OBLIGATIONS OF SELLER
1. To Preserve the Subject Matter
a. Article 1163 of the Civil Code lays down
a rule applicable to obligations and
contracts in general, that “[E]very person
obliged to give a determinate thing is also
obliged to take care of it with the proper
diligence of a good father of a family,
unless the law or the stipulation of the
parties requires another standard of
care.”
2. To Deliver the Subject Matter
a. Under Article 1495 of the Civil Code, the
seller is bound: (a) to transfer the
ownership of, and (b) to deliver the thing,
which is the object of the sale to the
buyer.
b. As early as in Kuenzle & Streiff v.
Watson & Co., the Supreme Court held
that where there is no express provision
that the title shall not pass until payment
of the price, and the thing sold has been
delivered, title passes from the moment
the thing sold is placed in the possession
and control of the buyer. In spite of the
reciprocal nature of a sale, it is not the
prior payment of price that determines
the effects of delivery of the subject
matter
3. To Deliver the Fruits and Accessories
a. Under Article 1164 of the Civil Code,
which applies only to an obligation to
deliver a determinate thing, the transferee
has a right to the fruits of the thing from
the time the obligation to deliver it arises;
however, he shall acquire no real right
over them until the same has been
delivered to him.
b. Under Article 1537, that the seller is
bound to deliver the thing sold and its
accessions and accessories in the
condition in which they were upon the
perfection of the contract, and all the
fruits shall pertain to the buyer from the
day on which the contract was perfected
4. To Warrant the Subject Matter
a. Under Article 1495 of the Civil Code,
with the fulfillment of the primary
obligation to deliver the subject matter,
the seller is then obliged to “warrant the
thing which is the object of the sale.”
Essence of Tradition
-ownership of the thing sold is a real right, which the
buyer acquires only upon delivery of the thing to him in
any of the ways specified in Articles 1497 to 1501 of the
Civil Code, or in any other manner signifying an
agreement that the possession is transferred from the
vendor to the vendee.
-This right is transferred, not merely by contract, but also
by tradition or delivery.
Tradition is based on two factors:
(a) Acceptance, although an obligation on the part of the
buyer, is not essential for delivery by the seller to achieve
its legal effects; and
(b) An express intention on the matter by the parties to a
sale, at the point of delivery is not essential for tradition
to produce its legal consequences.
Types of Delivery
1. Actual/Physical Delivery
a. Under Article 1497 of the Civil Code,
there is actual or physical delivery when
the thing sold is placed in the control and
possession of the buyer
b. “[t]he key word is control, not
possession,”
2. Constructive Delivery
a. Under Article 1496 of the Civil Code,
constructive delivery can take several
forms, and may be any “manner
signifying an agreement that the
possession is transferred from the vendor
to the vendee.” The essence of most
forms of constructive delivery is the
existence of an agreement between the
seller and the buyer, and that the latter is
understood to have control of the subject
matter of sale.
b. The importance of using the “execution
of a public instrument pursuant to a valid
sale,” as the prime example to highlight
the doctrines to cover all types of
constructive delivery comes from its
applicability to all types of subject
matter, whether movable or immovable,
tangible or intangible.
Froilan v. Pan Oriental Shipping Co., 11 held that in
the absence of stipulation to the contrary, the ownership
of the thing sold passes to the buyer upon the actual or
constructive delivery thereof.
Alfredo v. Borras, held that it is not necessary that the
seller himself delivers title of the property to the buyer
because the thing sold is understood as delivered when it
is placed in the control and possession of the buyer.
a. Execution of Public Instrument
Under Article 1498 of the Civil Code, in the case
of both movables and immovables, when the sale is made
through a public instrument, the execution thereof shall be
equivalent to the delivery of the subject matter of sale, if
from the deed the contrary does not appear or cannot
clearly be inferred.
first register the deed of sale and secure a new title in the
name of the buyer before the latter shall pay the balance
of the purchase price, which did not preclude the
transmission of ownership, thus: “In the absence of an
express stipulation to the contrary, the payment of the
purchase price of the goods is not a condition precedent
to the transfer of title to the buyer, but title passes by the
delivery.
Notarized deed of sale has two functions:
(a) It operates as a formal or symbolic delivery of the
property sold; and
(b) It authorizes the buyer to use the document as proof of
ownership
General rule is that the execution of a public instrument
has the same legal effects as actual or physical delivery,
i.e., it transfers the ownership of the subject matter to the
buyer, and constitutes valid compliance by the seller of
his primary obligations under the sale.
2. Secondly, when at the time of the execution of the
public instrument, the subject matter was not subject to
the control of the seller, then the legal effects of delivery
would not happen.
The Addison doctrine was reiterated in Power
Commercial and Industrial Corp. v. Court of
Appeals,where the Court emphasized that the operative
word in the doctrine is not “possession” but “control.”
(3) Special Variation to Addison Doctrine
-apply only to a public instrument that evidences
a valid sale.
b. Symbolic Delivery
(1) Constructive Delivery Has the Same Legal Effect
as Actual or Physical Delivery
Under Article 1498 ... the mere execution of the
deed of conveyance in a public instrument is equivalent to
the delivery of the property. ... prior physical delivery or
possession is not legally required.
(2) When Execution of Public Instrument Does Not
Produce Effects of Delivery
1. First, when in the execution of a public instrument,
there is a stipulation to the contrary.
(a) A certain date is fixed for the purchaser to take
possession of the property subject of the conveyance;
(b) In case of sale by installments, it is stipulated
that until the last installment is made, the title to the
property should remain with the seller;
(c) When the seller reserves the right to use and
enjoy the property until the gathering of the pending
crops; or
(d) Where the seller has no control over the thing
sold at the moment of the sale, and, therefore, its material
delivery could not have been made
Phil. Suburban held that since the execution of the public
instrument was preceded by actual delivery of the subject
real estate, then tradition was effected in spite of the
condition stated in the instrument that the seller should
As to movables, constructive delivery may also be made
by the delivery of the keys of the place or depository
where the movable is stored or kept.
c. Constitutum Possessorium
This mode of constructive delivery takes effect when at
the time of the perfection of the sale, the seller held
possession of the subject matter in the concept of owner,
and pursuant to the contract, the seller continues to hold
physical possession thereof no longer in the concept of an
owner, but as a lessee or any other form of possession
other than in the concept of owner
d. Traditio Brevi Manu
This mode of delivery is opposite that of constitutum
possessorium, where before the sale, the would-be buyer
was already in possession of the would-be subject matter
of the sale, say as a lessee, and pursuant to sale, he would
now hold possession in the concept of an owner
e. Traditio Longa Manu
This is delivery of a thing merely by agreement, such as
when the seller points the property subject matter of the
sale by way of delivery without need of actually
delivering physical possession thereof.
Thus, under Article 1499 of the Civil Code, the delivery
of movable property may be made by the mere consent or
agreement of the contracting parties, if the thing sold
cannot be transferred to the possession of the buyer at the
time of the sale.
f. Delivery of Incorporeal Property
An incorporeal property having no physical existence, its
delivery can only be effected by constructive delivery
Article 1501 of the Civil Code recognizes three (3) types
of constructive delivery specifi cally applicable to
incorporeal property, thus:
(a) When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed
the contrary does not appear or cannot clearly be inferred;
(b) By the placing of the titles of ownership in the
possession of the buyer; or
(c) The use and enjoyment by the buyer of the rights
pertaining to the incorporeal property, with the seller’s
consent.
g. Delivery by Negotiable Document of Title
A person to whom a negotiable document of title has been
duly negotiated acquires thereby such title to the goods as
transferor had or had ability to convey to a purchaser in
good faith for value, and also the title of the persons to
whom the documents was originally
h. Delivery Through Carrier
The general rule, and in the absence of stipulation or
circumstances to the contrary, delivery to carrier is
deemed delivery to the buyer, the premise being that the
carrier acts as an agent of the buyer.
(1) F.A.S. Sales
Under such arrangement, “the seller pays all charges and
is subject to risk until the goods are placed alongside the
vessel.” In other words, delivery of the goods alongside
the vessel completes the effect of tradition.
(2) F.O.B. Sales
“f.o.b.” stands for the words “free on board,” and under
such arrangement the seller shall bear all expenses until
the goods are delivered, depending on whether the goods
are to be delivered “f.o.b.” at the point of shipment or at
the point of destination.
Under an “f.o.b., shipping point” arrangement, delivery of
the goods to the carrier is equivalent to delivery to the
buyer, and at that point the risk of loss pertains to the
buyer
Under an “f.o.b., destination” arrangement, only when the
vessel has arrived at the point of destination would there
be delivery to the buyer and prior to that point in time, the
risk of loss over the subject matter of the sale will be
borne by the seller.
(3) C.I.F. Sales
The letters “c.i.f.” found in British contracts stand for
costs, insurance, and freight; they signify that the price
fixed covers not only the costs of the goods, but the
expense of freight and insurance to be paid by the seller.
Under that arrangement, the amount quoted by the seller
and agreed to by the buyer, covers not only the cost of the
merchandise (i.e., the price), but also the cost of insurance
and freight.
There are two schools of thought on the effect of delivery
under c.i.f. sales.
1. The costs of insurance and freight are ultimately
to be borne by the buyer, as part of the price he
has obligated himself to pay, then it would mean
that the carrier acts as an agent of the buyer who
pays the freight, and therefore delivery to the
carrier is delivery to the buyer
In addition, since the insurance over the goods
shipped is for the account of the buyer, then
clearly the buyer has obtained ownership over the
goods during the shipment period since this is
required under the insurance law for the buyer to
have insurable interest.
2. Both parties agree that the seller takes on the
responsibility of insuring the goods and providing
for their shipment to the buyer, and for which
responsibility he gets a package price
Delivery by the seller of the goods to the carrier
is not equivalent to delivery to the buyer, and the
seller must continue to bear the risk of loss during
the shipment period since this is an integral part
of his obligation under the agreed terms of the
sale
The lesson learned from all of these is that the shipping
arrangements in a sale create, by commercial usage,
certain presumptive effects; however, such presumptive
effects must give away, rather easily, to any stipulation or
even intimation to the contrary. The courts have therefore
tended to look at other stipulations or indications in the
agreement to find the true intentions of the parties as to
the transfer of the risk of loss before they would apply the
presumptive effects of such acronyms
EFFECTS AND COMPLETENESS OF DELIVERY
For tradition to produce the twin legal consequences of
transferring ownership to the buyer and effecting the
fulfillment of the primary obligations of the seller, two
principles must apply, namely:
(a) Delivery must be made pursuant to a valid sale;
and
When a sale is fictitious, and therefore void and
inexistent, as there was no consideration for the same, no
title over the subject matter of the sale can be conveyed.
Nemo potest nisi quod de jure potest — No man can do
anything except what he can do lawfully.
(b) Delivery must be effected when seller has
ownership over the subject matter of sale so delivered
Where the seller delivers to the buyer the goods he
contracted to sell mixed with goods of a different
description not included in the contract, the buyer may
accept the goods which are in accordance with the
contract and reject the rest.
In the preceding two paragraphs, if the subject matter is
indivisible, the buyer may reject the whole of the goods.
The provisions of this article are subject to any usage of
trade, special agreement, or course of dealing between the
parties. (n)
a. When Goods Held by Third Party
This stems from the principlethat no man can
dispose of that which does not belong to him. (Nemo dat
quod non habet.)
Where the goods at the time of sale are in the possession
of a third person, the seller has not fulfi lled his obligation
to deliver to the buyer unless and until such third person
acknowledges to the buyer that he holds the goods on the
buyer’s behalf.
(c) To Whom Delivery Must Be Made
b. Reservation of Ownership
Lagoon v. Hooven Comalco Industries, Inc., held
that where it is stipulated that deliveries must be made to
the buyer or his duly authorized representative named in
the contracts, the seller is bound to deliver in such manner
only, unless the buyer specifcally designated someone to
receive delivery
Despite delivery, ownership will not transfer to the buyer
in case of express reservation, such as when the parties
stipulate that ownership will not transfer until the
purchase price is fully paid,or until certain conditions are
fulfilled.
d. When Buyer Refuses to Accept
Article 1503 of the Civil Code gives the following
instances when there is an implied reservation of
ownership:
Since delivery of the subject matter of the sale is
an obligation on the part of the seller, the acceptance
thereof bythe buyer is not a condition for the
completeness of delivery.
Rules on Effects of Delivery for Movables
Article 1522 of the Civil Code provides the rules on the
delivery of goods:
Article 1522. Where the seller delivers to the buyer a
quantity of goods less than he contracted to sell, the buyer
may reject them, but if the buyer accepts or retains the
goods so delivered, knowing that the seller is not going to
perform the contract in full, he must pay for them at the
contract rate. If, however, the buyer has used or disposed
of the goods delivered before he knows that the seller is
not going to perform his contract in full, the buyer shall
not be liable for more than the fair value to him of the
goods so received.
Where the seller delivers to the buyer a quantity of goods
larger than he contracted to sell, the buyer may accept the
goods included in the contract and reject the rest. If the
buyer accepts the whole of the goods so delivered he must
pay for them at the contract rate.
Article 1503. When there is a contract of sale of specific
goods, the seller may, by the terms of the contract, reserve
the right of possession or ownership in the goods until
certain conditions have been fulfilled. The right of
possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or
to a carrier or other bailee for the purpose of transmission
to the buyer.
Where goods are shipped, and by the bill of lading the
goods are deliverable to the seller or his agent, or to the
order of the seller or of his agent, the seller thereby
reserves the ownership in the goods. But, if except for the
form of the bill of lading, the ownership would have
passed to the buyer on shipment of the goods, the seller's
property in the goods shall be deemed to be only for the
purpose of securing performance by the buyer of his
obligations under the contract.
Where goods are shipped, and by the bill of lading the
goods are deliverable to order of the buyer or of his agent,
but possession of the bill of lading is retained by the seller
or his agent, the seller thereby reserves a right to the
possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price
and transmits the bill of exchange and bill of lading
together to the buyer to secure acceptance or payment of
the bill of exchange, the buyer is bound to return the bill
of lading if he does not honor the bill of exchange, and if
he wrongfully retains the bill of lading he acquires no
added right thereby.
If, however, the bill of lading provides that the
goods are deliverable to the buyer or to the order of the
buyer, or is indorsed in blank, or to the buyer by the
consignee named therein, one who purchases in good
faith, for value, the bill of lading, or goods from the buyer
will obtain the ownership in the goods, although the bill
of exchange has not been honored, provided that such
purchaser has received delivery of the bill of lading
indorsed by the consignee named therein, or of the goods,
without notice of the facts making the transfer wrongful.
c. Obligation as to Accessories and Accessions
In the sale of movables, in addition to the
obligation of the seller to deliver the accessories and
accessions in the condition in which they were upon the
perfection of the contract, the seller must deliver to the
buyer a quantity of goods that should not be less than what
he contracted to sell, otherwise the buyer may reject them
d. Sale in Mass of Movables
if there is no provision in the contract for the measuring
or weighing of the fungible movables sold in order
tocomplete or perfect the sale, nor is the price agreed upon
by the parties to be based upon such measurement, then
the “subject matter of the sale is, therefore, a determinate
object, the mass, and not the actual number of units or tons
contained therein, so that all that was required of the seller
Gaite was to deliver in good faith to his buyer all of the
ore found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them.”
e. Sale by Description and/or Sample
In a sale of goods by description or sample, the sale may
be rescinded if the bulk of the goods delivered do not
correspond with the description or the sample, and if the
contract be by sample as well as by description, it is not
sufficient that the bulk of goods correspond with the
sample if they do not also correspond with the description.
Mendoza described a “sale of goods by description” as
one where “a seller sells things as being of a particular
kind, the buyer not knowing whether the seller’s
representations are true or false, but relying on them as
true; or as otherwise stated, where the buyer has not seen
the article sold and relies on the description given to him
by the seller, or has seen the goods, but the want of
identity is not apparent on inspection.”
f. “On Sale or Return”
Under Article 1502 of the NCC, when goods are delivered
to the buyer “on sale or return” to give the buyer an option
to return the goods instead of paying the price, the
ownership passes to the buyer on delivery, but he may
revest the ownership in the seller by returning or tendering
the goods within the time fixed in the contract, or, if no
time has been fixed, within a reasonable time.
g. “Sale on Approval, Trial, Satisfaction, or Acceptance”
On the other hand, Article 1502 provides that when goods
are delivered to the buyer on approval or on trial or on
satisfaction, or other similar terms, the ownership therein
passes to the buyer only:
(a) when he signifies his approval or acceptance to the
seller or does any other act adopting the transaction; or
(b)if the buyer does not signify his approval or
acceptance, but retains the goods without giving notice of
rejection, then if a time has been fixed for the return of the
goods, on the expiration of such time, and, if no time has
been fixed, on the expiration of a reasonable time.
h. Form of Such Special Sales
Industrial Textile Manufacturing Co. v. LPJ
Enterprises, Inc.,93 held that for a sale to be considered
and construed as a “sale or return” or a “sale on
approval,” there must be a clear agreement to either of
such effect, otherwise, the provisions of Article 1502 of
the Civil Code governing such sales cannot be invoked by
either party to the contract, and therefore must be in
writing, and cannot be proved by parol evidence
i. Written Proof of Delivery
Lao v. Court of Appeals, confirmed that in case of goods,
delivery is generally evidenced by a written
acknowledgment of a person that he has actually received
the thing or the goods, as in delivery receipts, under the
following rules:
(a) A bill of lading cannot substitute for a delivery
receipt, because it is a written acknowledgment of
receipt of the goods by the carrier and an
agreement to transport and deliver them at a
specific place to a person named or upon his
order; it does not evidence receipt of the goods by
the consignee or the person named in the bill of
lading; and
(b) A factory consignment invoice is not evidence of
actual delivery of the goods since in the invoice
nothing more than a detailed statement of the
nature, quantity and cost of the thing sold, and it
not proof that the thing or goods were actually
delivered to the buyer or the consignee.
j. Time and Place of Delivery
Whether it is for the buyer to take possession of the goods
or for the seller to send them to the buyer is a question
depending in each case on the contract, express or
implied, between the parties.
Apart from such contract, express or implied, or usage of
trade to the contrary, the place of delivery is seller’s place
of business, if he has one, and if not, his residence.
In case of a sale of specific goods, which to the knowledge
of the parties when the contract or the sale was made were
in some other place, then that place is the place of
delivery.
Where by a sale the seller is bound to send the goods to
the buyer, but no time for sending them is fixed, the seller
is bound to send them within a reasonable time.
k. Seller Shall Pay Expenses of Delivery
Unless otherwise agreed, the expenses in putting the
goods into a deliverable state must be borne by the seller