FATHER SATURNINO URIOS UNIVERSITY

Butuan City
SALES LAW
Benjie S. Escobido
Report
Article 1519: If goods are delivered to a bailee by the owner or by a
person whose act in conveying the title to them to a
purchaser in good faith for value would bind the owner
and a negotiable document of title is issued for them they
cannot thereafter, while in possession of such bailee, be
attached by garnishment or otherwise or be levied under
an execution unless the document be first surrendered to
the bailee or its negotiation enjoined. The bailee shall in
no case be compelled to deliver up the actual possession
of the goods until the document is surrendered to him or
impounded by the court.

The provision of Art. 1519 does not apply if the person depositing is
not the owner of the goods (like a thief) or one who has no right to
convey title to the goods binding upon the owner. Neither does it apply
to actions for recovery or manual delivery of goods by the real owner
nor to cases where the attachment is made before the issuance of the
negotiable document of title.
The rights acquired by attaching creditors cannot be defeated by the
issuance of a negotiable document of title thereafter.

Article 1520: A creditor whose debtor is the owner of a negotiable

document of title shall be entitled to such aid from courts
of appropriate jurisdiction by injunction and otherwise in
attaching such document or in satisfying the claim by
means thereof as is allowed at law or in equity in regard
to property which cannot readily be attached or levied
upon by ordinary legal process.

However, if an injunction is issued but the negotiable document of title

is negotiated to an innocent person, the transfer is nevertheless
effectual.

Article 1521: 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 on each case on the contract, express
or implied, between the parties. Apart from any such
contract, express or implied, or usage of trade to the
contrary, the place of delivery is the sellers place of
business if he has one, and if not, his residence; but in
case of a contract of sale of specific goods, which to the
knowledge of the parties when the contract of sale was
made were in some other place, then that place is the
place of delivery.

Where by a contract of 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.
Where the goods at the time of sale are in the possession of a third
person, the seller has not fulfilled his obligation to deliver
to the buyer unless and until such third person
acknowledges to the buyer that the goods on the buyers
behalf.
Demand or tender of delivery may be treated as ineffectual unless
made at a reasonable hour. What is a reasonable hour is a
question of fact.
Unless otherwise agreed, the expenses of and incidental
to putting the goods into a deliverable state must borne
by the seller.
Delivery of goods in possession of a third person.
It is important to observe a distinction between the delivery which will
satisfy the sellers duty to the buyer and the delivery which is necessary to
protect the buyer against third persons.
Hour of delivery of goods sold.
1. What is a reasonable hour is a question of fact largely dependent upon
the circumstances.
2. In case of goods which are bulky or needed special care, an hour might
be unreasonable which would not be so in an ordinary payment of
small sum of money.
3. Where the question is not merely one of tender but also of demand,
reasonableness will depend on the justifiable expectation that the hour
is reasonable for giving as well as receiving.
Duty of seller to put good in deliverable condition.
Unless otherwise agreed, the seller bears the expenses to place the
thing in a deliverable state, that is, in such a state that the buyer would,
under the contract, be bound to take delivery of them.
The buyer is not bound to make tender of payment until the seller has
complied with his obligations.
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 may reject the rest. If

the buyer accepts the whole of the goods so delivered he

must pay for them at the contract rate.
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.
Application of usage of trade, special agreement, or course of dealing.
1. A usage of trade is any practice or method of dealing having such
regularity of observance in a place, vocation or trade as to justify an
exception that will be observed with respect to the transaction in
question. The existence and scope of such a usage are to be proved as
facts.
2. A course of dealing is a consequence of previous conduct between the
parties to a particular transaction which is fairly to be regarded as
establishing a common basis of understanding for interpreting their
expressions and other conduct.
Article 1523: Where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer, delivery of
the goods to a carrier, whether named by the buyer or not, for the
purpose of transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in cases provided in Article 1503,
first, second, and third paragraphs or unless a contrary intent
appears.
Unless otherwise authorized by the buyer, the seller must make
such contract with the carrier on behalf of the buyer as may be
reasonable, having regard to the nature of the goods and the other
circumstances of the case. If the seller omits so to do, and the
goods are lost or damaged in the course of transit, the buyer may
decline to treat the delivery to the carrier as a delivery to himself,
or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the
buyer under circumstances in which the seller knows or ought to
know that it is usual to insure, the seller must give such notice to
the buyer as may enable him to insure them during their transit,
and, if the seller fails to do so, the goods shall be deemed to be at
risk during such transit.
Definition of shipping terms.
1. C.O.D- collect on delivery. If the goods are marked C.O.D., the carrier
acts for the seller in collecting the purchase price. The buyer must pay
for the goods before he can obtain possession. These terms do not

prevent title from passing to the buyer on delivery to the carrier where
they are solely intended as security for the purchase price.
2. F.O.B- Free on board. They mean that the goods are to be delivered
free of expense to the buyer to the point where they are F.O.B. In
general, the point of F.O.B., either the point of shipment of the point of
destination, determines when the ownership passes. Here the title
presumably passes when the goods are so delivered F.O.B., and;
3. C.I.F- Cost, Insurance and Freight. They signify that the price fixed
covers not only the cost of the goods, but the expense of freight and
insurance to be paid by the seller up to the point of destination. Title
passes to the buyer at the moment of delivery to the point especially
named.
Article 1524: The vendor shall not be bound to deliver the thing
sold, if the vendee has not paid him the price, or if no period for the
payment has been fixed in the contract.
When delivery must be made before the payment of the price.
GR: The thing shall not be delivered unless the price be paid
XPN: The thing must be delivered though the price be not paid first, if
time for such payment has been fixed in the contract.
Article 1525: The seller of goods is deemed to be an unpaid seller
within the meaning of this Title:
1. When the whole of the price has not been paid or tendered.
2. When the bill of exchange or other negotiable instrument has
been received as conditional payment, and the condition on
which it was received has been broken by reason of the
dishonour of the instrument, the insolvency of the buyer, or
otherwise.
In article 2525 and 1535 the term seller includes an agent of the
seller to whom the bill of lading has been indorsed, or a consignor
or agent who has himself paid, or is directly responsible for the
price, or any other person who is in the position of a seller
Where whole of price has not been paid.
1. Tender of payment by buyer- although tender of payment is not the
same as performance, and the seller to whom the price of goods has
been tendered is strictly unpaid, and can, therefore, bring an action
subsequently for the price, which he has refused, yet tender destroys
the sellers lien. Accordingly, so far as concerns his rights against the
goods, he is not an unpaid seller after the tender of the price.
2. Payment of part of price-payment of a part of the price does not
destroy a sellers lien. The seller remains an unpaid seller even if the
title has passed to the buyer.
3. Payment by negotiable instrument- according to par. 2 of Art 1249
(NCC), 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: Subject to the provisions of this Title, notwithstanding
that the ownership in the goods may have passed to the buyer, the
unpaid seller of goods, as such, has:
1. A lien on the goods or right to retain them for the price while
he is in possession of them;
2. In case of insolvency of the of the buyer, a right of stopping
the goods in transitu after he has parted with the possession
of them;
3. A right of resale as limited by this Title;
4. A right to rescind the sale as likewise limited by this Title.
Where the ownership in the goods has not passed to the buyer, the
unpaid seller has, in addition to his other remedies, a right of
withholding delivery similar to and co-extensive with his rights of
lien and stoppage in transitu where the ownership has passed to
the buyer.
Nature of unpaid sellers possessory lien on the goods.
The right given by this article though denominated as a lien, is in truth
greater than a lien.
The sellers position is very nearly that of a pledge with power to sell at
private sale in case of default, and the power survives till payment of the
price. An action for the price is not inconsistent with the later enforcement of
the lien though the buyer must be credited with any payment of the price in
reduction of the lien.
Unpaid sellers lien on the price- the possessory lien entitles the seller to
retain possession of the goods as security for the purchase price. Where the
goods are in the possession of the buyer, the seller has no more possessory
lien but his claim for the unpaid price is preferred claim or lien. Simply
stated, upon delivery, the sellers possessory lien on the goods is
lost, but his lien on the price remains.
Basis of rights of unpaid seller.
The ground upon which an unpaid seller is allowed a lien and kindred
remedies is the 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: Subject to the provisions of this Title, the unpaid seller
of goods who is in possession of them is entitled to retain
possession of them until payment or tender of the price in the
following cases, namely:
1. Where the goods have been sold without any stipulation as to
credit;
2. Where the goods have been sold on credit, but the term of
credit has expired;

3. Where the buyer becomes insolvent.

The seller may exercise his right of lien notwithstanding that he is
in possession of the goods as agent or bailee for the buyer.
Article 1528: Where an unpaid seller has made part delivery of the
goods, he may exercise his right of lien on the remainder, unless
such part delivery has been made under such circumstances as to
show an intent to waive the lien or right of retention.
Article 1529: The unpaid seller of goods loses his lien thereon:
1. When he delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer without reserving the
ownership in the goods or the right to the possession thereof;
2. When the buyer or his agent lawfully obtains possession of the
goods;
3. By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his
lien by reason only that he has obtained judgment or decree for the
price of the goods.
Revival of lien after delivery.
1. If the buyer refuses to receive the goods after they have been
delivered to a carrier or other bailee on his behalf, though the seller
has parted with both the ownership and the possession, he may
reclaim the goods and revest himself with his lien.
2. Likewise, if the buyer returns the goods in wrongful repudiation of the
sale, the lien is revived.
Article 1530: Subject to the provisions of this Title, when the buyer
of goods is or becomes insolvent, the unpaid seller who has parted
with the possession of the goods has the right of stopping them in
transitu, that is to say, he may resume possession of the goods at
any time while they are in transit, and he will then become entitled
to the same rights in regard to the goods as he would have had if he
had never parted with the possession.
Requisites for the exercise of right of stoppage in transitu.
1. The seller must be unpaid
2. The buyer must be insolvent
3. The goods must be in transit
4. The seller must either actually take possession of the goods sold or
give notice of his claim to the carrier or other person in possession.
5. The seller must surrender the negotiable document of title, if any,
issued by the carrier or bailee
6. The seller must bear the expenses of delivery of the goods after the
exercise of the right.
Basis and nature of right of stoppage in transitu.
1. The clearly injustice of allowing the buyer to acquire ownership and
possession of the goods when he has not paid and, owing to his

insolvency, cannot pay the price which was to be given in return of the
goods. (The fundamental basis of the right is the far-reaching principle
allowing rescission and restitution where there is actual or prospective
failure of consideration).
2. This right does not proceed from any agreement of the parties but is
independently conferred by law. It may be regarded as a legal
extension of the unpaid sellers lien.
Article 1531: Goods are in transit within the meaning of the next
preceding article:
1. From the time when they are delivered to a carrier by land,
water, or air, or other bailee for the purpose of transmission to
the buyer, until the buyer, or his agent in that behalf, takes
delivery of them from such carrier or other bailee;
2. If the goods are rejected by the buyer, and the carrier or other
bailee continues in possession of them, even if the seller has
refused to receive them back;
Goods are no longer in transit within the meaning of the
precedent article:
1. If the buyer, or his agent in that behalf, obtains delivery of the
goods before their arrival at the appointed destination;
2. If, after the arrival of the goods at the appointed destination,
the carrier or other bailee acknowledges to the buyer or his
agent that he holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his agent; and it
is immaterial that further destination for the goods may have
been indicated by the buyer.
3. If the carrier or other bailee wrongfully refuses to deliver the
goods to the buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck or
airplane chartered by the buyer, it is a question depending on the
circumstances of the particular case, whether they are in the
possession of the carrier as such as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his
agent in that behalf, the remainder of the goods may be stopped in
transitu, unless such part delivery has been under such
circumstances as to show an agreement with the buyer to give up
possession of the whole of the goods.
Attornment by the bailee- the right to stop the goods may be terminated not
simply by delivery to the buyer, but by attornment of the bailee to the buyer.
Effect of refusal of carrier to attorn or deliver the goods.- the carrier is not
allowed to enlarge the sellers right by wrongfully refusing to deliver or attorn
as the buyers agent. But a rightful refusal by the carrier, based for instance,
on the refusal of the buyer or his agent to pay the freight will not terminate
the right to stop.
Delivery to a ship, etc.

1. Chartered by the buyer- the mere fact that the carrier is chartered by
the buyer does not make a delivery to the carrier a delivery to the
buyer. Whether delivery to a carrier chartered by the buyer means
possession by the carrier as such or possession by the carrier as agent
of the buyer, in which case, the goods are no longer in transit, is a
question depending on the circumstances of the particular case.
2. Owned by the buyer- as delivery to an agent, other than one whose
only duty is to forward the goods, is a delivery to the principal, delivery
to the buyers servant who is under a general duty to obey his masters
order, is necessarily a delivery to the buyer. Hence, delivery to a vessel
belonging to the buyer is delivery to the buyer.
Article 1532: The unpaid seller may exercise his right to stoppage in
transitu either by obtaining actual possession of the goods or by
giving notice of his claim to the carrier or other bailee in whose
possession the goods are. Such notice may be given either to the
person in actual possession of the goods or to his principal. In the
latter case, the notice, to be effectual, must be given at such time
and under such circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to
the carrier, or other bailee in possession of the goods, he must
redeliver the goods to, or according to the directions of, the seller.
The expenses of such delivery must be borne by the seller. If,
however, a negotiable document of title representing the goods has
been issued by the carrier or other bailee, he shall not be obliged to
deliver or justified in delivering the goods to the seller unless such
document is first surrendered for cancellation.
Effect of outstanding bill of lading.
If the goods are covered by a negotiable document of title, the carrier
or bailee has no obligation to deliver the goods to the seller unless such
document is first surrendered for cancellation.
Should the carrier surrender the goods to the seller and afterwards the
bill of lading be negotiated to an innocent purchaser for value, the latter
would be entitled to demand delivery of the goods. The only way in which
the carrier can be assured that no subsequent purchaser can arise is by
requiring a value in good faith to whom such document has been negotiated
is superior to the sellers unpaid lien or stoppage in transitu even when such
purchaser acquired the same after notice of stoppage was given by the seller
to the carrier.
Article 1533: Where the goods are of perishable nature, or where
the seller expressly reserves the right of resale in case the buyer
should make default, or the price for an unreasonable time, an
unpaid seller having a right of lien or having stopped the goods in
transitu may resell the goods. He shall not thereafter be liable to
the original buyer upon the contract of sale for any profit made by

such resale, but may recover from the buyer damages for any loss
occasioned by the breach of the contract of sale.
When a resale is made, as authorized in this article, the buyer
acquires a good title as against the original buyer.
It is not essential to the validity of a resale that a notice of an
intention to resell the goods be given by the seller to the original
buyer. But where the right to resell is not based on the perishable
nature of the goods or upon an express provision of the contract of
sale, the giving or failure to give such notice shall be relevant in any
issue involving the question whether the buyer had been in default
for an unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice of the
time and place of such resale should be given by the seller to the
original buyer.
The seller is bound to exercise reasonable care and judgment
in making resale, and subject to this requirement may make a resale
either by public or private sale. He cannot, however, directly or
indirectly buy the goods.
ART. 1534. An unpaid seller having the right of lien or having
stopped the goods in transitu, may rescind the transfer of title and
resume the ownership in the goods, where he expressly reserved
the right to do so in case the buyer should make default, or where
the buyer has been in default in the payment of the price for an
unreasonable time. The seller shall not thereafter be liable to the
buyer upon the contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of the contract. The
transfer of title shall not be held to have been rescinded by an
unpaid seller until he has manifested by notice to the buyer or by
some other overt act an intention to rescind. It is not necessary that
such overt
act should be communicated to the buyer, but the giving or failure
to give notice to the buyer of the intention to rescind shall be
relevant in any issue involving the question whether the buyer had
been in default for an unreasonable time before the right of
rescission was asserted.
Unpaid sellers right of rescission.
(1) When seller may rescind. The fourth right of an unpaid seller is the
right to rescind the sale. An unpaid seller has a right to rescind only if he has
either a right of lien or a right to stop the goods in transitu and under either
of two situations:
(a) where the right to rescind is expressly reserved in case the buyer
should make a
default; or
(b) where the buyer delays in the payment of the price for an
unreasonable time.

(2) Effect of rescission. In the case of rescission, the seller resumes

ownership in the goods. While the seller shall not be liable to the buyer upon
the contract of sale, the latter, however,
may be made liable to the seller for damages for any loss occasioned by the
breach of contract.
(3) Manner of rescission. An election by the seller to rescind may be
manifested by notice to the buyer or by some other overt act showing an
intention to rescind. Communication of such election to the buyer is not
necessary. But, as in regard to resale, the giving or failure to give notice is
relevant in determining the reasonableness of the time given the buyer to
make good his obligations under the contract.