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CHAPTER 4

OBLIGATIONS OF THE VENDOR

SECTION 1. - General Provisions

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.

Principal obligations of the vendor:


1. To transfer the ownership of the determinate thing sold
2. To deliver the thing, with its accessions and accessories, if any, in the condition in which they when upon the
perfection of the contract
3. To warrant against eviction and against hidden defects
- Ex: makapaslig sya na ang nakapalit sa balay dili mapahawa; or ang tv na iyang gbaligya walay nakatagong
defect or guba
4. To take care of the thing, pending delivery, with proper diligence;
5. To pay for the expenses of the deed of sale, unless there is stipulation to the contrary

- At the time of perfection of the contract, vendor need not be the owner of the thing sold, it is enough that at
the time of deliver he has the right to transfer ownership
- When the vendor sells something he does not own yet, he is bound by the contract of sale when he acquires
it later
- If the vendor fails to deliver on time, he has no right to demand payment of the price. Vendee may ask for
the recession of the contract.
- If failure to deliver on time is not due to the fault of the vendor (ex. Wala nakahatag ug bayad/credit ang
vendee for the transportation sa goods), delay on the part of the vendor is excused
- DELIVERY IN EXECUTION SALES
o judgement debtor is not obliged to deliver the property sold to the buyer immediately because debtor
is given a period of one year to redeem the property.
o During the period of redemption, buyer is not authorized to take actual possession of property,
otherwise, he could be sued for forcible entry or damages
o Period of redemption (1 year) commences to run not from the day of the execution sale but on the
day the sale was registered in the Register of Deeds
 EXAMPLE: ang balay ni Liza napalit ni Ben during execution sale. Si Ben dili pwede
mudemand kay Liza na ihatag dayon ang actual possession sa property. Hatagan pa si Liza
ug usa ka tuig na paliton ug balik ang property (redeem). Unya na inig lapas sa one year
maka demand si Ben na ihatag na sa iyaha ang property ni Liza.
If mupugos si Ben ug possess sa property na wala pa nahuman ang one year pwede sya
kihaan ug forcible entry (pugos sa pagsulod sa property) or damages.

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.

RULE: ownership is transferred generally only by delivery of the thing sold


-As a rule, in the absence of agreement, ownership is not transferred,
even if sold, unless there has been delivery.
Ex.
 Jade sold his piano to Dumas.og, who immediately paid the price. Because the piano was at the
repair shop at the time the contract was perfected, no delivery was made. Before delivery could
be made, Regie, a creditor of Jade, who has filed a suit against him, attached the piano.
Question: What right has Dumas.og over the piano? May he ooppose the attachment levied by
Regie?
- ANS.: The piano not having been delivered to him by Jade,Dumas.og has only a PERSONAL RIGHT to
demand its delivery for it is generally only delivery that transfers the real right of ownership.
- Not having any right of ownership over the piano, Dumas.og may not legally oppose the attachment
levied thereon by Regie.

SECTION 2. - Delivery of the Thing Sold

Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.

Meaning of Tradition
- Tradition (tradition), or delivery, is a 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.

KINDS OF DELIVERY OR TRADITION


a) Actual or real.
(b) Legal or constructive
1) legal formalities.
2) symbolical tradition or traditio simbolica (such as the delivery of the key of the place where the movable
sold is being kept).
3) traditio longa manu (by mere consent or agreement) if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale.
4) traditio brevi manu (if the buyer had already the possession of the object even before the purchase, as
when the tenant of a car buys the car, that is, his possession as an owner).
5) traditio constitutum possessorium (opposite of tradition brevi manu) possession as owner changed,
forexample, to possession as a lessee. I sold my car but continued to possess it
as a lessee of the purchaser.

Importance:
- Delivery or tradition is necessary for the transfer of ownership of the thing sold
- Ownership is not transferred by contract merely, but by delivery, actual or constructive. Contracts only
constitute title or rights to the transfer or acquisition of ownership, while tradition or delivery is the method of
accomplishing the same
- When the object of the sale in placed in the control and possession of the vendee, or his agent, the delivery
is complete and the vendee is liable in case the things is lost without the fault of the vendor
- When the object sold is delivered to the vendee and the ownership is transferred, the vendor has the right to
claim payment thereof
- Delivery of the thing and the payment of the price, marks the consummation of the contract of sale
- Delivery is necessary to enable the vendee to enjoy and make use of the property purchased

ACTUAL DELIVERY
- There is actual delivery when the thing sold is placed in the control and possession of the vendee, or his
agent
- Physical delivery is usually done by the passing of a movable thing from hand to hand
- Actual delivery is not always essential to the passing of title thereto, parties may agree when and on what
conditions the ownership in the subject of the contract shall pass to the buyer
o EXAMPLE: parties my stipulate that ownership shall be transferred to the vendee upon full payment
o Necklace na gi.installment – parties may agree that delivery of the necklace to the buyer will not
transfer ownership, but only upon full payment thereof

Example FACTS: The Municipal Treasurer of Panique, Tarlac, thru the Bureau of Supply ordered one typewriter
from Smith,Bell & Co. The typewriter was received by the guard of the municipal Aug. 30, 1958. Ten days later,
the municipal building (as well as the typewriter) was totally burned. Shortly after, the seller sent a bill covering
the cost of the typewriter.The municipal council adopted a resolution requesting the Company to condone the
payment of the machine, it having been burned after delivery. Petitioner Company denied the request; thereafter,
the municipal treasurer submitted to the provincial treasurer a voucher covering the payment of the typewriter to
the petitioner. The Auditor General disapproved the same on the ground that there was no delivery, and that the
typewriter was never presented for inspection and verification as previously agreed upon.
Issue: Was there a delivery of the typewriter?
HELD: Yes. This was testified to by both the guard (who had personally received it and the Mayor who had
seen the delivery and ordered the taking of the machine to his office).
Moreover, the request for condonation of payment shows beyond doubt actual delivery of the machine.

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.
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. (1463a)

TWO KINDS OF CONSTRUCTIVE DELIVERY:

1st Paragraph: delivery through public instrument


- The execution of a document, like a notarized deed of sale is equivalent to the delivery of the object to the
vendee
- Applies to both movable and immovable property
- Ownership is transferred through the execution of such document
- Exception: if the parties agreed that ownership shall not transfer until certain acts shall have fulfilled by the
vendee.
o Example: despite the execution of the instrument parties agree that ownership shall transfer only
upon full payment
- Execution of a public document is equivalent to delivery only holds true when there is no impediment that
may prevent the passing of the property from the hands of the vendor to the vendee
o Example: A sold to B a parcel of land by executing a Deed of Sale. However, C occupies the land and
claims ownership thereof. Ownership is not transferred to B by the execution of the Deed of Sale. B
must take possession and control of the land first before symbolic delivery by execution of a
document takes effect
- Symbolic delivery by public instrument is just presumptive and not conclusive
- Equivalent to actual delivery only when the object is subject to the control of the vendor and there is no
impediment that prevents the passing of the object from the hands of the vendor to the vendee

2nd Paragraph: symbolic delivery or traditio symbolica


- The delivery of the key where the thing sold is stored or kept is equivalent to the delivery of the thing
because the key represents the thing.
- Requisites:
1. The vendor must have actual possession and control over the object of the sale
2. The object must be place under the control of the vendor
3. Vendor intends to deliver the object of the sale for purposes of transferring ownership to the vendee

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.

Traditio longa manu (long hand - by pointing)

- This mode of delivery takes place by the mere consent or agreement of the contracting parties as when the
vendor merely points to the thing sold which shall thereafter be at the control and disposal of the vendee.
- Example: A bought the refrigerator owned by B. B may just point to the refrigerator. By mere pointing of B to
the refrigerator, it is considered delivered to A.
- delivery “by the mere consent or agreement of the contracting parties” is qualified by the phrase “if the thing
sold cannot be transferred to the possession of the vendee at the time of the sale.”

Traditio brevi manu (short hand)


- happens 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.
- Example: A is renting a house owned by B. B sold the house to A. From lessee, A now becomes the owner.
- Instead of turning over the thing to the vendor so that the latter may, in turn, deliver it, all these are
considered done by action of law.

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

traditio constitutum possessorium


- opposite of traditio brevi manu
- It takes place when the vendor continues in possession of the property sold not as owner but in some other
capacity, as for example, when the vendor stays as a tenant of the vendee.
o Example: A sold his house to B. But wla sya papahawaa ni B, instead B leases the house to A. A
continued to possess it as a lessee of the buyer B.
- In this case, instead of the vendor delivering the thing to the vendee so that the latter may, in turn, deliver it
back to the vendor, the law considers that all these have taken place by mere consent or agreement of the
parties.

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.

- Generally, traditio is applied only to corporeal things


- Corporeal things means those that are visible to the eye. Example: house, car
- In the case of incorporeal things, delivery is effected:
a. by the execution of a public instrument; or
b. when that mode of delivery is not applicable, by the placing of the titles of ownership in the
possession of the vendee; or
c. by allowing the vendee to use his rights as new owner with the consent of the vendor.
- Incorporeal means not visible. Example: rights (katungod). This mode of delivery of incorporeal things or
rights is known as quasi-traditio.
- 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.
- In all the different modes of delivery, two things must concur:
1. There must be a real intention to deliver on the part of the vendor
2. Real intention to accept on the part of the vendee
- Example:
o the titles of ownership of property are placed in the possession of the vendee for his study or
inspection but not with the intention of making the delivery.

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. (n)
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:
(1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(2) 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. (n)

On sale or return
” (This is a sale that depends on the discretion of the buyer; it is a sale with a resolutory condition.)
- the revesting or return by refusing to accept the return of the property
- the risk of loss or deterioration is on the buyer prior to his exercise of his option to revest the ownership of
the goods
- the buyer has no right to return if he materially abused the property
- if the property deteriorates a contract sale with a resolutory condition
- the buyer becomes the owner of the property on delivery,
- however, he has the option to return the same to the seller instead of paying the price, if he finds them
unsatisfactory to his needs or purpose
- if the buyer opts to revest the ownership of the goods to the seller, he should return or tender the goods
within the period agreed upon
- if there is no period agreed, he must return or tender within a reasonable time
- if he fails to return within the period, the sale shall become absolute and the buyer shall pay the price
- the seller cannot prevent without the fault of the buyer, he may return, provided the period to return has not
yet expired
- EXAMPLE:
o S delivered to B a cellphone “on sale or return”.
o B became the owner in view of the delivery
o B may revest ownership by returning the cellphone to S within the time agreed in the contract, or no
time is agreed, within a reasonable time
o B may return the cellphone even if he finds nothing wrong with the quality of the cellphone because
the discretion is with the buyer
o If B does not return the cellphone within the period, S can collect the price since the sale became
absolute
o If B has not yet returned the cellphone and it was destroyed by a fortuitous event, he will bear the
loss because ownership was transferred to him by delivery

Sale on trial or on approval or on satisfaction


(Here, the buyer may in time become the owner under the conditions specifi ed in the law; otherwise, the seller is still the
owner.) (This is a sale really dependent on the quality of the goods; it is a sale with suspensive condition.)
- Sale with suspensive condition
- Goods are delivered to the buyer but ownership remains with the seller until sale becomes absolute
- The sale becomes absolute by:
o the approval of the buyer, or
o his fail to return, or
o failure to send notice of dissatisfaction within the period agreed upon, or
o by doing overt acts manifesting buyer’s approval or satisfaction of the goods delivered (ex: iyaha na
gigamit ang goods)
- Risk of loss or deterioration is with the seller since ownership is not yet transferred to the buyer upon
delivery. Except when the loss or deterioration is due to the fault of the buyer
- Buyer must give the goods a trial except when it is clear that it cannot perform the work intended

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 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. (n)

- This article applies only to sale of specific goods


- General rule: ownership of the goods passes to the buyer upon delivery to the carrier
- Exception: delivery to the carrier does not transfer ownership to the buyer in the following cases –
1. When the ownership or possession is reserved to the seller until certain conditions are fulfilled
2. When ownership is reserved until the price has been fully paid

Example:
Shiela sold Bert a laptop; the radio was shipped on board a carrier. The bill of lading stated that the laptop is deliverable
to the order of Bert. The bill of lading was sent to Bert, accompanied by a bill of exchange which Bert was supposed I to
honor. If Bert does not honor the bill of exchange, but wrongfully retains the bill of lading, ownership remains with the
seller. If Bert sells the bill of lading to Jack, Jack can obtain ownership of the goods if heis an innocent purchaser.

Art. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the
buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual
delivery has been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract
and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the time of such delivery;

(2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the
party in fault.

- General rule: in case of loss, the risk is borne by the owner of the thing at the time of loss
- Before the perfection of the contract, the seller bears the loss because he is still the owner at that time
o EX: S agrees to sell to B his car. Before the actual sale of the car, it was destroyed by a flood. B is
not liable to pay S. S bears the loss of the car.
- When the ownership transfers to the buyer, whether there is delivery or not, the loss shall be borne by the
buyer
o EX: S sold his car to B. it is agreed that B will pay and get the car next day. The car was destroyed
by the flood. B must still pay the price because he was already the owner even if there was no
delivery yet.
- However, even if the ownership is still with the seller, the buyer shall bear the loss from delivery:
o if the purpose of the reservation of ownership is merely to secure performance of the buyer’s
obligations under the contract, or
o when there has been delay in the delivery due to the fault of the buyer

Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and
who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods
than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner of goods
to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent
jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special
laws. (n)

Exaple
(a) Tere bought a pair of shoes from a shoe store and repair shop. It was later discovered, however, that the
shoes did not belong to the store but to a customer who had left it there for repair. Did Tere acquire good title to
the shoes?
ANS.: Yes, although the store was not the owner of the shoes. The reason is simple: The shoes were purchased
at a merchant’s store. A contrary rule would retard commerce.
(b) What is a store?
ANS.: It is any place where goods are kept and sold by one engaged in buying and selling. Thus, it hasbeen held
that the placing of an order for goods and the making of payment thereto at a principal offi ce of a producer of
logs does not transform said offi ce into a store, for it is a necessary element that there must also be goods or
wares stored therein or on display and that
the fi rm or person maintaining said offi ce is actually engaged in the business of buying and selling.

Art. 1506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale,
the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the
seller's defect of title. (n)

Example:
1. Sarah bought a car from Jay(an insane man), and in turn sold the car to Celso who is in good faith. After
delivery of the car to Celso, he becomes its owner if, at the time he bought it, the contract between Sarah
and Jay had not yet been annulled.

(a) Before a voidable contract is annulled it is considered valid.


(b) Where one of two innocent parties must suffer, he who placed the offender in a position to do wrong
must suffer.

2. Can a buyer acquire title from a thief (a person who stole and then sold the goods to him)?
ANS.: No, because the owner has been unlawfully deprived of it. Hence, the true owner can get it back without
reimbursement.
If the buyer had acquired the stolen automobile at a public auction, even if he be in good faith, the true
owner can still get it from him, but this time he would be entitled to reimbursement.

Art. 1507. A document of title 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 is a negotiable document of title. (n)
What ‘Document of Title’ Includes
(a) any bill of lading
(b) dock warrant
(c) quedan
(d) warehouse receipt or order
(e) any other document used as proof of possession or as authority to transfer the goods represented by
the document.

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

(1) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to
deliver the goods to the bearer; or

(2) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to
deliver the goods to the order of a specified person, and such person or a subsequent endorsee of the document has
indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document
of title has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any specified person,
and in such case the document shall thereafter be negotiated only by the endorsement of such endorsee. (n)

Q1: How Negotiable Document of Title is Negotiated


There are two forms of negotiating a negotiable document of title:
(a) mere delivery;
(b) indorsement PLUS delivery.

Q.2:When Mere Delivery is Suffi cient


Mere delivery (handing over) is suffi cient —
(a) If “deliverable to bearer.”
(NOTE: The holder can just transfer it to a friend,and the friend will be entitled to the goods.)
(b) If “deliverable to the order of a certain person” AND that person has indorsed it in blank merely (put his name
at the back) or indorsed it to bearer (at the back, he placed “deliver to bearer” and then he signed his name).
The
document can now be negotiated by mere delivery.

Art. 1509. A negotiable document of title may be negotiated by the endorsement of the person to whose order the goods
are by the terms of the document deliverable. Such endorsement may be in blank, to bearer or to a specified person. If
indorsed to a specified person, it may be again negotiated by the endorsement of such person in blank, to bearer or to
another specified person. Subsequent negotiations may be made in like manner. (n)

* This refers to negotiation by indorsement and delivery.


Example: The document says “deliver to the order of Mr. Gin” To negotiate it, Mr. Gin must sign his name at the
back and then deliver. Mere delivery without signing is not sufficient. When he signs he may:
-just sign his name (blank indorsement);
-or say “deliver to Ms. Yase”;
- or say “deliver to bearer.”
(NOTE: Mr. Gin can in turn indorse it in blank,to bearer, or to another specified person.)

Art. 1510. If a document of title which contains an undertaking by a carrier, warehouseman or other bailee to deliver the
goods to bearer, to a specified person or order of a specified person or which contains words of like import, has placed
upon it the words "not negotiable," "non-negotiable" or the like, such document may nevertheless be negotiated by the
holder and is a negotiable document of title within the meaning of this Title. But nothing in this Title contained shall be
construed as limiting or defining the effect upon the obligations of the carrier, warehouseman, or other bailee issuing a
document of title or placing thereon the words "not negotiable," "non-negotiable," or the like. (n)
Q1:Effect of Placing the Word ‘Non-Negotiable’
Example:
A negotiable document of title was marked “non-negotiable”by the warehouseman (or carrier or depositary). Is it still
negotiable?
ANS.: Yes, insofar as the various holders of the note are concerned, the note is still negotiable. Regarding the intent or
liability of the maker, this Article does not deal with the same.

Art. 1511. A document of title which is not in such form that it can be negotiated by delivery may be transferred by the
holder by delivery to a purchaser or donee. A non-negotiable document cannot be negotiated and the endorsement of
such a document gives the transferee no additional right. (n)
Example of 1st sentence of Article
(1)A document of title was non-negotiable. May it still be given or assigned to another?
ANS.: Yes, but this does not have the effect of a negotiation.It is a mere transfer or assignment.

(2) Effect of Negotiation and Indorsement of Non-NegotiableInstrument


Example of 2nd sentence of Article
A document of title contained the words “deliver to Mr.X.” This is therefore non-negotiable.
(a) May it be negotiated?
ANS.: No, but it may be transferred.
(b) Suppose it is indorsed by Mr. X?
ANS.: The indorsement is useless and does not give the indorsee any additional right. There is in this case only a transfer
or assignment.

Art. 1512. A negotiable document of title may be negotiated:


(1) By the owner therefor; or
(2) By any person to whom the possession or custody of the document has been entrusted by the owner, if, by the terms
of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the
possession or custody of the document has been entrusted, or if at the time of such entrusting the document is in such
form that it may be negotiated by delivery. (n)

Q1:Who May Negotiate Negotiable Document of Title


(a) This Article speaks of the person who may negotiate a negotiable document of title.
Example: A document of title contained the following words: “Deliver to the order of Mae or to the order of the
person to whom this document has been entrusted by Mae.”
Later, Mae entrusted the document to April. May April negotiatethe same by indorsement?
ANS.: Yes.

Art. 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in
good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the
terms of the document had or had ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the
terms of the document as fully as if such bailee had contracted directly with him. (n)

Rights of Person to Whom Negotiable Document IsNegotiated


(a) This Article speaks of some of the rights of a person to whom a negotiable document of title has been negotiated.
(b) Note that the bailee (or carrier or depositary) directly holds the property in behalf of the person to whom the
negotiable document was negotiated. It is as if such person had dealt directly with the bailee.

Art. 1514. A person to whom a document of title has been transferred, but not negotiated, acquires thereby, as against
the transferor, the title to the goods, subject to the terms of any agreement with the transferor.
If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document of
the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him
according to the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of title, the title of the
transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the transferor, or by a notification to such bailee by the
transferor or a subsequent purchaser from the transfer of a subsequent sale of the goods by the transferor. (n)

Q1:Who Can Defeat Rights of Transferee


The third paragraph refers to the persons who can defeat the right of the transferee PRIOR to the notification.

Art. 1515. Where a negotiable document of title is transferred for value by delivery, and the endorsement of the
transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to endorse the
document unless a contrary intention appears. The negotiation shall take effect as of the time when the endorsement is
actually made. (n)

Rule if Indorsement is Needed for Negotiation


Example: A document of title contained the words “deliver to Matheo or his order.” Matheo wanted to negotiate it
to Sam, but instead of indorsing it, he merely delivered it to Sam. Has there been negotiation?
ANS.: No, because ofthe non-indorsement. But Sam acquires a right to compel Matheo to indorse it provided that:
(a) Sam paid value for the document; and
(b) no contrary intention appears.

Art. 1516. A person who for value negotiates or transfers a document of title by endorsement or delivery, including one
who assigns for value a claim secured by a document of title unless a contrary intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the validity or worth of the document; and
(4) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular
purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer without a
document of title the goods represented thereby. (n)

Q1: Effect of Indorsee’s Knowledge of Forged Indorsement


If the indorsee knows that any of the former indorsements is a forgery, he does not acquire a valid title to the
document.