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LAW ON SALES DE LEON SUMMARY CHAPTER 1-5
Corporate Law (Lyceum-Northwestern University)
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CHAPTER 1
4. Donation
NATURE AND FORM OF THE CONTRACT
5. Intellectual Creation
6. Prescription
(ARTS. 1458-1637)
7. Succession
What mode do we use here in Sales?
Art. 1458
-
We
use
TRADITION
DELIVERY here in sales.
-
Sale is the title in which in the
basis to affect the ownership
but the mode of transferring
ownership is Tradition or
Delivery.
Concept of contact of sales

One of the parties, mainly the seller,
binds himself to deliver a
determinate thing, to the buyer
who binds himself to pay a sum of
money or its equivalent.
Characteristics of a Contract of Sale

Consensual – it is perfected by mere
consent or meeting of the minds
upon the object that is determinate
and upon the price that must be
certain.

Bilateral – Both parties are
reciprocally obligated towards one
another.

Onerous – Sale is Onerous because
it is for a valuable consideration.

Commutative – The thing is
equivalent to the value of the price.

Nominate – It is a specific or
particular name in the Law

Principal – It is a stand-alone
contract. Its existence and validity
do not depend upon another
contract. (ex. Pledge, mortgages,
guarantees)
Essential Requisites of a Contract of Sale:

Consent or Meeting of the Minds –
This refers to the consent on the
part of the vendor to transfer and
deliver the thing and the buyer ot
pay its price or it equivalent.

A MODE is the legal means, by which
ownership is either created, transferred, or
destroyed. There are seven (7) modes of
acquisition of ownership.
1. Occupation

3. Tradition or delivery
No, Both parties
should have the
legal capacity to
bind themselves or
obligate
themselves.
“If there is merely an offer
from one party, is it
consent?”

If the seller has
not accepted the
price offered by the
buye
then
no.
Without
the
acceptance of the
other, there is no
consent.

Object of Subject Matter – This
refers to the determinate thing
which is the object of the contract.

Cause or Consideration – Refers to
the “Price certain of money or its
equivalent”
Natural or Accidental Elements:

2. Law
“Can a third party bind one
of the parties into an
obligation with the seller
and vice versa?”

NOTE:
Sale is a TITLE and not a mode. It is a
title because it is a legal basis by which
ownership is affected. In other words, Sale in
itself does NOT transfer ownership. The most
that Sale can do is to create the OBLIGATION to
transfer ownership.
OR
Natural Elements – those which
are deemed to exist even if the
parties do not provide or stipulate
them, and is presumed by law to
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exists; such as a warranty of hidden
defects or eviction etc.

contracting parties manifest
their interest in the contract
and ends at the moment of
their agreement.
Accidental Elements – Those
elements that are present or absent
depending on the stipulations given
by the parties, like conditions,
interest or penalty.
-
Perfection or birth of the
contract occurs when they
agree upon the essential
elements thereof.
-
Consummation, the last stage,
occurs when the parties "fulfill
or perform the terms agreed
upon
in
the
contract,
culminating
in
the
extinguishment thereof.
Two kinds of Sales:

Absolute – Its not subject to any
condition and follows the general
rules that ownership or title is
transferred upon the delivery.
(Whether
it
is
actual
or
constructive)


Even if the contract of sale
is perfected by consent,
ownership is only passed
upon delivery.
Conditional – Ownership is not
transferred until the condition is
fulfilled.
“How will we know if a sale is a
conditional or absolute sale”
-
-
(CONDITIONAL) If the condition
is imposed upon the obligation
of the seller to transfer
ownership.
Meaning
that,
ownership will not transfer until
the happening of that specific
condition.
(ABSOLUTE) But if the condition
is simply imposed upon the
payment of the price, then
therefore it is an ABSOLUTE
contract of sale. Because the
contract is already perfected.
Why? Because payment and
any condition imposed upon
payment is part of the
consummation
or
performance, that is already a
perfected contract.
-
The three stages of a contract
-
A contract has three distinct
stages: preparation, perfection,
and
consummation.
Preparation or negotiation
begins when the prospective
The Contract to Sell:

It is a specie of conditional sales. It
is subject to the condition that must
be fulfilled in order to give rise to an
absolute contract if sale.

It is a bilateral contract where the
ownership or title to that thing is
retained despite the delivery to the
buyer. Ownership will only be
transferred upon the fulfillment of a
suspensive condition (usually the
full payment of the purchase price)

Suspensive – the happening
of the condition gives rise
to an obligation.
_______________________________________
Distinguishing Contract of Sales vs Contract to
Sell:
Sale: In absolute sale, the perfection of a
contract results in the reciprocal obligations of
the seller having to deliver the thing and the
busyer having to pay for the thing sold.
-
Sale, the title passes upon the
delivery
Sell: The perfection of the contract only results
in the reciprocal suspensive condition which
creates the obligation from the seller to deliver,
ONLY IF the buyer fully pays the price or other
conditions is fulfilled.
-
Sell, the thing is may be in the
possession of the buyer, but the
ownership is still with the seller
and will only pass to the buyer
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upon the FULL payment or
fulfillment of a condition.
IN THE CASE OF FAILURE TO PAY:



(SALES) This results to a breach in a
obligation which gives rise to the
remedies of either:
Illicit per accidens (unlawful
because of some provisions
declaring it illegal)

1) Specific Performance
2) Recission of the contract
with damages


(SELL) In the case that buyer fails to
pay the full payment, it only
prevents the obligation of the seller
to deliver from coming into
existence. In layman’s term, the
obligation of the seller does not
exist or does not have to deliver
ownership anymore.
1. Only he can sell only what he owns.
o
o
It is not necessary for the
vendor to transfer ownership at
the time the contract is
perfected. It is sufficient enough
when he has the right to sell
thing at the time when the
ownership is to pass
o
Reason being future goods or
goods whose acquisition by the
seller
depends
upon
a
contingency. Why? Because it
would be inconsistent for Art.
1459 to require the thing to be
owned by the vendor at the
time of sale, also it is not
possible for an individual to
own something that is not in
existence yet.
The thing must be licit and the
vendor must have a right to transfer
the ownership thereof at the time it
is delivered.
Requisites concerning the Object:
1. Thing
a. It must be a determinate thing
b. It must be licit (legal). Meaning
it should not be contrary to law,
morals, good customs public
order or public policy.
c. It should not be impossible
2. Right

All rights which are Intransmissible
(Intransmissible means that it does
not pass on to one’s heirs or
assigns.) or personal may not be an
object of sale.

Note: services may be the
object of contract but
cannot be the object of
contract of sale
For a sale to be valid, the
vendor must be the owner or at
least must be authorized by
the owner of the thing sold. It is
a general rule that no one can
dispose of that he does not
have.
2. It is sufficient if right exists at a time of
delivery
ART. 1459

ART. 1460

A thing is determinate when it is
particularly designated or physically
segregated from all the others of
the same class.
SUBJECT
MATTER
DETERMINATE:

Kinds of Illicit Things:

Prohibited lottery tickets or
drugs. Same is true in
respect with land sold to an
“alien” (in other words, not
a citizen of the Philippines)
as it is prohibited by the
constitution
Right of Vendor to transfer ownership:
The remedies of the seller in a
contract to sell, in the case of a
breach is:
1) An action to recover the
possession of the property
or goods
Rotten food that is unfit for
consumption
Illicit per se (unlawful of its nature)
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MUST
BE
A DETERMINATE THING IS
IDENTIFIED
BY
ITS
INDIVIDUALITY AND IT IS
NOT NECESSARY TO BE IN
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SIGHT BY THE TIME THE
CONTRACT IS ENTERED
INTO.

A thing is determinate or
specific
when
it
is
particularly designated or
physically segregated from
all others of the same class.
General rule of it is that the
object of every contract is
determinate as to its kind.
the condition contemplated or
expected will come into existence.

This sale refers to an “expected
thing” which is not yet in existence,
and not to hope or expect which
already exists, in view of the
condition that the thing will come
into existence.

The sale of Hope or Mere
Expectancy is STILL VALID even if
the thing hoped or expected does
not come. UNLESS the Sale of Hope
or mere expectancy is in vain
(Falsified information ex. Falsified
winning sweepstakes tickets), in
which the sale is void.
Ex. My watch, Car with
the plate number xqc
123.
SUFFICIENT IF THE SUBJECT MATTER IS
CAPABLE OF BEING DETERMINATE

The subject matter should be
capable of being made determinate
without the need to create an
another agreement or further the
one made just to assure the price,
quantity, quality of the product
sold. If it cannot be known what
may have been sold, then therefore
the contract is null and void.
ART. 1462
GOODS WHICH MAY BE THE OBJECT OF SALE
Goods which form the contract of sale
may either be
a. EXISTING GOODS OWNED OR
POSSED BY THE SELLER
i. EX. The sale of pots
currently stored in the
warehouse is a sale of
existing goods
ART. 1461
SALE OF
EXISTENCE

THINGS
HAVING
POTENTIAL
The sale refers to future goods
which are not yet in existence and
may be the object of the sale in the
time that the contract has entered
into, that is, provided that the thing
is reasonably certain to come into
existence as the natural growth or
usual incident of something in
existence already belonging to the
seller and the title will vest upon
the buyer the moment the thing is
in existence. The thing sold,
however must be specific and
identified and it must be also
owned by the vendor at the time.

EX. The grain a field is
expected to produce next
year, the milk a cow may
yield in the coming years
and the wine a vine is
expected to produce.
SALE OF MERE HOPE OR EXPECTANCY

The sale of mere hope or
expectancy is deemed subject to
b. FUTURE GOODS, or goods to be
manufactured,
raised
or
acquired
i. Manufactured – the
sale of tetra packs with
the name of the buyer
printed on to it.
ii. Raised – sale of pigs
that may be raised in a
farm, sale of future
palay from a rice field
iii. Acquired – sale of land
that the seller expects
to buy
SALE OF FUTURE GOODS

A sale of future goods, even though
the contract is in the form of a
present sale is still valid but only as
an EXECUTORY CONTRACT (An
executed contract is one that has
been fully performed. Both parties
have done all they promised to do.
An executory contract is one that
has not been fully performed.) to be
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remainder of the mass, it follows that
the whole mass is at risk of all the
parties interested in it.
fulfilled by the acquisition and
delivery of the goods specified.
______________________________________
SUBJECT MATTER
ARTICLE 1463
SALE OF UNDIVIDED INTEREST IN A THING
1. BY SOLE OWNER
 The sole owner of a thing may sell the
entire thing; or only a specific portion
thereof; or an undivided interest
therein and such interest may be
designated as an aliquot part of the
whole. Such sale shall produce the
effect of making the seller and buyer coowners of the thing sold.
2. BY CO-OWNER
 being the owner of his undivided
interest therein, can dispose his share
even without the consent of the other
co-owner/s

_______________________________________
ARTICLE 1465
SALE OF THING SUBJECT TO A RESOLUTORY
CONDITION


ARTICLE 1464
SALE OF AN UNDIVIDED SHARE OF A SPECIFIC
MASS
FUNGIBLE GOODS

ARTICLE 1466
SALE DISTINGUISHED FROM AGENCY TO SELL
refers to interchangeable goods such as
grain, oil, etc. that allow one to be
replaced by another without loss of
value.

The owner of a mass of goods may sell
only an undivided share thereof,
provided the mass is specific or capable
of being made determinate.
a. if the quantity i.e., number, weight,
or measure, of the mass is MORE
THAN the quantity sold the parties
shall become co-owners of the
mass.
b. if the quantity of the mass is LESS
THAN the quantity sold, the buyer
becomes the owner of the whole
mass, with the seller being bound
to make good the deficiency from
goods of the same kind and quality,
unless a contrary intent appears.
If the buyer becomes co-owner, with
the seller, or other owners of the
a contract of agency, a person binds
himself to render some service or to do
something in representation or on
behalf of another, with the consent or
authority of the latter.
IN SALE:





the buyer receives the goods as owner
the buyer must pay the price
the buyer, as a rule, cannot return the
object sold
the seller, warrants the thing sold
the buyer can deal with the thing sold
as he pleases, being the owner
IN AGENCY TO SELL:


RISK OF LOSS

A resolutory condition is an uncertain
event upon the happening of which the
obligation (or right) subject to it is
extinguished.
If the resolutory condition attaching to
the object of the contract, which object
may include things as well as rights
should happen, then the vendor cannot
transfer the ownership of what he sold
since there is no object.
_______________________________________
EFFECT OF SALE

The subject matter is an incorporeal or
intangible right.

The agent receives the goods as the
goods of the principal who retains his
ownership over them.
The agent simply to account for the
proceeds of the sale he may make on
the principal behalf;
The agent can return the object in case
he is unable to sell the same to a third
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
person; and the agent makes no
warranty for which he assumes personal
liability as long as he acts within his
authority and in the name of the seller;
The agent in dealing with the thing
received, must act and is bound
according to the instructions of his
principal
_______________________________________
ARTICLE 1467
SALE DISTINGUISHED FROM CONTRACT FOR A
PIECE OF WORK

A contract for a piece of work, the
contractor binds himself to execute a
piece of work for the employer, in
consideration of a certain price or
compensation.
CONTRACT OF SALE

Which the vendor in the ordinary
course of business manufactures or
procures for the general market,
whether the same is on hand or not.
(within the statute of frauds)
CONTRACT FOR A PIECE OF WORK

If the goods are manufactured specially
for the customer and upon his special
order, and not for the general market.
(are not within the statute of frauds)
RISK OF LOSS
Before the delivery is borne by the worker or
contractor, not by the employer (the person
who ordered
the contract shall be one of sale or
barter depending upon the manifest
intention of the parties
IF THE INTENTION DOES NOT CLEARLY:
Contract is one of barter - if the value of the
thing given as part of the consideration exceeds
the monetary consideration
Consideration is one of sale - if the monetary
consideration is more than or equal to the value
of the thing given as part of the consideration
______________________________________
ARTICLE 1469
WHEN PRICE CONSIDERED CERTAIN
1. NO SALE IF PRICE NOT CERTAIN OR
ASCERTAINABLE
 The price in a contract of sale ought to
be settled for there can be NO SALE
WITHOUT A PRICE. It must be certain or
capable of being ascertained in money
or its equivalent; and money is to be
understood as currency and its
equivalent means promissory notes,
checks
and
other
mercantile
instruments as representing money.
2. CASES WHEN PRICE CONSIDERED CERTAIN
a. the parties have fixed or agreed upon
definite amount
b. it’ll be certain with reference to another
thing certain
c. the determination of the price is left to
the judgment of a specified person or
persons.
___________________________________
ARTICLE 1468
SALE DISTINGUISHED FROM BARTER
The contract of barter or exchange, one of the
parties binds himself to give one thing in
consideration other’s promise to give another
thing in contract of sale the vendor gives a thing
in consideration for a price of in money.
However, where the consideration is partly in
money and partly in another thing, the ff. rules
shall be observed to determine whether the
contract is sale or barter:
The last two cases are applicable only when no
specific amount has been stipulated by the
parties
EFFECT WHEN PRICE FIXED BY THE 3RD
PERSON DESIGNATED
EXCEPTIONS SUCH AS:
1. When the 3rd person acts in bad faith
or by mistake
2. When the 3rd person disregarding
specific instructions, or the procedure
laid down by the parties
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easier it is for the owner to buy back
the property.
EFFECT WHERE PRICE NOT FIXED BY THIRD
PERSON DESIGNATED:
1. IF THE 3RD PERSON DESIGNATED BY THE
PARTIES TO FIX THE PRICES REFUSES OR
CANNOT FIX
 The contract shall become ineffective,
as if no price had been agreed upon
unless of course, the parties
subsequently agree upon the price.
2. IF SUCH 3RD PERSON IS PREVENTED FROM
FIXING THE PRICE BY THE FAULT OF SELLER
OR THE BUYER.
 Which consist of a choice between
rescission or fulfillment, with damages
in either case. If the innocent party
chooses fulfillment, the court shall fix
the price
_______________________________________
ARTICLE 1471
EFFECT WHERE THE PRICE SIMULATED
1. IF THE PRICE IS SIMULATED OR FALSE

Then the sale is void but the contract
shall be valid as a donation
2. IF THE CONTRACT IS NOT SHOWN TO BE
DONATION OR ANY OTHER ACT OR CONTRACT
TRANSFERRING OWNERSHIP

Because the parties do not bound at all
the ownership of the thing is not
transferred. The contract is void and
inexistent
______________________________________
ARTICLE 1472
ARTICLE 1470
PRICE ON A GIVEN DAY AT PARTICULAR MARKET
EFFECT OF GROSS INADEUACY OF PRICE IN
VOLUNTARY SALES

Gross inadequacy does not affect a
contract of sale, except as it may
indicate a defect in the consent, or that
the parties really intended a donation
or some other act or contract.


EFFECT OF GROSS INADEQUACY OF PRICE IN
VOLUNTARY OR EXECUTION SALES
1. GENERAL RULE

Judicial or execution sale is one made
by a court with respect to the property
of a debtor for the satisfaction of his
unpaid indebtedness.
2. WHERE PRICE IS SO LOW AS TO BE
“SHOCKING TO THE CONSCIENCE”

A judicial sale, say of real property will
be set aside by the court.
3. 3.WHERE SELLER GIVEN THE RIGHT TO
REPURCHASE


The validity of the sale is not necessarily
affected where the law gives to the
owner the right to redeem, as when a
sale is made at public auction, upon the
theory that the lesser the price, the
It follows the principle in ARTICLE 1469
that price is considered if it could be
determined with reference to another
thing certain
“Provided said amount be certain”
when an amount is fixed ABOVE or
BELOW the price on a given day or in a
particular exchange or market, the said
amount must be certain, otherwise THE
SALE IS INEFFICACIOUS because the
price cannot be determined.
In this article is applicable to fungible
things, the prices of which are subject
to fluctuations of the market.
______________________________________
ARTICLE 1473
FIXING OF PRICE BY ONE OF THE CONTRACTING
PARTIES NOT ALLOWED
1. If the consent is essential to a contract
of sale, the determination of the price
cannot be left to the discretion of one
of the contracting party. The validity or
compliance of the contract cannot be
made to depend upon the will of one
party
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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 THE IS CONTRACT EXECUTORY:
 If the price cannot be determined in
accordance with articles 1469 and 1472
the contract is without effect.
Consequently, there is no obligation on
the part of the vendor to deliver the
thing and on the part of the buyer to
pay.
2. WHERE DELIVERY HAS BEEN MADE
 if the thing has already been delivered
and appropriated by the buyer, the
latter must pay a reasonable price. The
reasonable price or value of goods is
generally the market price at the time
and place fixed by the contract or by
law for the delivery of the goods.
_______________________________________
ARTICLE 1475
PERFECTION OF CONTRACT OF SALE


a contract of sale is perfected at the
moment there is a meeting of minds
upon the thing which is the object of
the contract and upon the price the
reciprocal obligations of the parties
arise. But the ownership is not
transferred until delivery of the thing.
In case one of the contracting parties
should not comply with what is
incumbent upon him, the injured party
sue for FULFILLMENT or RESCISSION
with the payment of damages in either
case.
RIGHT OF OWNER TO FIX HIS OWN PRICE
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. 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
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shall remain with the seller until the
purchaser has fully paid the price.
3. RIGHT OF THE SELLER TO BID IN THE
AUCTION
The seller or his agent may bid in an
auction sale provided:
ARTICLE 1479
1. such right was reserved
2. notice was given that the sale is subject
to a right to bid in behalf of the seller;
and
3. the right to bid by the seller is not
prohibited by law or stipulation.
a. WHEN NO NOTICE GIVEN OF RIGHT TO
BID
it shall be unlawful for the seller to bid
either directly or indirectly or for the
auctioneer to employ or induce any
person to bid on behalf of the seller. The
purpose of the notice is to prevent
puffing or secret bidding by or on behalf
of the seller by people who are not
themselves bound
KINDS OF PROMISE TREATED IN ARTICLE 1479
It applies specifically to a promise “to buy or to
sell” it refers to 3 kinds of promise, namely:
1. AN ACCEPTED UNILATERAL PROMISE TO
SELL IN WHICH THE PROMISEE (acceptor)
elects to buy.
2. AN ACCEPTED UNILATERAL PROMISE TO
BUY IN WHICH THE PROMISEE (acceptor)
elects to sell.
3. A BILATERAL promise to buy and sell
reciprocally accepted in which either of the
parties chooses to exact fulfillment.
EFFECT OF UNACCEPTED UNILATERAL PROMISE

b. WHEN NOTICE GIVEN OF RIGHT TO BID
a right to bid may be expressly reserved by
or on behalf of the seller. It is, therefore,
the secrecy of puffing which renders it a
fraud upon bidding. Where
there is
notice of the intention to bid by the seller,
the bidding in such case would not operate
as fraud.
a unilateral promise or offer to sell or to
buy a thing which is not accepted
creates no juridical effect or legal bond.
Such unaccepted offer is called
policitation
OPTION

is a privilege existing in one person for
which he has paid a consideration
which gives him the right to buy/sell.
_______________________________________
EFFECT OF ACCEPTED UNILATERAL PROMISE
ARTICLE 1477-1478
OWNERSHIP OF THE THING TRANSFERRED BY
DELIVERY


delivery of the thing sold is essential
in a contract of sale, without it the
buyer may not enjoy the thing sold
to him. After the delivery of the
thing sold that the buyer acquires a
real right or ownership over it.
delivery may be actual or
constructive
EXCEPTION TO THIS RULE

the parties may stipulate that despite
the delivery, the ownership of the thing

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 actsthe offer and the acceptance- generates
a binding contract of sale.
_______________________________________
ARTICLE 1480
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1. SALE BY DESCRIPTION
o where a seller sells things as
being of a particular kind,
where the purchaser has not
seen the article sold and relies
on the description given him by
the vendor. If the bulk of the
goods delivered do not
correspond
with
the
description, the contract may
be rescinded.
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.
2. SALE BY SAMPLE
o in a sale by sample, the seller
warrants that the thing sold and
to be delivered by him shall
conform with the sample in
kind, character, and quality.
3. IF THE THING IS LOST AFTER PERFECTION
BEFORE ITS DELIVERY

even before the ownership is
transferred to the buyer the risk of loss
is shifted to the buyer as an exception
to the rule of res perit domino
4. IF THE THING IS LOST AFTER DELIVERY
 the buyer bears the risk of loss
following the general rule of res perit
domino.
3. SALE BY DESCRIPTION AND SAMPLE
o when a sale is made both by
sample and by description, the
goods must satisfy all the
warranties appropriate to either
kind of sale, and it is not
sufficient that the bulk of the
goods correspond with the
sample if they do not
correspond with the description
and vice versa.
SCOPE OF ARTICLE 1480
1. THE 1ST APPLIES TO NON-FUNGIBLE
GOODS
 the risk of the thing sold passes to the
buyer, even though the thing has not
yet been delivered to him. In other
words, the buyer assumes the risk of
loss caused by fortuitous event, without
the fault of the seller.
_______________________________________
ARTICLE 1482
MEANING OF EARNEST MONEY
2. THE 2ND RULE RELATES TO FUNGIBLE
THINGS
 the vendee assumes the risk if he has
incurred in delay in receiving the goods
sold.


_______________________________________
ARTICLE 1481
SALE OF GOODS BY DESCRIPTION AND/ OR
SAMPLE

is money given by the buyer to the
seller to bind the bargain. It is actually a
partial payment of the purchase price
and is considered as a proof of the
perfection of the contract.
advance payment it must be deducted
from the total price
EARNEST MONEY
DISTINGUISHED
AND
OPTION
MONEY

EARNEST MONEY
o is part of purchase price
o is given only where there is already
a sale
o when earnest money is given, the
buyer is bound to pay the balance

OPTION MONEY
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.
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o
o
o
is the money given as distinct
consideration for the option
contract
applies to a sale not yet perfected
while when the would-be buyer
gives option money, he is not
required to buy.
BUT OPTION MONEY MAY BECOME EARNEST
MONEY, IF THE PARTIES SO AGREE.

Where the “applicable statute” requires
that the contract of sale
be in certain
form for its validity, the required form must
be observed in order that the contract may
be both valid and enforceable
4. WHERE FORM IS REQUIRED ONLY FOR THE
CONVENIENCE OF THE PARTIES

______________________________________
ARTICLE 1483
in order that the sale may be registered in
the Registry of Deeds to make effective as
against third persons the right acquired
under such sale.
FORM OF CONTRACT OF SALE
1. GENERAL RULE
o a contract may be entered into in any
form provided all the essential
requisites for its validity are present.
SALE OF REAL PROPERTY OR AN INTEREST


2. WHERE CONTRACT COVERED BY STATUTE
OF FRAUDS
o The contract of sale should be covered
by the Statute of Frauds, the law does
require that it be in writing subscribed
by the party 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 validity, the required
form must be observed in order the
contract may be both valid and
enforceable.
UNDER THE STATUTE OF FRAUDS
The ff. contracts must be in writing, otherwise
they cannot be enforced in court litigation:
a. sale of personal property at a price not
less than 500 pesos
b. sale of real property or an interest
therein regardless of the price involved;
and
c. sale of property not to be performed
within a year from the date thereof
regardless of the nature of the property
and the price involved.
3. WHERE FORM IS REQUIRED IN ORDER THAT
A CONTRACT MAY BE VALID
a sale of a piece of land or interest therein
when made through an agent is void unless
the agent’s authority is in writing.
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 sale must be in
public instrument or document.
STATUTE OF FRAUDS APPLICABLE ONLY TO
EXECUTORY CONTRACTS
-the reason for this rule is that partial
performance like the writing, furnishes reliable
evidence of the intention of the parties or the
existence of the contract. A contrary rule would
result in injustice or unfairness to the party who
has performed his obligation.
_______________________________________
ARTICLE 1484
REMEDIES OF VENDOR IN SALE OF PERSONAL
PROPERTY PAYABLE IN INSTALLMENT (RECTO
LAW)
May exercise the ff. remedies:
1. elect fulfillment upon the
vendee’s failure to pay
2. cancel the sale if the vendee
shall have failed to pay two or
more installments.
3. foreclose the chattel mortgage,
if one has been constituted, if
the vendee shall
have
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failed to pay two or more
installments

NATURE OF THE REMEDIES
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.
the evident purpose is to prevent
vendors from resorting to this form of
contract which, usually, is in reality a
contract of sale of personal property
payable in installments in contravention
of the provisions of Article 1484
_______________________________________
ARTICLE 1486
RIGHT OF VENDOR TO RECOVER UNPAID
BALANCE OF PURCHASE PRICE
1. REMEDY OF SPECIFIC PERFORMANCE
 He may still recover from the purchaser
the unpaid balance of price, if any on
the real and personal properties of the
buyer not exempt by law from
attachment and execution
2. REMEDY OF CANCELLATION
 The latter can demand only the return
of payments already made unless there
is a stipulation about forfeiture
3. REMEDY OF FORECLOSURE
 He shall have no further action against
the vendee for the recovery of any
unpaid balance of the price and any
agreement to the contrary is void. The
foreclosure is effected by selling the
mortgaged personal property at public
auction and applying the proceeds to
sale to the satisfaction of the claim
secured by the mortgaged.
STIPULATION AUTHORIZING FORFEITURE OF
INSTALLMENTS OR RENTS PAID

the parties may stipulate that the
installments or rents paid are not to be
returned. Such a stipulation is valid
“insofar as the same may not be
unconscionable
under
the
circumstances” otherwise the court has
the power to order the return of a
portion of the total amount paid in
installments or rents.
ARTICLE 1487
EXPENSES FOR EXECUTION AND REGISTRATION


RECOVER OF DEFICIENCY AFTER FORECLOSURE
PROHIBITED
the vendor has the duty to pay not only
the expenses for the execution of the
sale but also for the registration of the
same in the absence of any agreement
between the parties to the contrary.
expenses incurred subsequent to the
transfer of title are borne by the buyer,
unless caused by the fault of the seller.
_____________________________________

It prevents mortgagees from seizing the
mortgaged property, buying it at
foreclosure sale for a low price and then
bringing suit against the mortgagor for a
deficiency judgment.
_______________________________________
ARTICLE 1485
LEASE OF PERSONAL PROPERTY WITH OPTION
TO BUY

on the part of the lessee who takes
possession or enjoyment of the
property leased are really sales of
personal
property
payable
in
installments.
ARTICLE 1488
EXPROPRIATION OF PROPERTY FOR PUBLIC
USE

it covers the procedure for the exercise
of the power of eminent domain.
Expropriation must be decreed by
competent authority and for public use
and always upon payment of just
compensation.
CHAPTER 2
CAPACITY TO BUY AND SELL
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RELATIVE INCAPACITY OF HUSBAND AND WIFE
ARTICLE 1489
PERSON WHO MAY ENTER INTO A CONTRACT
OF SALE


General rule: all persons, whether
natural or juridical, who can bind
themselves by contract have also legal
capacity to buy and sell.
Exceptions: when the law determines
that party suffers from either absolute
or relative incapacity.
1. they are prohibited by the article 1490
from selling property to each other.
2. they are also prohibited from making
donations to each other during the
marriage except moderate gifts on the
occasion of any family rejoicing. If there
has been a separation of property
agreed upon in the marriage
settlements, or when there has been a
judicial separation of property decreed
between them by the court, THE SALES
BETWEEN THEM, ARE ALLOWED.
KINDS OF INCAPACITY


Absolute incapacity- in the case of
persons who cannot bind themselves;
and
Relative incapacity- where it exists only
with reference to certain persons or a
certain class of property
REASON FOR PROHIBITION UNDER ARTICLE
1490

LIABILITY FOR NECESSARIES OF MINOR OR
OTHER PERSON WITHOUT CAPACITY TO ACT


“Necessaries” are those things which
are needed for sustenance, dwelling,
clothing and medical attendance, in
keeping with the financial capacity of
the family of the incapacitated person.
generally, the contracts entered into by
a minor and other incapacitated
persons are voidable. However, where
necessaries are sold and delivered to
him (without intervention of the parent
or guardian) he must pay a reasonable
price therefor, the contract is valid, but
the minor has the right to recover any
excess above a reasonable value paid by
him.
PERSONS PERMITTED TO QUESTION SALE
1. the heirs of either spouse, as well as
2. creditors at the time of the transfer, can
attack the validity of the sale but not
creditors who became such only after
the transaction
3. the government
_____________________________________
ARTICLE 1491
INCAPACITY BY REASON OF RELATION TO
PROPERTY

SALE BY MINORS

when the minors pretend that they are
now in adult age while in fact they have
not, the sale is valid. They cannot be
permitted to excuse themselves from
compliance with the obligations
assumed by them or to seek their
annulment.
______________________________________
the possibility that the husband will
induce his wife to engage in ruinous
operations. The prohibition is primarily
for the protection of 3rd person who
relying upon supposed property of
either spouse enters into a contract
with either of them only to find out that
the property relied upon was
transferred to the other spouse.

the persons who, because of their
position and relation with the persons
under their charge or property under
their control, are prohibited from
acquiring said property under their
control.
They are the: (1) guardians, (2) agents,
(3) executors and (4) administration, (5)
public officers and employees; (6)
judicial officers and employees and (7)
lawyers
and
others
especially
disqualified by law.
ARTICLE 1490
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
REASON FOR PROHIBITION

is to prevent frauds on the part of
the persons enumerated therein
and minimize temptations to the
exertion of undue and improper
influence.
Its existence “perishes” (pertaining
to material deterioration), goes out
of commerce or is unknown, and it
cannot be recovered.
ARTICLE 1494
EFFECT OF LOSS IN CASE OF SPECIFIC GOODS
ARTICLE 1493 – Applies only to specific goods
OTHER PERSONS ESPECIALLY DISQUALIFIED
1. aliens who are disqualified to purchase
private agricultural lands
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 judgment
rendered against the owner.
ARTICLE 1494 - applies only to sales of goods,
that is, the object of the sale consists of a mass
of specific goods
Two (2) remedies to the buyer:
1. SALE DIVISIBLE- a contract is DIVISIBLE
when its consideration is made up of
several parts.
2. SALE
INDIVISIBLEwhen
the
consideration is entire and single. The
object may be considered as a specific
thing.
ARTICLE 1492
PROHIBITION IN EXTENDS TO SALE IN LEGAL
REDEMPTION
1. COMPROMISE - is a contract whereby
the parties, by reciprocal concessions,
avoid a litigation or put an end to one
already commenced. It is the amicable
settlement of a controversy.
2. BY RENUNCIATION - a creditor
gratuitously abandons his right against
his creditor. The other terms used by
the law are condonation and remission.
ARTICLE 1493
EFFECT OF LOSS OF THING AT THE TIME OF
SALE
1. THING ENTIRELY LOST
 at the time of perfection, the
contract is inexistent and void
because there is no object.
2. THING ONLY PARTIALLY LOST
 the vendee may elect between
withdrawing from the contract and
demanding the remaining part,
paying its proportionate price.
WHEN A THING CONSIDERED LOST
CHAPTER 4
OBLIGATIONS OF THE VENDOR
ARTICLE 1495
PRINCIPAL OBLIGATIONS OF THE VENDOR:
1. to transfer the ownership
 general
rule,
ownership
is
transferred upon delivery whether
actual or constructive. Payment
does not affect ownership and in
the case of failure results in
remedies of specific performance or
recission with damages.
 Exceptions: If there is a contractual
stipulation reserving ownership:
1. “Factum Reservati Domini” the
parties can agree in the
stipulation that ownership is
reserved until payment of the
price.
2. Ownership will not pass in the
contracts to sell (bilateral
contracts that are subject to
suspensive condition, usual full
payment.
3. Sales
upon
Acceptance/
Trial/approval or satisfaction –
the buyer signifies his approval
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or performance that adapts the
act. If he doesn’t signify his
approval within the fixed time
then ownership transfers
4. Implied
reservation
of
ownership – This happens
when goods are shipped under
the bill of lading, the seller or to
his agent then the seller
reserves ownership
But if the goods are delivered to
the buyer or his agent but
possession of the bill of lading is
still with the seller, then the
seller retains its ownership over
the goods.
If the seller draws on the buyer
for the price and transmits the
bill of lading and exchange to
secure the payment, and the
buyer dishonors the bill of
exchange then there is an
implied
reservation
of
ownership.
2. to deliver the thing and its accessions &
accessories
 The seller is bound to deliver all the
goods and the accessions and
accessories except when there is
stipulation that delivery will be by
installments. The thing and all of its
accessions/accessories must be
delivered in the conditions of the
time of the contract. The fruits they
pertain to the buyer on the day of
which the contract is perfected.
 Requisites for a valid delivery:
1. Identity – Object itself must be
delivered
2. Integrity – all of the things must
be delivered in the enjoyment
of the buyer in the condition to
allow him to see that it is
consistent with the purposes of
the obligation
3. Intentional
 Actual or Real Delivery – Physically
given to the buyer
 Constructive – Acts or Signs
indicative of delivery. Buyer must
have some form of control and
must have intent to give control.
 Methods:
3.
4.
5.
6.
7.
1. Execution of Public Instrument
is enough to constitute a
delivery ….
EXCEPT IN THE FOLLOWING
CASES:
 If there is a stipulation of
taking is stipulated on the
parties,
 another
is
when
ownership will only be
transferred upon final
installment
 or if there is reservation of
the right of the seller to
use the thing until he is
finished gathering the
goods.
 The thing is not controlled
by the seller because the
execution is only a mere
act and the seller has no
control yet finally, there is
no reasonable time given
for the buyer to take
control. Because The law
requires that the buyer be
given reasonable time in
which takes control of the
thing subject of the public
instrument
to warrant against eviction and hidden
defects
to take care of the thing, pending
delivery, with proper diligence
to pay for the expenses for the execution
and registration of the deed of sale,
unless there is a stipulation to the
contrary
to give the buyer the right to examine
the goods, to enter a contract with a
carrier on the buyer’s behalf if
reasonable.
To notify the buyer of the necessity to
ensure the goods if it is usual.
ARTICLE 1496
WAYS OF EFFECTING DELIVERY
1. By actual or real delivery
2. By constructive or legal delivery
3. By delivery in any other manner
signifying an agreement
WAYS OF EFFECTING CONSTRUCTIVE DELIVERY
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the buyer only after he has fully
paid the price or fulfilled conditions.
1. EQUIVALENT TO ACTUAL DELIVERY
It may be affected in any of the following
ways:
a) by the execution of public
instrument
b) by symbolica tradition/ tradition
symbolica - is by delivery of a
symbol or token representing the
thing which is delivered, such as the
key to a warehouse.
c) by traditio longa manu (long hand)
– which is by mere agreement or
when the seller merely points out
to the vendee the thing which is
delivered which at the time must be
withing sight.
d) by tradition brevi manu (short
hand) - is when the buyer is already
in possession of the thing and then
later own vendee becomes the
owners
and
continues
in
possession.
e) by
tradition
constitutum
possessorium – It is where the
seller continues in possession but
he is no longer the owner in other
words, by the seller alienates a
thing belonging to him, but
continues in possession thereof
under a different title, such as that
of a lessee, pledgee or depositary.
f)
by quasi-delivery or quasi-tradicio
– execution of the public
instrument or actual placing of the
title in the hands of the buyer or in
case of the seller allows the buyer
to make use of the rights. In other
words, is used to indicate the
exercise of a right by the grantee
with the acquiescence of the
grantor, such as delivery which may
be made by the execution of a
public instrument with respect to
incorporeal property.
g) Operation of Law – delivery is
effected solely by virtue of an
express provision of the law
SECTION 2- DELIVERY OF THE THING SOLD
ARTICLE 1497
CONCEPT OF TRADITION OR DELIVERY

IMPORTANCE OF TRADITION

Delivery of the thing to enable the
buyer to enjoy and make use of the
property purchased. After delivery,
the risk of loss of the thing sold is
borne by the buyer.
ACTUAL DELIVERY OF THING SOLD
1. WHEN DEEMED MADE
 it involves the physical delivery of
the thing and is usually done by
passing of a movable thing from
hand to hand.
2. NOT ALWAYS ESSENTIAL TO PASSING OF
TITLE
 The parties to the contract may
agree when and on what conditions
the ownership in the subject of the
contract shall pass to the buyer.
ARTICLE 1498
EXECUTION OF PUBLIC INSTRUMENT OR
DOCUMENT

Public instrument is one which is
acknowledged before notary public
or any official authorized to
administer oath, by the person who
executed the same.
WHEN THE THING NOT SUBJECT TO CONTROL
OF VENDOR


2. CONTRARY MAY BE STIPULATED
 The parties may stipulate that
ownership in the thing shall pass to
“tradition” is a derivative mode of
acquiring ownership by virtue of
which one who has the right and
intention to alienate a corporeal
thing, transmits it by virtue of a just
little to one who accepts the same.
a
seller
cannot
deliver
constructively if he cannot deliver
even if he wants to.
the parties make use of a token
symbol to represent the thing
delivered
ARTICLE 1499
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TRADITIO LONGA MANU

2.
it takes place by the mere consent or
agreement of the contracting parties as
when the vendor merely points to thing
sold which shall thereafter be at the
control and disposal of the vendee
TRADITIO BREVIE MANU

when the vendee has already the
possession of the thing sold by virtue of
another title as when the lessor sells
the thing leased to the lessee.
SALE OR RETURN DISTINGUISHED FROM SALE
ON TRIAL
ARTICLE 1500
TRADIO CONSTITUTUM POSSESSORIUM

it takes place when the vendor
continues in possession of the property
sold as owner but in some other
capacity, as for example, when the
vendor stays as a tenant on the vendee.
ARTICLE 1501
QUASI-TRADITIO/ QUASI-DELIVERY

SALE ON TRIAL OR APPROVAL
 The buyer has an option to
purchase the if the goods prove
satisfactory. The title shall continue
in the seller until the sale has
become absolute either by the
buyer’s approval of the goods, or by
his filing to comply with the express
or implied conditions of the
contract as to giving notice of
dissatisfaction.
Tradition can only be made with
respect to corporeal things. In case
of incorporeal things, delivery is
effected:
1. by the execution of a public
instrument
2. by the placing of the titles of
ownership in the possession of
the vendee,
3. by allowing the vendee to use
his rights as new owner with
the consent of the vendor
Thus, the delivery to a person of a
negotiable document of title in which it is stated
that the goods referred to therein will be
delivered to the bearer amounts to delivery of
the goods to such person.
ARTICLE 1502
CONTRACTS OF SALE OR RETURN, AND OF SALE
ON TRIAL OR APPROVAL OR SATISFACTION
1. SALE OR RETURN –
 the buyer has an option to purchase
or return the same to the seller
instead of paying the price. Without
reference to the quality of goods,
SALE OR RETURN
1. subject to resolutory condition
2. depends entirely on the will of the
buyer
3. 3. the ownership of the goods passes to
the buyer on delivery and
subsequent return of the goods
reverts ownership in the seller
4. the risk of loss or injury rests upon the
buyer
SALE ON TRIAL
1. subject to suspensive condition
2. depends on the character or quality of
the goods
3. the ownership remains in the seller
until the buyer signifies his approval or
acceptance to the seller
4. the risk still remains with the seller
ARTICLE 1503
DELIVERY OF SPECIFIC
GENERALLY PASSES TITLE
GOODS
SOLD
this article relates to a sale of specific goods:
1. DELIVERY TO A CARRIER
 General rule: the delivery be it only
constructive, and delivery to the
carrier is deemed to be a delivery to
the buyer
2. REDELIVERING BY CARRIER TO HIMSELF
 If the seller directs the carrier to
redeliver the goods at their
destination to the seller himself, or
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to his order. The ownership still
remain in the latter.
WHERE BILL OF LADING IS SENT FORWARD
WITH DRAFT ATTACHED:
WHERE SELLER OR HIS AGENT IS CONSIGNEE

1. CARRIER BECOMES BAILEE FOR SELLER
 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 his
agent, the seller thereby reserves
the ownership in the goods.
2. RIGHTS OF THE SELLER
 the seller may not only retain the
goods until the buyer performs his
obligation under the contract.
EFFECT OF BUYER’S OBTAINING POSSESSION
OF BILL OF LADING WITHOUT HONORING
DRAFT

WHERE SELLER’S TITLE ONLY FOR PURPOSE OF
SECURITY
1. FORM OF BILL OF LADING NOT
CONCLUSIVE
 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 ownership is simply to
secure himself in regard to the
performance by the buyer of the
latter’s obligation.
2. WHERE OWNERSHIP WOULD HAVE
PASSED BUT FOR THE FORM OF BILL OF
LADING
 by shipping the goods, the seller
has definitely lost all use of them to
the buyer. Where the title to the
goods is held merely for the
purpose of security, the beneficial
owner (buyer), not the one who
holds for security (seller) bears the
risk of loss or deterioration
WHERE THE BUYER OR HIS AGENT IS
CONSIGNEE BUT SELLER RETAINS THE BILL OF
LADING:

The seller thereby retains a right to
the possession of the goods as
against the buyer. Although the
property in the goods will ordinarily
pass to the buyer on delivery, the
latter is unable to obtain the goods
without the bill
the fact that the bill of lading and
bill of exchange are attached
together indicates that the seller
intends to make the delivery of the
goods conditional upon the
payment or acceptance of the draft.
A purchaser in good faith for value
of the bill of lading or goods from
the buyer will obtain the ownership
of the goods although the bill of
exchange has not been honored.
ARTICLE1504
RISK OF LOSS GENERALLY ATTENDS TITLE
General rule:
1. if the thing is lost by fortuitous
event the risk is borne by the
owner of the thing at the time
of the loss
 Exceptions:
1. The ownership is considered transferred
to the buyer who, therefore, assumes
the risk from the time of delivery.
2. Where actual delivery has been delayed
through the fault of either the buyer or
the seller. In this case, the law punishes
the party at fault.

RISK OF LOSS BY FORTUITOUS EVENT AFTER
PERFECTION BUT BEFORE DELIVERY

if the thing is lost after perfection of
the contract but before its delivery,
even before the ownership is
transferred to the buyer, the risk of
loss by a fortuitous event without the
seller’s fault is borne by the buyer.
Taken from the American Law on
Sales it provides that “Unless
otherwise agreed, the goods remain
at the seller’s risk until the ownership
therein is transferred to the buyer”
the risk of loss is shifted from the
seller to the buyer even though the
buyer has not yet acquired ownership
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thereof, this conflict can only be
resolved by legislation.
5. WHERE THE SELLER HAS A VOIDABLE
TITLE WHICH HAS NOT BEEN AVOIDED AT
THE TIME OF SALE
ARTICLE 1505
SALE BY THE PERSON NOT THE OWNER
1. WHERE THE OWNER OF THE GOODS IS,
BY HIS CONDUCT, PRECLUDED FROM
DENYING THE SELLER’S AUTHORITY TO
SELL

Where a property is sold by one not
the owner or the agent of the owner,
but the real owner states that he
authorized such sale so that the
vendor was acquitted of the charge
against him, a buyer in good faith
acquires a valid title to the property
as it is not lawful nor permissible for
said owner to deny or retract his
former sworn statement that he had
consented to said sale
2. WHERE THE LAW ENABLES THE
APPARENT OWNER TO DISPOSE OF THE
GOODS AS IF HE WERE THE TRUE
OWNER THEREOF
 has no such law as the Factor’s Act.
The law referred to here, therefore,
must be found in the provisions of
our Civil Code on Agency.
3. WHERE THE SALE IS SANCTIONED BY
STATUTORY OR JUDICIAL AUTHORITY
 one who has lost any movable, or has
been unlawfully deprived thereof,
may recover it from the person in
possession of the same. If the
possessor of a movable lost or of
which the owner has unlawfully been
deprived has acquired it in good faith
at a public sale, the owner cannot
obtain its return without reimbursing
the price paid therefore.
4. WHERE THE SALE IS MADE AT
MERCHANT’S STORES, FAIRS, OR
MARKETS
 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 prevails
for a buyer.
6. WHERE
SELLER
SUBSEQUENTLY
ACQUIRES TITLE
 When a person conveys property to
another of which at the time he is not
the owner, his subsequent acquisition
of title validates his previous
conveyance.
ARTICLE 1506
SALE BY ONE HAVING A VOIDABLE TITLE
1. REQUISITES FOR ACQUISITION OF GOOD
TITLE BY BUYER
 if the seller has only a voidable title to
the goods, the buyer acquires a good
title to the goods provided he buys
them:
a) before the title of the seller has
been avoided
b) in good faith for value; and
c) without notice of the seller’s
defect of title
2. BASIS RULE
 Seems to be based on the principle
that where loss has happened which
must fall on one of two innocent
persons, it should be borne by him
who is the occasion of the loss.
ARTICLE 1507
NATURE AND FUNCTION OF DOCUMENTS OF
TITLE
1. RECEIPTS OF, OR ORDEFS UPON A BAILEE
OF GOODS REPRESENTED
 documents of title refer to goods and
not to money. A different name is
given in popular speech to the
document when it is issued by a
carrier and when it is issued by a
warehouseman
2. EVIDENCE OF TRANSFER OF TITLE AND
POSSESSION OF GOODS AND CONTRACT
BETWEEN THE PARTIES
 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
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person to whom or to whose order, the
goods are to be delivered.
c. contract between the parties
who are bound by its terms
MOST COMMON FORMS OF DOCUMENTS OF
TITLE
ARTICLE 1509
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
consignee.
(the
shipper
and
consignee may be one and same
person)
2. DOCK WARRANT
 an instrument given by dock owners
to an importer of goods warehoused
on the dock recognizing the
importer’s title to the said goods; and
3. WAREHOUSE RECEIPT
 it is a contract or receipt for goods
deposited with a warehouseman
containing the latter’s undertaking to
hold and deliver the said goods to a
specified person, to order, or to
bearer.
 (QUEDAN- is a warehouse receipt
usually for sugar received by a
warehouseman)
CLASSES OF DOCUMENTS OF TITLE
1. NEGOTIABLE DOCUMENTS
 those by the terms of which the bailee
undertakes to deliver the goods 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 a specified
person.
NEGOTIATION OF NEGOTIABLE DOCUMENT BY
INDORSEMENT
1. if indorsed in blank or to bearer, the
document becomes negotiable by
delivery
2. if indorsed to a specified person, it may
be again negotiated by the indorsement
of such person in blank, to bearer, or to
another specified person. Delivery alone
is not sufficient.
\
ARTICLE 1510
NEGOTIABLE DOCUMENTS OF TITLE MARKED
“NON-NEGOTIABLE”

the words “not negotiable”, “non
negotiable” and the like when placed
upon a document of title in which the
goods are to be delivered to “order” or
to “bearer” have no effect and the
document continues to be negotiable.
ARTICLE 1511
TRANSFER OF NON-NEGOTIABLE DOCUMENTS


a non-negotiable of title cannot be
negotiated. It can be transferred or
assigned by delivery. In such case, the
transferee or assignee acquires only
the rights stated in Article 1514
even if the document is indorsed, the
transferee acquires no additional right.
ARTICLE 1512
ARTICLE 1508
PERSONS WHO MAY NEGOTIATE A DOCUMENT
NEGOTIATION OF NEGOTIABLE DOCUMENT BY
DELIVERY

if the document is specially indorsed, it
becomes an order document of title
and negotiation can only be effected
by the indorsement of the indorsee. A
special indorsement specifies the


it will be noticed that the provision does
not give a power to negotiate
documents of title equal to that allowed
in the case of bills of exchange and
promissory notes under the Negotiable
Instruments Law
however, if the owner of the goods
permits another to have the possession
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
or custody of negotiable receipts
running to the order of the latter or to
bearer, it is a representation or title
upon which bona fide purchasers
the loss must fall upon him whose
misplaced confidence made the loss
possible
ARTICLE 1513
RIGHTS OR PERSON TO WHOM DOCUMENT
HAS BEEN NEGOTIATED

it specifies the rights of a person to
whom a negotiated document of title
has been duly negotiated, in the case of
a document of title to bearer, or by
indorsement and delivery, in the case of
a document of title. Such person
acquires:
1. the title of the person
negotiating the document, over
the goods covered by the
document
2. the title of the person
(depositor or owner) to whose
order by the terms of the
document the goods were to be
delivered, over such goods; and
3. the direct obligation of the
bailee
(warehouseman
or
carrier) to hold possession of
the goods for him, as if the
bailee had contracted directly
with him
RIGHTS OF THE THIRD PERSON TO GOODS
WHERE DOCUMENT HAS BEEN TRANSFERRED
1. the transfer does not effect the delivery
of the goods covered it. Before
notification, the bailee is not bound to
the transferee whose right may be
defeated by a levy of an attachment or
execution upon the goods by the creditor
or the transferor
2. or if the document is negotiable, the
goods cannot be attached or be levied
under an execution unless the document
be first surrendered to the bailee or its
negotiation enjoined.
ARTICLE 1515
TRANSFER OF ORDER DOCUMENT WITHOUT
INDORSEMENT

(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 1514
RIGHTS OF PERSON TO WHOM DOCUMENT
HAS BEEN TRANSFERRED

It refers to the rights of a person to
whom a negotiable document of title
(not duly negotiated) has been
transferred or of the transferee of a
non-negotiable document. Such person
acquires:
1. the title to the goods as against
the transferor
2. the right to notify the bailee of
the transfer thereof
3. the right, thereafter, to acquire
the obligation of the bailee to
hold the goods for him.
it specifies the right of a person to
whom an order document of title,
which may not properly be negotiated
by mere delivery, has been delivered,
without indorsement. They are:
1. the right to the goods against the
transferor and
2. the right to compel the transferor to
indorse the indorsement
SUBSEQUENT INDORSEMENT OF NEGOTIABLE
DOCUMENT TRANSFERRED

the negotiation shall take effect as of
the time when the indorsement is
actually made, not at the time the
document is delivered. The reason is
because the negotiation becomes
complete only at the time of
indorsement.
ARTICLE 1516
WARRANTIES ON SALE OF DOCUMENTS

it treats of the warranties or liabilities of
a person negotiating or transferring a
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document. The liability is limited only to
a violation of the 4 warranties.
ARTICLE 1521
PLACE OF DELIVERY OF GOODS SOLD
ARTICLE 1517
INDORSER NOT A GUARANTOR

the indorsement of a negotiable
instrument has a double effect; the
indorser will pay the instrument if the
party primarily liable fails to do so. The
indorsement of a document of title
amounts merely to a conveyance by the
indorser, not a contract of guaranty.
ARTICLE 1518
WHEN NEGOTIATION NOT IMPAIRED
FRAUD, MISTAKE, DURESS, ETC.


BY
it may be negotiated by even by a thief
or finder and the holder thereof would
acquire a good title thereto if he paid
value therefor in good faith without
notice of the seller’s defect.
it speaks of the theft of the document
and not of the goods covered by such
document. In the latter case, it needs
no argument to show that even a bona
fide holder of a document issued over
such stolen goods cannot acquire title
TIME OF DELIVERY OF GOODS SOLD
ARTICLE 1519
ATTACHMENT OR LEVY UPON GOODS
COVERED BY A NEGOTIABLE DOCUMENT


in the possession of such bailee, the
goods cannot be attached or levied
under an execution unless the
document be first surrendered or its
negotiation prohibited by law.
this provision is for the protection of
the bailee since he could be made liable
to a subsequent purchaser for value in
good faith.
ARTICLE 1520
CREDITOR’S REMEDIES TO REACH NEGOTIATE
DOCUMENTS

1. RULES
a. where there is an agreement, express or
implied, the place of delivery is that
agreed upon
b. where there is no agreement, the place
of delivery is that determined by usage
of trade.
c. where there is no agreement and there
is also no prevalent usage, the place of
delivery is the seller’s place of business.
d. in any other case, the place of delivery
is the seller’s residence
e. which to the knowledge of the parties
at the time the contract was made were
in some other place, that place is the
place of delivery in the absence of any
agreement or usage of trade to the
contrary.
2. PRESUMPTION
 it can be seen that the presumption is
that the buyer must take goods from
the seller’s place of business or
residence rather than the seller to
deliver them to the buyer.
this article expressly gives the court full
power to aid by injunction (a restraining
order) and otherwise a creditor seeking
to get a negotiate document covering
such goods.
1) IF NO TIME IS FIXED BY THE CONTRACT,
then the seller is bound to send the
goods to the buyer within a reasonable
time.
2) IF THE CONTRACT PROVIDES A FIXED
TIME FOR PERFORMANCE, the question
is whether time is of the essence, and if
so whether the correct performance
was offered within that time. If time is
not of the essence, the question is
whether correct performance was
offered within a reasonable time.
3) WHERE THE CONTRACT DOES NOT
SPECIFY THE TIME FOR DELIVERY
o so that delivery is to be made
within a reasonable time
o the buyer cannot make time the
essence of the contract without
giving the seller notice of his
intention to cancel unless
delivery is made on or before a
fixed time
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DELIVERY OF GOODS IN POSSESSION OR A 3RD
PERSON


to affect third person, the person
holding the goods must acknowledge
being the bailee for the buyer.
Where the seller delivers a quantity
larger than the contracted, the buyer
may accept the quantity contracted for
and reject the excess. If he accepts all
the goods delivered, he makes himself
liable for the price of all of them.
DELIVERY OF GOODS MIXED WITH OTHERS
HOUR OF DELIVERY OF GOODS SOLD

The demand or tender of delivery to be
effectual, must be made at a reasonable
hour
1. WHAT IS A REASONABLE
HOUR? Where all that is
required of the other party is
to receive a payment or
performance which can
readily be accepted
2.
IN CASE GOODS WHICH
ARE BULKY OR NEEDED
SPECIAL CARE – an hour
might
be reasonable
which would not be so in an
ordinary payment of a small
amount of money.
DUTY OF SELLER TO
DELIVERABLE CONDITION


PUT
GOODS
EFFECT OF INDIVISIBILITY OF SUBJECT MATTER


permitting evidence of usage of trade,
special agreement, or course of dealing
between the parties is but a special
application of the general rules
concerning
contracts.
IN
ARTICLE 1523
The seller bears the expenses to place
thing in a deliverable state that is, in
such a state the buyer would, under the
contract, be bound to take delivery of
them.
DELIVERY TO CARRIER ON BEHALF OF BUYER

DELIVERY OF GOODS LESS THAN QUANTITY
CONTRACTED

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 mention only if the subject matter
is indivisible.
RULES MAY BE CONTROLLED BY USAGE OF
TRADE
ARTICLE 1522

the buyer may accept those which are
in accordance with the contract and
reject the rest. And of course, may
accept them all if he so desires
Where the seller delivers a smaller
quantity the buyer may reject the goods
so delivered. (kulang)
The buyer may accept the goods in
which case he must pay for their: price
at the contract rate if he knew that no
more were to be delivered or the fair
value of the goods, if he did not know
that the seller is going to be guilty of a
breach of contract.
DELIVERY OF GOODS MORE THAN QUANTITY
CONTRACTED

GENERAL RULE
o when the seller is authorized or
required to send the goods to
the buyer, is that delivery of
such goods to the carrier
constitutes delivery to the
buyer, whether the carrier is
named by the buyer is not.
EXCEPTIONS
o the parties did not intend the
delivery of the goods to the
buyer through the carrier.
SELLER’S DUTY AFTER DELIVERY TO CARRIER
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
circumstances.
2. To give notice to buyer regarding necessity
to insure goods- the seller must give notice
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to the buyer as may enable him to insure
the goods during their transit. If the seller
fails to do so, the risk will be borne to him.
the obligation likewise does not
exist or at least is suspended.
WHEN DELIVERY MUST BE MADE BEFORE
PAYMENT OF THE PRICE
DEFINITION OF TRADE TERMS

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
located. 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,
It contains 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
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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.
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 TRANSIT

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.
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
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