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Obligations of the Vendor

Principal Obligations of the Vendor
Art. 1495. The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the
sale.
a) transfer the ownership (tradicion) of the determinate thing
b) deliver the thing
c) warrant against eviction and against hidden defects (1495,
1547)
d) take care of the thing pending delivery (1163)
e) pay for the expenses of execution and registration except if
there is a contrary stipulation (1487)
Delivery
Art. 1496. The ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from
the vendor to the vendee.
1478: parties may stipulate that despite delivery, ownership will
not be transferred to the buyer until full payment of the purchase
price

Failure to Deliver

if there is a period stipulated within which to deliver and the

seller fails to do the same, he cannot demand for the
payment of the price and there can be a rescission of the
sale
if the seller fails to deliver without fault on the part of the
buyer, the latter may ask for rescission

Kinds of Delivery
Actual or real

Art. 1497. The thing sold shall be understood as delivered, when

it is placed in the control and possession of the vendee.

Mode of acquiring ownership, as a consequence of certain

contracts such as sale, by virtue of which, actually or
constructively, the object is placed in the control and
possession of the vendee

Derivative mode of acquiring ownership by virtue of which

one who has a right and intention to alienate a corporeal
thing transmits by virtue of a just title to one who accepts the
same

d.
e.
f.

Execution of a public document/ legal formalities

Art. 1498. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing
which is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred.
Public Instrument one which is acknowledged before a notary
public or an official authorized to administer oath, by the person who
executed the same
Exception: if it appears from the document or if it can be inferred that it
was not the intention to make delivery

Symbolic tradition/ traditio symbolica

Art. 1498 With regard to movable property, its delivery may also
be made by the delivery of the keys of the place or depository
where it is stored or kept.

Pertains to movable things

to effect delivery, the parties make use of a token symbol to

represent the thing delivered

Traditio Brevi Manu and Longa Manu

Art. 1499. The delivery of movable property may likewise be made
by the mere consent or agreement of the contracting parties, if
the thing sold cannot be transferred to the possession of the
vendee at the time of the sale, or if the latter already had it in his
possession for any other reason.

Importance: necessary to enable the buyer to enjoy and

make use of the property purchased
Constructive or legal

Requires the following:

o
Seller must have control over the thing
o
Buyer must be put under control
o
There must be an intention to deliver the thing for
purposes of ownership
Ways of Doing Constructive Delivery
a.
b.
c.

execution of a public document/ legal formalities (1498)

symbolical tradition/ traditio symbolica (1498)
traditio longa manu (1499)

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traditio brevi manu (1499)

traditio constitutum possessorium (1500)
quasi-delivery or quasi-traditio (1501)

Traditio Longa Manu

Delivery of thing by mere consent or agreement of the
contracting parties (if the thing sold cannot be transferred to
the possession of the buyer at the time of the sale)
when seller points to the property without need of actually
delivering
Traditio Brevi Manu
Before contract of sale, the would be buyer was already in
possession of the would be subject matter of sale (ex: as
lessee)
Buyer has already the possession of the thing sold by virtue
of another title; instead of turning over the thing to the seller
so that the latter may in turn deliver it back to him

Constitutum Possessorium
Art. 1500. There may also be tradition constitutum possessorium.

at the time of perfection of contract, seller continues to hold

possession merely as a holder

opposite of brevi manu; vendor continues in possession of

the property sold not as an owner but in some other capacity

instead of the vendor delivering the thing to the vendee so

that the latter may in turn deliver it back to the vendor

Quasi Traditio
Art. 1501. With respect to incorporeal property, the provisions of
the first paragraph of article 1498 shall govern. In any other case
wherein said provisions are not applicable, the placing of the
titles of ownership in the possession of the vendee or the use by
the vendee of his rights, with the vendor's consent, shall be
understood as a delivery.

Pertains to Intangibles/ incorporeal property

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Delivery done either by:

1. execution of a public document
2. quasi-delivery or quasi-traditio
3. placing the titles of ownership in the possession of
the vendee
4. by allowing the vendee to use his rights as new
owner with the consent of the vendor

Delivery on Sale or Return and Delivery on Sale on Trial

Sale or Return
Art. 1502. When goods are delivered to the buyer "on sale or
return" to give the buyer an option to return the goods instead of
paying the price, the ownership passes to the buyer of delivery,
but he may revest the ownership in the seller by returning or
tendering the goods within the time fixed in the contract, or, if no
time has been fixed, within a reasonable time.

CONTRACT OF SALE OR RETURN

Contract by which property is sold but the buyer, who
becomes the owner of the property on delivery, has the
option to return the same to the seller instead of paying the
price
Option to purchase or return the goods rests on the buyer
Buyer has no right to return if he has materially abused the
condition of the thing
Deterioration without the fault of the buyer, buyer can still
return provided reasonable time for returning has not yet
lapsed

Sale on Trial
Art. 1502 When goods are delivered to the buyer on approval or
on trial or on satisfaction, or other similar terms, the ownership
therein passes to the buyer:

When he signifies his approval or

acceptance to the seller or does any
other act adopting the transaction;

If he does not signify his approval or

acceptance to the seller, but retains
the goods without giving notice of
rejection, then if a time has been
fixed for the return of the goods, on
the expiration of such time, and, if no
time has been fixed, on the expiration
of a reasonable time. What is a
reasonable time is a question of fact.

SALE ON TRIAL OR APPROVAL OR SATISFACTION

Contract in the nature of an option to purchase if the goods
prove satisfactory, the approval of the buyer being a
condition precedent
Seller remains the owner until the sale becomes absolute
either by:

the buyers approval of the goods or

by his failure to comply with the express or implied

conditions of the contract as to giving notice of
dissatisfaction or as to returning the goods
Risk of loss remains with the seller until the sale becomes
absolute; except if buyer is at fault or if buyer expressly
agreed to bear loss
Sale by Sample or Description

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Art. 1481. In the contract of sale of goods by description or by

sample, the contract may be rescinded if the bulk of the goods
delivered do not correspond with the description or the sample,
and if the contract be by sample as well as description, it is not
sufficient that the bulk of goods correspond with the sample if
they do not also correspond with the description.
The buyer shall have a reasonable opportunity of comparing the
bulk with the description or the sample.
bulk of the goods denotes the goods themselves as distinguished
from the sample and/or description with which they must correspond;
does not denote the greater portion of the goods

Sale by description
Occurs where a seller sells things as being of a particular/certain kind,
the buyer not knowing whether the sellers representations are true or
false, relying on them as true
purchaser has not seen the article sold but relies on the
description given him by the vendor, or has seen the goods
but the want of identity is not apparent on inspection
bulk of goods do not correspond with the description:
contract may be rescinded

Sale by Sample
Parties contracted solely with reference to the sample, with the
understanding that the bulk was like it
exhibition of the sample by the seller was an inducement of
the sale or formed the sole basis thereof; thus, seller
warrants that the thing sold and to be delivered shall
conform with the sample kind, character and quality
bulk of goods do not correspond with the sample: contract
may be rescinded

Sale by Description and Sample

Goods must satisfy all the warranties appropriate to either kind of sale
Art. 1503. When there is a contract of sale of specific goods, the
seller may, by the terms of the contract, reserve the right of
possession or ownership in the goods until certain conditions
have been fulfilled. The right of possession or ownership may be
thus reserved notwithstanding the delivery of the goods to the
buyer or to a carrier or other bailee for the purpose of
transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are
deliverable to the seller or his agent, or to the order of the seller
or of his agent, the seller thereby reserves the ownership in the
goods. But, if except for the form of the bill of lading, the
ownership would have passed to the buyer on shipment of the
goods, the seller's property in the goods shall be deemed to be
only for the purpose of securing performance by the buyer of his
obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are
deliverable to order of the buyer or of his agent, but possession
of the bill of lading is retained by the seller or his agent, the seller
thereby reserves a right to the possession of the goods as
against the buyer.
Where the seller of goods draws on the buyer for the price and
transmits the bill of exchange and bill of lading together to the
buyer to secure acceptance or payment of the bill of exchange,
the buyer is bound to return the bill of lading if he does not honor
the bill of exchange, and if he wrongfully retains the bill of lading
he acquires no added right thereby. If, however, the bill of lading
provides that the goods are deliverable to the buyer or to the
order of the buyer, or is indorsed in blank, or to the buyer by the
consignee named therein, one who purchases in good faith, for

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value, the bill of lading, or goods from the buyer will obtain the
ownership in the goods, although the bill of exchange has not
been honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the
transfer wrongful.

Reservation of Ownership

Applies to sale of specific goods

General Rule: delivery transfers ownership
delivery to the carrier is deemed delivery to the
seller
Exceptions:
contrary intention appears
pars. 2, 3 and 4of Art. 1503

Instances when seller is still the owner despite delivery

Documents of Title

A document in which it is stated that the goods referred to

therein will be delivered to the bearer or to the order of any
person named in such document not creation of law but by
merchants to allow them to deal with merchandise without
having to physically carry them around pertains to specific
type of movables only : GOODS

What it includes:
Any bill of lading
Dock warrant
Quedan
Warehouse Receipt or order
Any document used as proof of possession or as authority to
transfer the goods represented in the document

A.

By Express stipulation

1.
2.
3.
4.
5.

B.

When under the bill of lading, the goods are deliverable to

the seller or agent or their order. The seller or his agent is
the consignee

1.

C.

D.

If the seller directs the carrier to

redeliver goods at their destination to
the seller himself or to his order
intention: carrier shall be bailee for the
seller; seller remains the owner

Buyer or his agent is the consignee but seller retains the bill
of lading
Although the bill of lading states that the goods are
to be delivered to buyer or his agent, it is kept by
the seller or his agent
Seller retains right to the possession of the goods,
Buyer is unable to obtain the goods without the bill
When the Bill of exchange drawn on the buyer for the price,
is transmitted together with the bill of lading to the buyer to
secure payment of the BE but does not honor the BE
Ownership is retained by the seller until the BE is
paid
Other Obligations of the vendor

Sale by a person not the owner (Art. 1505)

General Rule: No one can give what he does not own
Exceptions
1. Estoppel When the owner of the goods is, by his conduct,
precluded from denying the sellers authority to sell (e.g.
judicial admissions, by deed etc.)
2. Where the law enables the apparent owner to dispose of the
goods as if he were the true owner thereof. (governed by the
law on agency and recording laws like PD 1529)
3. When the sale is sanctioned by statutory or judicial authority
e.g. Article 559 of Civil Code the posssession of a
movable property acquired in good faith is equivalent to title.
4. Where the sale is made at merchants stores, fairs or
markets
5. Where the seller has a voidable title which has not be
avoided at the time of the sale (Art. 1506) e.g. sale by a
person relatively incapacitated and one in good faith and for
value purchases the goods
6. When seller subsequently acquires title

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How Document of Title is negotiated

Mere delivery
a. If deliverable to bearer
b. If deliverable to the order of a certain person and
that person has indorsed it in blank or indorsed it
to bearer
2. Indorsement PLUS delivery

Forms
1. Negotiable
a)

b)

even if the face of the instrument says NONNEGOTIABLE, it is still NEGOTIABLE; limiting
words does not destroy negotiability
if the document of title is an order instrument and
no endorsement was made it is merely equivalent
to assignment

2. Non-negotiable

Negotiation vs. Assignment

1.
2.
3.

Important considerations
Negotiation gives better right than assignment
Assignee takes document with defects of the assignor
Obligation of bailee bailee is immediately bound by the
document

Warranties in negotiation

1.
2.
3.

That the document is genuine

That he has a legal right to negotiate or transfer it
That he has knowledge of no fact which would impair the
validity or worth of the document
4. That he has the right to transfer title to goods and goods are
merchantable/fit
- Indorser does not warrant that bailee or previous indorsers will fulfill
their obligation

Rules on attachment
If document is negotiable and the goods are in possession of the
bailee:
GR No attachment or levy except
a. If the document is surrendered to the bailee
b. Negotiation of the document is enjoined

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c. It is impounded by the courts
- Purchaser in good faith and for value will not be affected by infirmity
of negotiation

1.
2.
3.

Place of Delivery
If there is an agreement, express or implied, then follow the
agreement
No agreement, get the usage of trade
No agreement or prevalent usage, buyer must get them at
the sellers business place or residence

Exception: specific goods were in some place other than where the
parties were at the time of the perfection of the contract
1. In any other case: sellers residence

there is sufficient delivery when a fortuitous event prevents

delivery at the actual place agreed upon, forcing the delivery
at a place near the original

there is sufficient delivery when the original place is changed

but the buyer accepted the goods at a different place without
complaint so long as the seller was in good faith

1.
2.

Time of Delivery
If there is an agreement, then follow the agreement
No agreement, within reasonable time
reasonable time depends upon the circumstances attending
the transaction such as
o
character of the goods
o
purpose intended
o
ability of the seller to produce the goods
o
transportation facilities
o
distance thru which the goods must be carried
o
usual course of business in a particular trade
Goods in the possession of third person
in order for there to be delivery (constructive), the third
person must acknowledge that he holds the goods on behalf
of the buyerotherwise: seller shall not have complied with
his duty to deliver yet
applies only to existing goods in the hands of a third person,
not to goods to be manufactured
demand or tender of delivery to be effectual must be made
at a reasonable hour of the day
seller bears the expenses to place the thing in a deliverable
condition

Other obligations of the Vendor

Delivery to Carrier
Art. 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 the case provided for 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 to do so, 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.

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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
his risk during such transit.
General Rule: Delivery to the Carrier is Delivery to the Buyer
Exceptions:
1. Contrary Intent
2. Paragraphs 1 & 2 of Article 1503 (reservation of ownership)

Kinds of Delivery to Carrier

1. C.I.F. cost, insurance, freight

Price covers not only the price of goods but the expenses of
freight and insurance

All charges up to the place of destination must be paid by

the seller
2. F.O.B. free on board

Goods are to be delivered free of expense to the buyer to

the point where they are FOB

Either:

f.o.b. at the place of shipment buyer must pay the freight

f.o.b. alongside (the vessel) the moment the goods are

brought alongside the vessel, the buyer must pay for the
freight or expenses (a.k.a. FAS)

f.o.b. at the place of destination seller must pay for the

freight

Unpaid Seller

Art. 1525. The seller of goods is deemed to be an unpaid seller

within the meaning of this Title:
When the whole of the price has not been paid or tendered;
When a 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 dishonor of the
instrument, the insolvency of the buyer, or otherwise.
In Articles 1525 to 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.

Seller is still an unpaid seller even if part of the price has

been paid or tendered
Mere delivery of a negotiable instrument does not extinguish
the obligation to pay because it may be dishonored

Rights of an Unpaid Seller

Art. 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:
o
A lien on the goods or right to retain them for
the price while he is in possession of them;
o
In case of the insolvency of the buyer, a right
of stopping the goods in transitu after he has
parted with the possession of them;
o
A right of resale as limited by this Title;

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o

A right to rescind the sale as likewise limited

by this Title.

o
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 coextensive with his rights of
lien and stoppage in transitu where the ownership has passed to
the buyer.

Subject Matter: Movables (In General)

No man may not take law in his own hands, he must seek
remedy through courts
Exception: Doctrine of Self Help; Special Remedies

Requisites for the availment of Remedies:

Subject matter goods

Seller is unpaid not completely paid or received negotiable

instrument under a condition & condition has been breached
by reason of dishonor

1.
2.
3.
4.

Physical possession of goods is with seller

Remedies
possessory lien if seller is no longer in possession, he
retains a lienpreferred creditor
stoppage in transitu
special right of re-sale
special right to rescind
Possessory Lien
Seller not bound to deliver if buyer has not paid him the price
Right to retain cannot be availed when seller does not have
custody; remains only so long as the property is still with the
vendor
Exercisable only under the circumstances provided for in
Arts. 1527 and 1528 of the NCC

Art. 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:

Where the goods have been sold without any stipulation

as to credit;

Where the goods have been sold on credit, but the term
of credit has expired;

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.
Art. 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.

Instances when possessory lien is lost

Art. 1529. The unpaid seller of goods loses his lien thereon:

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;

When the buyer or his agent lawfully obtains

possession of the goods;

By waiver thereof.

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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.

Only possessory lien is lost; seller still has a lien on the price

Delivery to carrier but seller reserved the right of ownership:

does not lose possessory lien

Bringing an action for collection of the price is not a way of

losing possessory lien

Waiver

loses lien when he parts with goods (still has stoppage in

transitu)

Right of Stoppage in Transitu

Art. 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.

vendor may resume possession of the goods while they are

in transit when the buyer is or becomes insolvent

basis: injustice of allowing the buyer to acquire ownership

and possession when he has not paid and cannot pay

insolvency need not be judicially declared

Requisites for the exercise of the right to stoppage in

transitu

1.
2.
3.
4.

Seller must be unpaid

Buyer must be insolvent (is/becomes insolvent)
Goods are in transit
Seller must either actually take possession of the goods sold
or give notice of his claim to the carrier or other person in
possession
Seller must surrender the negotiable document of title, if any,
issued by the carrier or bailee
Seller must bear the expense of delivery of the goods after
the exercise of the right

5.
6.

When are goods in transit

Art. 1531. Goods are in transit within the meaning of the
preceding article:
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;
o
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.

When goods are no longer in transit

Goods are no longer in transit within the meaning of the
preceding article:

If the buyer, or his agent in that

behalf, obtains delivery of the goods
before their arrival at the appointed
destination;

If, after the arrival of the goods at the

appointed destination, the carrier or
o

GROUP 4A&4B

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;

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 or 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.

How right to stoppage exercised

Art. 1532. The unpaid seller may exercise his right of 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
obliged to deliver or justified in delivering the goods to the seller
unless such document is first surrendered for cancellation.
1. Obtain actual possession of goods
2. Give notice of claim to carrier / bailee in possession thereof

Notice by seller to buyer is not required; notice to carrier is

essential

To whom notice is given:

>person in actual possession of the goods

>his principal (notice must be given at such time and under

such circumstances that he, through reasonable diligence,
may communicate it to his agent

1.
2.
3.
4.

Effects of the exercise of the right of stoppage in transitu

goods are no longer in transitu
contract of carriage ends; carrier becomes baliee
carrier should not deliver to buyer or his agent anymore;
otherwise, he will be liable for damages
carrier must redeliver to or according to the instructions of
the seller

Special Right to Resell

Art. 1533. Where the goods are of perishable nature, or where the
seller expressly reserves the right of resale in case the buyer

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should make default, or where the buyer has been in default in

the payment of 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 or 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.
Where 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 resale that 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 a 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.

Requisites
1. seller is unpaid
2. has either a right of possessory lien or stoppage in transitu
3. can be exercised only under any of the following cases:
o
goods are perishable (of a nature that they
deteriorate rapidly)
o
parties have stipulated the right of resale in case
buyer defaults (legal delay) in payment
o
buyer in default for unreasonable time

rule refers to right not the duty to resell

deficiency in price may be obtained as damages/ may sue

buyer for the balance; excess goes to the seller

notice by seller to buyer not essential

Special Right to Rescind

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.
Requisites
1. seller is unpaid
2. has either a right of possessory lien or stoppage in transitu
3. can be exercised only under any of the following cases:
o
express stipulation or reservation
o
unreasonable default

seller resumes ownership

buyer may be held liable for damages in case of loss

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what should be done in order to rescind the transfer of title:
o
notice to the buyer
o
overt act showing an intention to rescind

why special? ownership of goods already with buyer but

seller may still rescind; ownership is destroyed even without
court intervention but in ordinary sale, need to go to court to
destroy transfer of ownership

Effect of disposal by buyer

Art. 1535. Subject to the provisions of this Title, the unpaid
seller's right of lien or stoppage in transitu is not affected by any
sale, or other disposition of the goods which the buyer may have
made, unless the seller has assented thereto.
If, however, a negotiable document of title has been issued for
goods, no seller's lien or right of stoppage in transitu shall defeat
the right of any purchaser for value in good faith to whom such
document has been negotiated, whether such negotiation be prior
or subsequent to the notification to the carrier, or other bailee
who issued such document, of the seller's claim to a lien or right
of stoppage in transitu.
General Rule:
Unpaid sellers right of lien or stoppage in transit remains even if the
buyer has sold or disposed of the goods
Exceptions:
1. seller has given his consent to the sale or disposition
2. purchaser (includes a mortgagee or pledge) is a buyer for
value in good faith of a negotiable document of title

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 or 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.
Double Sale and Warranties

Double Sale
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should
be movable property.

Should it be immovable property, the

ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership

shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is
good faith.

1.
2.
3.
4.

Requisites
exactly same subject matter
exactly same immediate seller
buyers represent conflicting interest
both sales are valid

Rules on double sale

General Rule: first in time, priority in right
1. MOVABLE
o
The first to posses in good faith is the owner
2. IMMOVABLE
o
First to register in good faith
o
In the absence of registration, the first to possess
in good faith
o
No registration & no possession in good faith
Person who presents oldest title in good faith

Conditions
Art. 1545. Where the obligation of either party to a contract of sale
is subject to any condition which is not performed, such party
may refuse to proceed with the contract or he may waive
performance of the condition. If the other party has promised that
the condition should happen or be performed, such first
mentioned party may also treat the nonperformance of the
condition as a breach of warranty.

Where the ownership in the thing has not passed, the

buyer may treat the fulfillment by the seller of his
obligation to deliver the same as described and as
warranted expressly or by implication in the contract of
sale as a condition of the obligation of the buyer to
perform his promise to accept and pay for the thing.
Condition: An uncertain event or contingency on the happening of
which the obligation of the contract depends. The obligation does not
attach until the condition is performed
1. If the condition is not performed, the innocent party has the
following options:
o
refuse to proceed with the contract
o
waive the performance of the condition
2. If the condition is in the nature of a promise that is should happen,
the non performance of the condition may be treated as a breach of
warranty only
Warranties

Express Warranty
Art. 1546. Any affirmation of fact or any promise by the seller
relating to the thing is an express warranty if the natural tendency
of such affirmation or promise is to induce the buyer to purchase
the same, and if the buyer purchases the thing relying thereon.
No affirmation of the value of the thing, nor any statement
purporting to be a statement of the seller's opinion only, shall be
construed as a warranty, unless the seller made such affirmation
or statement as an expert and it was relied upon by the buyer.

Requisites
1. it must be an affirmation of fact or any promise by seller
relating to the subject matter of sale
2. natural tendency of affirmation or promise is to induce buyer
to purchase subject matter
3. buyer purchases the subject matter relying thereon

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Dealers talk cannot be considered as an express warranty

little exaggeration is allowed by law as a
concession to human nature: caveat emptor (let
the buyer beware)
Mere expression of opinion does not import a warranty
Except if seller is an expert and opinion was relied
upon by the buyer
Implied Warranties

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Art. 1547. In a contract of sale, unless a contrary intention
appears, there is:
o
An implied warranty on the part of the seller
that he has a right to sell the thing at the time
when the ownership is to pass, and that the
buyer shall from that time have and enjoy the
legal and peaceful possession of the thing;
o
An implied warranty that the thing shall be free
from any hidden faults or defects, or any
charge or encumbrance not declared or known
to the buyer.

This Article shall not, however, be held to render liable a

sheriff, auctioneer, mortgagee, pledgee, or other person
professing to sell by virtue of authority in fact or law, for
the sale of a thing in which a third person has a legal or
equitable interest.
Implied Warranty deemed included in all contracts of sale whether
parties are actually aware or not, whether they were intended or not

by operation of law/ law attaches an obligation which is not

expressed in any words

prescribes in 10 years

1.
2.
3.
4.

Kinds
warranty that seller has a right to sell/warranty as to sellers
title
warranty against eviction (1548)
warranty against hidden defects or unknown encumbrances
(1561)
warranty as to fitness or merchantability (1562)

Warranty as to Sellers Title

Warranty that seller has a right to sell/warranty as to sellers title

refers to consummation stage since in consummation stage,

it is where ownership is transferred by tradition

not applicable to sheriff, auctioneer, mortgagee, pledge

Warranty against encumbrances (non- apparent)
Requisites:
a. immovable sold is encumbered with nonapparent burden or
servitude not mentioned in the agreement
b. nature of nonapparent servitude or burden is such that it
must be presumed that the buyer would not have acquired it
had he been aware thereof

when breach of warranty exist: buyer may ask for rescission

or indemnity

warranty not applicable when non apparent burden or

servitude is recorded in the Registry of Property unless
there is express warranty that the thing is free from all
burdens & encumbrances

Warranty Against Eviction

Art. 1548. Eviction shall take place whenever by a final judgment
based on a right prior to the sale or an act imputable to the
vendor, the vendee is deprived of the whole or of a part of the
thing purchased.

The vendor shall answer for the eviction even though

nothing has been said in the contract on the subject.

The contracting parties, however, may increase,

diminish, or suppress this legal obligation of the vendor.

Essential Elements

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1.
2.
3.
4.
5.

The vendee is deprived in whole or in part of the thing

purchased
He is so deprived by virtue of final judgement
The judgment is based on a right prior to the sale or an act
imputable to the vendor
The vendor was summoned in the suit for eviction at the
instance of the vendee
There is no waiver on the part of the vendee

Vendor is responsible for:

1. His own acts
2. Those of his predecessor-in-interest
For what is the Vendor responsible for
a. Value
b. Income or fruits
c. Costs
d. Expenses
e. Damages

Some rules
Art. 1549. The vendee need not appeal from the decision in
order that the vendor may become liable for eviction.
Art. 1550. When adverse possession had been commenced
before the sale but the prescriptive period is completed after
the transfer, the vendor shall not be liable for eviction.
Art. 1551. If the property is sold for nonpayment of taxes due
and not made known to the vendee before the sale, the
vendor is liable for eviction.
Art. 1552. The judgment debtor is also responsible for
eviction in judicial sales, unless it is otherwise decreed in
the judgment.
Art. 1553. Any stipulation exempting the vendor from the
obligation to answer for eviction shall be void, if he acted in
bad faith.

Warranty against Hidden Defects

Art. 1561. The vendor shall be responsible for warranty against
the hidden defects which the thing sold may have, should they
render it unfit for the use for which it is intended, or should they
diminish its fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have acquired it or
would have given a lower price for it; but said vendor shall not be
answerable for patent defects or those which may be visible, or
for those which are not visible if the vendee is an expert who, by
reason of his trade or profession, should have known them.

1.
2.
3.

4.
5.

Requisites
Defect must be hidden
o
Not known and could not have been known
Must exist at the time the sale was made
Defect must be important/serious
o
Renders the thing unfit or considerably decreases
fitness
o
unfit for the use: use must have been stated in
the contract or can be inferred from the nature of
the object or occupation of the buyer
Vendee must give notice of defect to the vendor within
reasonable time
Action must be instituted within the statute of limitations
o
Art. 1571. Actions arising from the provisions of
the preceding ten articles shall be barred after six

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months, from the delivery of the thing sold.

(rescission/ reduction of the price)
Art. 1577. The redhibitory action, based on the
faults or defects of animals, must be brought
within forty days from the date of their delivery to
the vendee.

Important considerations
SELLER does not warrant patent defect; caveat emptor
When defect is visible or even if not visible but buyer is an
expert by reason of his trade or profession, seller is not liable
Subject matter may be movable or immovable
Had the buyer been aware, he would not have acquired it or
would have given a lower price
obligation of seller for breach depends on whether he has
knowledge of such defect or not
o
seller is aware seller should return price &
refund expenses of contract with damages
o
seller is not aware - seller should return price and
interest & refund expenses ( no damages )
buyer may elect between withdrawing from contract or
demanding proportionate reduction of price with damages in
either case
applicable to judicial sale except that judgment debtor not
liable for damages

Knowledge of Defect
Art. 1566. The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware
thereof.

This provision shall not apply if the contrary has been

stipulated, and the vendor was not aware of the hidden
faults or defects in the thing sold
Caveat venditor: vendor is liable to the vendee for any
hidden faults or defects in the thing sold even though he was
not aware thereof
ignorance of the defect or good faith cannot be availed of as
a defense
Reason: seller has to repair the damage done
Exception: vendor acted in good faith

Implied warranty of fitness

Art. 1562. In a sale of goods, there is an implied warranty or
condition as to the quality or fitness of the goods, as follows:

Where the buyer, expressly or by implication, makes

known to the seller the particular purpose for which the
goods are acquired, and it appears that the buyer relies
on the seller's skill or judgment (whether he be the
grower or manufacturer or not), there is an implied
warranty that the goods shall be reasonably fit for such
purpose;

Where the goods are brought by description from a

seller who deals in goods of that description (whether
he be the grower or manufacturer or not), there is an
implied warranty that the goods shall be of
merchantable quality.
Implied warranty of fitness
1. There is an implied warranty that the goods are reasonably
fit for a particular purpose:
2. Buyer, expressly or by implication, makes known to the seller
the particular purpose for which the goods are acquired
buyer relies upon the sellers skill or judgment whether he be
the grower or manufacturer or not

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goods are suitable for the special purpose of the buyer which
will not be satisfied by mere fitness for general purpose
Quality of goods - state or condition
Purpose for holding seller liable: promote high standard of
business and discourage unfair dealings
Implied Warranty of Merchantability

Art. 1563. In the case of contract of sale of a specified article

under its patent or other trade name, there is no warranty as to its
fitness for any particular purpose, unless there is a stipulation to
the contrary.
Implied warranty of merchantability
1. Goods are bought by description
2. Requires identity between what is described in the contract
and what is tendered
Buyer defines what he wants by means of a trade name or
any other way: exercised his own judgment instead of relying
upon that of the seller
fit for the general purpose of a thing

Usage of Trade
Art. 1564. An implied warranty or condition as to the quality or
fitness for a particular purpose may be annexed by the usage of
trade.
Usage of trade
A trade practice that is so common in a particular region or
vocation that an expectation of its being followed in a given
transaction is justified; a usual and customary practice or set
of practices connected with a particular type of business or
trade; for example, in mortgage loan transactions it is
customary for the borrower to pay for an appraisal of the
value of the property
Reason: parties are presumed to be acquainted with the usages of
trade

Sale by Sample
Art. 1565. In the case of a contract of sale by sample, if the seller
is a dealer in goods of that kind, there is an implied warranty that
the goods shall be free from any defect rendering them
unmerchantable which would not be apparent on reasonable
examination of the sample.

Sale by sample: goods must be like the sample

Latent defect (inspection will not reveal): buyer is entitled not

simply to the goods like the sample but to goods like those
which the sample seem to represent merchantable goods
of that kind and character

Defects in Animals

Redhibitory Defect
Art. 1572. If two or more animals are sold together, whether for a
lump sum or for a separate price for each of them, the redhibitory
defect of one shall only give rise to its redhibition, and not that of
the others; unless it should appear that the vendee would not
have purchased the sound animal or animals without the
defective one.
The latter case shall be presumed when a team, yoke pair, or set
is bought, even if a separate price has been fixed for each one of
the animals composing the same.
Art. 1576. If the hidden defect of animals, even in case a
professional inspection has been made, should be of such a

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nature that expert knowledge is not sufficient to discover it, the
defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith should fail
to discover or disclose it, he shall be liable for damages.
Art. 1574. There is no warranty against hidden defects of animals
sold at fairs or at public auctions, or of live stock sold as
condemned.
Art. 1575. The sale of animals suffering from contagious diseases
shall be void.
A contract of sale of animals shall also be void if the use or
service for which they are acquired has been stated in the
contract, and they are found to be unfit therefor.
Art. 1577. The redhibitory action, based on the faults or defects of
animals, must be brought within forty days from the date of their
delivery to the vendee.
This action can only be exercised with respect to faults and
defects which are determined by law or by local customs.
Art. 1578. If the animal should die within three days after its
purchase, the vendor shall be liable if the disease which cause
the death existed at the time of the contract.
Art. 1579. If the sale be rescinded, the animal shall be returned in
the condition in which it was sold and delivered, the vendee being
answerable for any injury due to his negligence, and not arising
from the redhibitory fault or defect.
Art. 1580. In the sale of animals with redhibitory defects, the
vendee shall also enjoy the right mentioned in article 1567; but he
must make use thereof within the same period which has been
fixed for the exercise of the redhibitory action.

accion redhibitoria/ rescission plus damages

accion quanti minoris demand proportionate reduction in
the price plus damages

Art. 1581. The form of sale of large cattle shall be governed by

special laws.
- (Cow, Carabao, Horse, Mule, Ass, or other domesticated member of
the Bovine Family)

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