will bedelivered to the bearer, or to the order of anyperson named in such document is a negotiabledocument of title.

Document of title to goods includes any billof lading, dock warrant, quedan, or warehousereceipt or order for the delivery of goods, or anyother document used in the ordinary course ofbusiness in the sale or transfer of goods, asproof of the possession or control of the goods,or authorizing or purporting to authorize thepossessor of the document to transfer orreceive, either by indorsement or by delivery,goods represented by such document.

A document of title is symbol of thegoods covered by it, serving asevidence ofa. Transfer of title;b. Transfer of possession; andc. A contract between the parties who

are bound by its terms. So far as concerns the transfer of

property between the parties, theirintention would be effectual without the

document, but where third parties rightsare involved, the form of the document(negotiable or non-negotiable) becomesimportant.

3 Most common forms or documents of title1. Bill of lading It is a contract and a

receipt for the transport of goods andtheir delivery to the person namedtherein, to order, or to bearer. It involvesthe carrier, the shipper, and theconsignee.

2. Dock warrant It is an instrument given

by dock owners to an importer of goodswarehoused on the dock as arecognition of the importers title to thesaid goods, upon production of the bill oflading.

3. Warehouse receipt It is a contract orreceipt for goods deposited with awarehouseman containing the lattersundertaking to hold and deliver the saidgoods to a specified person, to order, orto bearer. Quedan is a warehousereceipt usually for sugar received by awarehouseman.

Laws governing documents of title1. The Civil Code;2. The Warehouse Receipts Law; and3. The Code ofCommerce

Classes of documents of titles1. Negotiable documents of title those by

the terms of which the bailee undertakesto deliver the goods to the bearer and


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those by the terms of which the baileeundertakes to deliver the goods to theorder of a specified person (Art.1508);or

2. Non-negotiable documents of title those by the terms of which the goodscovered are deliverable to a specifiedperson (Art.1511).

Art. 1508. A negotiable document of title may benegotiated by delivery:

1. Where by the terms of the document thecarrier, warehouseman or other baileeissuing the same undertakes to deliverthe goods to the bearer; or

2. Where by the terms of the document thecarrier, warehouseman or other baileeissuing the same undertakes to deliverthe goods to the order of a specifiedperson, and such person or a

subsequent indorsee of the documenthas indorsed it in blank or to the bearer.

Where by the terms of a negotiabledocument of title the goods are deliverable tobearer or where a negotiable document of titlehas been indorsed in blank or to bearer, anyholder may indorse the same to himself or toany specified person, and in such case thedocument shall thereafter be negotiated only bythe indorsement of such indorsee.

Negotiation of negotiable document by deliveryA negotiable document of title is negotiable by

delivery if:1. The goods are deliverable to the bearer;

or2. When it is indorsed in blank or to the

bearer by the person to whose order thegoods are deliverable or by asubsequent indorsee.

An indorsement is in blank when the holdermerely signs his name at the back of the receiptwithout specifying to whom the goods are to bedelivered.

If the document is specially indorsed, it becomes

an order document of title and negotiation canonly be effected by the indorsement of theindorsee. A special indorsement specifies theperson to whom or to whose order the goods areto be delivered.

Art. 1509. A negotiable document of title may benegotiated by the indorsement of the person towhose order the goods are by the terms of thedocument deliverable. Such indorsement may

be in blank, to bearer or to a specified person. Ifindorsed to a specified person, it may be againnegotiated by the indorsement of such person inblank, to bearer or to another specified person.Subsequent negotiations may be made in likemanner.

Negotiation of negotiable document byindorsement

A negotiable document of title by the terms ofwhich the goods are deliverable to a personspecified therein may be negotiated only by theindorsement of such person.

1. If indorsed in blank or to bearer, thedocument becomes negotiable bydelivery (Art.1508).

2. If indorsed to a specified person, it maybe again negotiated by the indorsementof such person in blank, to bearer, or toanother specified person. Delivery alone

is not sufficient. (If delivery alone withoutindorsement, it is merely a transfer)

3. A party is liable only as guarantor andnot as indorser if his indorsement ismade for the purpose of identificationonly.

Art. 1510. If a document of title which containsan undertaking by a carrier, warehouseman orother bailee to deliver the goods to bearer, to aspecified person or order of a specified personor which contains words of like import, hasplaced upon it the words not negotiable, non-

negotiable, or the like, such document maynevertheless be negotiated by the holder and isa negotiable document of title within themeaning of this Title. But nothing in this Titlecontained shall be construed as limiting ordefining the effect upon the obligations of thecarrier, warehouseman, or other bailee issuing adocument of title or placing thereon the wordsnot negotiable, non-negotiable, or the like.

Negotiable documents of title marked non-negotiableIt has no effect and the document continues to

be negotiable.

When the document of title is to order, the baileeis obliged to take it p before delivering thegoods. Accordingly, he is liable to the holder ofan order document if the goods are delivered tothe consignee without surrender of thedocument even though the latter was markednot negotiable.


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Art. 1511. A document of title which is not insuch form that it can be negotiated by deliverymay be transferred by the holder by delivery to apurchaser or done. A non-negotiable documentcannot be negotiated and the indorsement ofsuch a document gives the transferee noadditional right.

A non-negotiable document of title cannot benegotiated. Nevertheless, it can be transferredor assigned by delivery. In such a case, thetransferee or assignee acquires only the rightsstated in Art.1514. Even if the document isindorsed, the transferee acquires no additionalright.

Art. 1512. A negotiable document of title may benegotiated:

1. By the owner thereof; or2. By any person to whom the possession

or custody of the document has beenentrusted by the owner, if, by the termsof the document the bailee issuing thedocument undertakes to deliver thegoods to the order of the person towhom the possession or custody of thedocument has been entrusted, or if atthe time of such entrusting thedocument is in such form that it may benegotiated by delivery.

Art. 1513. A person to whom a negotiabledocument of title has been duly negotiated

acquires thereby:1. Such title to the goods as the person

negotiating the document to him had orhad ability to convey to a purchaser ingood faith for value and also such title tothe goods as the person to whose orderthe goods were to be delivered by theterms of the document had or had abilityto convey to a purchaser in good faithfor value; and

2. The direct obligation of the baileeissuing the document to holdpossession of the goods for him

according to the terms of the documentas fully as if such bailee had contracteddirectly with him.

Rights of person to whom document has beennegotiated

1. The title of the person negotiating thedocument, over the goods covered bythe document;

2. The title of the person (depositor orowner) to whose order by the terms ofthe document the goods were to bedelivered, over such goods; and

3. The direct obligation of the bailee(warehouseman or carrier) to holdpossession of the goods for him, as ifthe bailee had contracted directly withhim.

One who purchases, therefore, a negotiabledocument of title issued to a thief acquires noright over the goods as the thief has no right totransfer, notwithstanding that such purchaser isinnocent. But the purchaser acquires a good titlewhere the owner, by his conduct, is stoppedfrom asserting his title.

Art. 1514. A person to whom a document of titlehas been transferred, but not negotiated,acquires thereby, as against the transferor, the

title to the goods, subject to the terms of anyagreement with the transferor.

If the document is non-negotiable, suchperson also acquires the right to notify the baileewho issued the document of the transfer thereof,and thereby to acquire the direct obligation ofsuch bailee to hold possession of the goods forhim according to the terms of the document.

Prior to the notification to such bailee bythe transferor or transferee of a non-negotiabledocument of title, the title of the transferee to thegoods and the right to acquire the obligation ofsuch bailee may be defeated by the levy of an

attachment of execution upon the goods by acreditor of the transferor, or by a notification tosuch bailee by the transferor or a subsequentpurchaser from the transferor of a subsequentsale of the goods by the transferor.

Rights of person to whom document has beentransferredSuch person acquires:

1. The title to the goods as against the

transferor;

2. The right to notify the bailee of the

transfer thereof; and

3. The right, thereafter, to acquire theobligation of the bailee to hold the goodsfor him.

The right of the transferee is not absolute as it issubject to the terms of any agreement with thetransferor.

Attachment of goods covered by documenttransferred


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The transfer of a non-negotiable document oftitle does not effect the delivery of the goodscovered by it. Accordingly, before notification,the bailee is not bound to the transferee whoseright may be defeated by a levy of anattachment or execution upon the goods by thecreditor of the transferor or by a notification tosuch bailee of the subsequent sale of the goods.

If the document is negotiable, the goods cannotbe attached or be levied under an executionunless:

a. The document be first surrendered tothe bailee; or

b. Its negotiation enjoined.

Art. 1515. Where a negotiable document of titleis transferred for value by delivery, and theindorsement of the transferor is essential fornegotiation, the transferee acquires a right

against the transferor to compel him to indorsethe document unless a contrary intentionappears. The negotiation shall take effect as ofthe time when the indorsement is actually made.

Transfer of order document without indorsementThe rights of a person to whom an orderdocument of title, which may not properly benegotiated by mere delivery, has been delivered,without indorsement, are:

1. The right to the goods as against thetransferor (Art.1514); and

2. The right to compel the transferor to

indorse the indorsement,.If the intention of the parties is that thedocument should be merely transferred, thetransferee has no right to require the transferorto indorse the document.

Rule where document subsequently indorsedFor the purpose of determining whether thetransferee is a purchaser for value in good faithwithout notice, the negotiation shall take effectas of the time when the indorsement is actuallymade, not at the time the document is delivered.The reason is that the negotiation becomes

complete only at the time of indorsement. So, ifby that time the purchaser already had noticethat the title of the seller was defective, hecannot be considered a purchaser in good faiththough he had no such notice when he boughtthe document.

(warranties/liabilities of a personnegotiating/transferring)

Art. 1516. A person who for value negotiates ortransfers a document of title by indorsement ordelivery, including one who assigns for value aclaim secured by a document of title unlesscontrary intention appears, warrants:

1. That the document is genuine;2. That he has a legal right to negotiate or

transfer it;3. That he has knowledge of no fact which

would impair the validity or worth of thedocument; and

4. That he has a right to transfer the title tothe goods and that the goods aremerchantable or fit for a particularpurpose, whenever such warrantieswould have been implied if the contractof the parties had been to transferwithout a document of title the goodsrepresented thereby.

A person negotiating or transferring a document

could be held liable as when the document wasa forgery, or he had stolen it, or he hadknowledge that the document was invalid forwant of consideration, or that the goods hadbeen damaged.

Art. 1517. The indorsement of a document oftitle shall not make the indorser liable for anyfailure on the part of the bailee who issued thedocument or previous indorsers thereof to fulfilltheir respective obligations.

Double effects of the indorsement of a

negotiable instrument1. It is a conveyance of the instrument; and2. A contract of the indorser with the

indorsee that on certain conditions theindorser will pay the instrument if theparty primarily liable fails to do so.

The indorsement of a document of title amountsmerely to a conveyance by the indorser, not acontract of guaranty.

Accordingly, an indorser of a document of titleshall not be liable to the holder if, the bailee failsto deliver the goods because they were lost dueto his fault of negligence.

Art. 1518. The validity of the negotiation of anegotiable document of title is not impaired bythe fact that the negotiation was a breach of dutyon the part of the person making the negotiation,or by the fact that the owner of the documentwas deprived of the possession of the same byloss, theft, fraud, accident, mistake, duress, orconversion, if the person to whom the documentwas negotiated or a person to whom the


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document was subsequently negotiated paidvalue therefor in good faith without notice of thebreach of duty, or loss, theft, fraud, accident,mistaken, duress or conversion.

A thief or finder and the holder thereof wouldacquire a good title thereto if he paid valuetherefor in good faith without notice of thesellers defect of title.

Art. 1519. If goods are delivered to a bailee bythe owner or by a person whose act inconveying the title to them to a purchaser ingood faith for value would bind the owner and anegotiable document of title is issued for themthey cannot thereafter, while in possession ofsuch bailee, be attached by garnishment orotherwise or be levied under an executionunless the document be first surrendered to thebailee or its negotiation enjoined. The bailee

shall in no case be compelled to deliver up theactual possession of the goods until thedocument is surrendered to him or impoundedby the court.

The bailee cannot be compelled to deliver up thepossession of the goods until the document issurrendered to him or impounded by the court.This prohibition is for the protection of the baileesince he could be made liable to a subsequentpurchaser for value in good faith.

This article do not apply of if the person

depositing is not the owner of the goods (like athief) or one who has no right to convey title tothe goods binding upon the owner. Neither doesit apply to actions for recovery or manualdelivery of goods by the real owner nor to casewhere the attachment is made before theissuance of the negotiable document of title.

Art. 1520. A creditor whose debtor is the ownerof a negotiable document of title shall be entitledto such aid from courts of appropriate jurisdictionby injunction and otherwise in attaching suchdocument or in satisfying the claim by means

thereof as is allowed at law or in equity in regardto property which cannot readily be attached orlevied upon by ordinary legal process.

Creditors remedies to reach negotiabledocuments

1. Injunction;2. Attachment or levy.

Art. 1521. Whether it is for the buyer to takepossession of the goods or for the seller to sendthem to the buyer is a question depending ineach case on the contract, express or implied,between the parties.Place of delivery of goods sold:

1. Where there is an agreement, expressor implied, the place of delivery is thatagreed upon;

2. Where there is no agreement, the placeof delivery is that determined by usageof trade;

3. Where there is no agreement and thereis also no prevalent usage, the place ofdelivery is the sellers place of business;

4. In any other case, the place of deliveryis the sellers residence; and

5. In case of specific goods, which to theknowledge of the parties at the time thecontract was made were in some other

place, that place is the place of delivery,in the absence of any agreement orusage of trade to the contrary.

The presumption is that the buyer must take thegoods from the sellers place of business orresidence rather than the seller to deliver themto the buyer.

Where, however, the delivery was not effectedat the place specified in the contract, but thebuyer accepted the goods nevertheless withoutcomplaint, the buyer would be deemed to have

waived the sellers failure to deliver according tothe terms of the contract, and would be liable topay the price agreed upon.

Delivery of goods in possession of a third personThe seller can hardly be discharged from hisobligations where the goods are in thepossession of a third person by simply telling thebuyer that they are there or by notifying thebailee to deliver to the buyer.

Hour of delivery of goods soldThe demand or tender of delivery to be effectual

must be made at a reasonable hour of the day.What is a reasonable hour is a question of fact.

The buyer is not bound to make tender ofpayment until the seller has complied with hisobligations.

Art. 1522.


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Where the seller delivers to the buyer aquantity of goods less than hecontracted to sell, the buyer may1. reject them; or2. if the buyer accepts or retains the

goods so delivered, knowing thatthe seller is not going to perform thecontract in full, he must pay for themat the contract rate.

If, however, the buyer has used ordisposed of the goods delivered beforehe knows that the seller is not going toperform his contract in full, the buyershall not be liable for more than the fairvalue to him of the goods so received.

Where the seller delivers to the buyer aquantity of goods larger than hecontracted to sell, the buyer may acceptthe goods included in the contract andreject the rest. If the buyer accepts the

whole of the goods so delivered he mustpay for them at the contract rate.

Where the seller delivers to the buyerthe goods he contracted to sell mixedwith goods of a different description notincluded in the contract, the buyer mayaccept the goods which are inaccordance with the contract and rejectthe rest.

In the preceding two paragraphs, if thesubject matter is indivisible, the buyermay reject the whole of the goods.

The provisions of this article are subject

to any usage of trade, specialagreement, or course of dealingbetween the parties.

Fair value to him the benefit which the buyermay have received from the goods; it is notnecessarily the market value.

Usage of trade any practice or method ofdealing having such regularity


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Documents

51955217 Reviewer in Sales