SALES FINALS REVIEWER

Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is
object of the sale.

Obligations of Vendor
a. To transfer ownership (cannot be waived)
b. To deliver (cannot be waived)
c. To warrant object sold (this can be waived or modified since warranty is not an essential element of
the contract of sale)
d. To preserve the thing from perfection to delivery, otherwise he can be held liable for damages.

Failure to Deliver on Time

a. If the seller promised to deliver at a stipulated period, and such period is of the essence of the
contract, but did not comply with his obligation on time, he has no right to demand payment of the
price. As a matter of fact, the vendee-buyer may ask for the rescission or resolution of the sale.
b. If failure by seller to deliver on time is not due to his fault, as when it was the buyer who failed to
supply the necessary credit for the transportation of the goods, delay on the part of the seller may be
said to be sufficiently excused.

Effect of Non-Delivery
If the seller fails to deliver, and the buyer has no fault, the latter may ask for the resolution or rescission of the
contract. (Gonzales v. Haberer)

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 Arts. 1497 (Actual Delivery) to 1501, (Constructive Delivery) or in any other
manner signifying an agreement that the possession transferred from the vendor to the vendee.

Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of
the vendee.
This article speaks of real or actual delivery (Actual tradition)

When Ownership is not transferred despite delivery

The delivery of the sugar to the warehouse of the buyer transfers ownership provided that the sale had
already been perfected (Ocejo Perez and Co. v. Int. Bank), but ownership is not transferred, although there
has been perfection and delivery, if it was intended that no such transfer of ownership will take place until
full payment of the price. (See Art. 1478, Civil Code: The parties may stipulate (expressly or implied) that
ownership in the thing shall not pass to the purchaser until he has fully paid the price. (Masiclat, et. al. v.
Centeno)

Tradition or delivery mode of acquiring ownership, as a consequence of certain contracts such as sale, by
virtues of which, actually or constructively, the object is placed in the control and possession of the vendee.

Kinds of delivery or tradition (Take note/Memorize)

a. Actual or real. (Art. 1497, Civil Code)
b. Legal or constructive.
1. Legal formalities (Art. 1498, Civil Code)
Ex: Deed of Absolute Sale
2. Symbolical tradition or tradition simbolica (such as the delivery of the key of the place where the
movable sold is being kept.) (Art. 1498, par. 2, Civil Code).
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. (Art. 1499, Civil Code)
4. Traditio brevi manu (if the buyer had already6 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).- Speaks of
prior possession of a thing sold. (Art. 1499, Civil Code) Example: Rent to own car.
5. Traditio constitutum possessorium (opposite of tradition brevi manu) possession as owner
changed, for example, to possession as a lessee. No possession even there is transfer of
ownership. Example: I sold my car but continued to possess it as a lessee of the purchaser. (Art.
1500 Civil Code)

NOTE: In the case of Tan Boon Dick v. Aparri Farmers Coop Marketing Assn, Inc., the SC held that
in tradition brevi manu (and by implication, also in tradition constitutum possessorium), there is not
only constructive delivery, but also ACTUAL DELIVERY. In said case, the buyer was at the time of
the sale already a lessee of the property. The Court also held that the possession of the buyer as
lessee was converted into that of an owner from the date of the execution of the contract. The
rule applies even if the price has not been fully paid in the absence of course of any stipulation
that the ownership of the tings shall not pass to the purchaser until he has fully paid the price. Art.
1478, Civil Code)
c. Quasi-tradition delivery of rights, credits, or incorporeal property, made by:
1. Placing titles of ownership in the hands of a lawyer;
2. Or allowing the buyer to make use of the rights. (Art. 1501, Civil Code)
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.

Two kinds of Constructive Delivery (Thru Legal Formalities and Thru Traditio Simbolica)
This article treats of two kinds of constructive delivery:
a. By legal formalities (1st par.) applies to real and personal property since the law does not distinguish.
(PUatu v. Mendoza, and Buencamino v. Viceo)
b. Traditio simbolica. (2nd par.)

Effect of Non-payment of Price

Execution of the deed of sale, in the absence of any defect, transfers delivery, even if the selling price, in
whole or in part has not yet been paid, for it is not payment that transfers ownership. (Puatu v. Mendoza and
David-Read this case) (Take Note)

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.

The first part deals with traditio longa manu.

The second part deals with tradition brevi manu.
Notice that Art. 1499 speaks of movable property.

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

The basis here is consent.
Where a seller continues to occupy the land as tenant, the possession, by fiction of law, is deemed to be
constituted in the buyer. (Amuo v. Teves)

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 vendors consent, shall be
understood as a delivery.

Delivery of Incorporeal Property

a. By constructive tradition execution of public instrument.
b. By quasi-tradition placing of titles of ownership in the possession of the buyer, or the use by the
buyer of his rights with the sellers consent.
NOTE: The delivery of land title deeds is equivalent to a delivery of the property itself. (Guerrero v.
Miguel) So it is the use of the vendors right with the vendors consent.

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 on delivery, but he may revest the
ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time
has been fixed, within a reasonable time.
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 ach 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.
(Take Note)

Transaction On sale or return a sale that depends on the discretion of the buyer; it is a sale with a
resolutory condition.

Transaction On approval or on trial or satisfaction a sale really dependent on the quality of the goods; it is
a sale with suspensive condition.
The buyer may in time become the owner under the conditions specified in the law; otherwise the seller is
still the owner.

Problems on On Sale or Return

a. S delivered to B a videocam on sale or return. Did B become owner upon delivery?
Answer: Yes, in view of the delivery. Of course, B may revest the ownership in S by returning or tendering
the videocam to him within the time fixed in the contract; or if no time has been fixed, within a
reasonable time. (Art. 1501, par. 1)
b. In the preceding problem, can B return the goods even if he finds nothing wrong with the quality of
the goods?
Answer: Yes, for discretion here is with the buyer.
 c. In letter (a), if B does not return the videocam in due time, what will be the consequences of his
inaction?
Answer: The sale will be considered absolute, and the price may be recovered since after all, delivery
had been made. (Balender v. Pearce)
d. In letter (a), if B had not yet returned the goods, does he have to pay for them even if the videocam
has been destroyed by a fortuitous event?
Answer: Yes, for ownership has been transferred to him, and being the owner, he bears the loss. (46 Am.
Jur. Sales, Sec. 482)
NOTE:
a. In a case of on sale or return, the buyer has no right to return if he has materially abused the
condition of the thing. The sale in this case becomes absolute. (46 Am. Jur.
b. In a case of on sale or return, if the objects deteriorate without fault of the buyer, the buyer can still
return, provided the reasonable period for returning has not yet lapsed. (46 Am. Jur.)
c. Give the difference between a contract on sale or return and a delivery of property with option to
purchase.

Some Rules on Sale On Approval or Trial or Satisfaction

a. The risk of loss remains with seller, although there has been delivery, until the sale becomes absolute.
(46 Am. Jur.)
b. Risk of loss remains with seller although there has been delivery, if the sale has not yet become
absolute.

Exceptions:
1. If buyer is at fault;
2. If buyer had expressly agreed to bear loss. (46 Am. Jur.)
c. Buyer must give goods a trial except when it is evident that it cannot perform the work intended. (46
Am. Jur.)
d. Period within which buyer must signify his acceptance commences to run only when all the parts
essential for the operation of the object have been delivered. (46 Am. Jur.)
e. If it is stipulated that a third person must satisfy approval or satisfaction, the provision is valid, but the
third person must be in good faith. If refusal to accept is not justified, seller may still sue. (46 Am. Jur.)
f. Generally, the sale and delivery to a buyer who is an expert on the object purchased in NOT
obviously a sale on approval, trial, or satisfaction. (Ascona v. Pac. Com. Co.)

Art. 1503. Where 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
carrier or other bailee for the purpose of transmission to the buyer.

Where the 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
sellers 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 provided 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.

Art. 1504. Unless otherwise agreed, the goods remain at the sellers 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
buyers 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 buyers 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 at fault.
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 sellers authority to sell.

Nothing in this Title, however, shall affect:

1.The provisions of any factors acts, 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 merchants store or in fairs, or markets, in accordance with the Code of Commerce
and special laws.
(Take Note)

Generally, Buyer Acquires Merely the Sellers Rights

The general rule is no one can give what he does not have nemo dat quod non habet. Therefore, even if a
person be a bona fide purchaser, he succeeds only to the rights of the vendor. (US v. Sotelo) If the seller is
not the owner, the sale is null and void. (Arnido v. Francisco)

If a vendee buys a parcel of land the certificate of title to which contains an inscription requiring his seller to
execute a deed of sale of a portion of the lot in favor of another person, he merely acquires all the rights
which his seller may have over the land subject to the right of such third person. He cannot claim otherwise
for he cannot acquire more than what his seller can convey. (Bacolod Murcia Milling Co., Inc. v. De Leon, et.
al.)

If an illegitimate mother sells her childrens land to another, the buyer does not become the owner because
the seller was not. (Bustamante v. Azarcon)

Exceptions
a.When the owner of the goods by his conduct precluded from denying the sellers authority.
Example: If A sells Bs property to C, and B consents, B is stopped from denying As authority to sell.
(Gutierrez Hermanos v. Orense)
b.Second paragraph (Nos. 1, 2, 3) of Art. 1505.

Some Recording Acts

a. Sale of large cattle no transfer of large cattle shall be valid unless the same is registered, and a
certificate of transfer obtained. (Sec. 59, Rev. Adm. Code)
b. Land Registration Law. Act. 496)
c. Sale of vessels record at each principal port of entry. (Sec. 1171, Rev. Adm. Code)

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 sellers defect of title.

Effect if Seller has only a Voidable Title

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

Reason for the Law

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. (Neal, etc., Co. v. Tarley)

Purchase from a Thief

Can a buyer acquire title from a thief (a person who stole and then sold the goods to him)?

Answer: No, because the owner has been unlawfully deprived of it. Hence, the true owner can get it back
without reimbursement. (Tuason and Sampedro, Inc. v. Giminea and Art. 559, Civil Code)

- 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. 559, 2nd par.)
NOTE: All that has been stated in No. 3 applies to all cases of unlawful deprivation (theft, robbery, estafa).
(Art. 105, par. 2 RPC). It also applies to the case of a depositary who sells the car to an innocent purchaser
for value, because this would be a case of estafa and the car is an object of the crime. (Arena v.
Raymundo, Art. 105, par. 2, RPC)
NOTE: However, when no crime is committed, and only a civil liability arises (as when a buyer who had not
yet paid for the goods should sell them to another who is in good faith), the seller cannot recover from the
third person the goods, for here there was neither a losing nor an unlawful (criminal) deprivation. (Asiatic
Commercial Corp. v. Ang, et. al.)

[NOTE: For reference purposes, Art. 559 is hereby quoted

The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who
has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession
of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in
good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.]

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.

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 indorsee
of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title of the goods are deliverable to bearer or where a
negotiable document of title has be indorsed in blank or to bearer, any holder may indorse t
Same to himself or to any specified person, and in such case the document shall thereafter be negotiated
only by the endorsement of such indorsee.

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

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, warehouse man, or other bailee issuing a document of title or placing thereon the
words not negotiable, non-negotiable, or the like.

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 done. A non-negotiable document cannot be
negotiated and the endorsement of such a document gives the transferee no additional right.

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

1.By the owner thereof; 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.
Who Bears Loss in Case of Unauthorized Negotiation

If the owner of a negotiable document of title (deliverable to bearer) entrusts the document to a friend for
deposit, but the friend betrays the trust and negotiates the document by delivering it to another who is in
good faith, the said owner cannot impugn the validity of the negotiation. As between two innocent persons,
he who made the loss possible should bear the loss, without prejudice to his right to recover from the
wrongdoer. (Siy Long Bieng and Co. v. HK & Shanghai Banking Corp.)

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.
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 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 transferor of a subsequent sale of the goods
by the transferor.

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

Art.1516. A person who for value negotiates or transfers a document of title by indorsement 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.

Warranties in Negotiation or Transfer

a. This refers to warranties
1. By a person who negotiates;
2. By a person who assigns or transfers for value;
b. Note that there are warranties
1. About the document;
2. About the right to the document;
3. About the goods represented by the document.

NOTE: Merchantable goods fit for at least the ordinary purpose of the goods.

Effect of Indorsees 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. (Great Eastern Life Insurance Co. v. HK & Shanghai Banking Corp.)

Art. 1517. The indorsement of a document of title shall not make the indorser liable for any failure on the part
of the bailee who issued the document or previous indorsers thereof to fulfill their respective obligations.
Non-liability of Indorser for Failure of Bailee to Comply

Failure of the bailee or the previous indorsers to comply with their obligations does not make the present
indorsers liable. Reason: The indorser warrants only the things mentioned in the preceding article.

Art. 1518. The validity of the negotiation of a negotiable document of title is not impaired by the fact that the
negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the
owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake,
duress, or conversion, if the person to whom the document was negotiated or a person to whom the
document was subsequently negotiated paid value thereof in good faith without notice of the breach of
duty, or loss, theft, fraud, accident, mistake, duress or conversion.

Art. 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 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.
Generally No Attachment or Surrender
This Article speaks of two important things (if the document is negotiable):
a.Generally no attachment or levy, except:
1.if the document is surrendered to bailee;
2.or the negotiation of the document enjoined.
b.The bailee (or depositary or carrier) cannot be compelled to surrender the goods except:
1.if the document is surrendered to him;
2.or the document is impounded by the court.

NOTE: A creditor of the owner of the negotiable document is protected by the next article.
Art. 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.
Right of Creditor

Here, special aid is to be given to the creditor because the document concerned is negotiable. Attachment
is not easily made.

Art. 1521. Whether it is not for the buyer to take possession of the goods or for the seller t send them to the
buyer is a question depending in 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 the 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 he holds
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
be borne by the seller.

Specification for the Delivery

This Article provides for the:
1. Place of delivery;
2. Time of delivery;
3. Manner of delivery.

Art. 1522. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer
may reject them, but if the buyer accepts or retains the goods so delivered, knowing that the seller is not
going to perform the contract in full, he must pay for them at the contract rate. If however, the buyer has
used or disposed of the goods delivered before he knows that the seller is not going to perform his contract
in full, the buyer shall not be liable for more than the fair value to him of the goods so received.
Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may
accept the goods included in the contract and reject the rest. If the buyer accepts the whole of the goods so
delivered he must pay for them at the contract rate.
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. (Take Note)

Rules when the Quantity is LESS than that Agreed Upon

a.Buyer may reject;
b.Or buyer may ACCEPT what have been delivered, at the contract rate.
Example: B buys from S 100 cans of tomato sauce. S delivers only 80 cans. Can B reject the goods?
Answer: Yes. But if B accepts the goods knowing that S cannot deliver the remaining 20, he must pay
for the 80 cans at the contract rate, namely, the price fixed for each multiplied by 80. He cannot
return the 80 because he would be in estoppels.

When estoppels does not apply:

B bought 100 suits, only 60 of which arrived. He sold some of them (perhaps even for a lesser price for
purposes of propaganda or advertisement), thinking that the others were coming. Can he return the rest, if
they are unsold? What price must he pay?

Answer: Yes, he can return the rest. (Kershrnan v. Crawford Plumber Co.) Since 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. (Art. 1622, par. 1,
2nd sentence)

Rules when the Quantity is MORE than the Agreement

a.Buyer may reject ALL. He must not be burdened with the duty of segregation, if he does not so desire. (List
and Son Co. v. Chase).
b.Buyer may accept the good agreed upon and reject the rest.
c.If he gets all, he must pay for them at the contract rate. (Art. 1622, par. 2)

NOTE: For the rule to apply, the quantity must have been fixed by prior agreement. (Sheetner v. Holywood
Credit Clothing Co.)

Example of the rule: B bought from S 100 cans of tomato sauce, 120 of which arrived. What is Bs right?

Answer: B may accept 100 and return the 20. If he accepts all of the 120, he must pay for them at the
contract rate, namely, the price per can multiplied by 120.
NOTE: The law does not consider trifles and will not cure them (de minimis non curat lex). So if it was agreed
that less than 500 piculs would be delivered, and 500 piculs are actually delivered, the slight discrepancy
may be disregarded, and the case may be considered as one of sufficient compliance with the terms of the
obligation. (Matute vs. Cheong Boo). Moreover, if a buyer agrees to purchase a designated amount, but
actually orders a lesser amount, the seller cannot complain if he decided to fulfill the order for the lesser
quantity. This is a clear case of a waiver. (Quiroga v. Parsons Hardware Co.)

Implied Acceptance
Acceptance, even if not express, is implied when the buyer exercises acts of ownership over the excess
goods. (Huber v. Lalley Light Corp.)

Rule when Quality is Different

Where the seller delivers to the buyer the goods agreed upon MIXED with the goods of a different
description, the buyer may:
a. Accept the goods which are in accordance with the contract, and
b. Reject the rest.

NOTE: If the sale is indivisible, the buyer may reject the whole of the goods.

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 cases provided
for in Art. 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 omit so to do, and the goods are lost or damaged in 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 his risk during such transit.

When Delivery to Carrier is Delivery to Buyer

a. This article deals with delivery to a carrier on behalf of the buyer.
b. General rule: Delivery to carrier is deliver to buyer, if it is the duty of the seller to send the goods to the
buyer. (Behn, Meyer & Co. Ltd. V. Yangco)

Kinds of Delivery to Carrier

a. C.I.F. (cost, insurance, freight) (Since the selling price includes insurance and freight, it is understood
that said insurance and freight should now be paid by the seller.)
NOTE: All charges up to the place of destination must be paid by the seller.
- If the goods will be transported from NY C.I.F. Manila, this means that delivery should be made in
Manila. If the goods then are not delivered at Manila, seller should be held liable. (Behn, Meyer and
Co., Ltd. v. Yangco)
b. F.O.B. (free on board)

The sale may be:

1. f.o.b at the place of shipment (here, the buyer must pay the freight).
2. f.o.b. alongside (the vessel) (here, also from the moment the goods are brought alongside the vessel,
the buyer must pay for the freight or expenses).
3. f.o.b. at the place of destination (here, the seller must pay the freight, since the contract states free
on board till destination).

NOTE: The general rule in f.o.b. or f.a.s. (free alongside) sales that the property passes as soon as the goods
are delivered aboard the carrier or alongside the vessel, and that the buyer as the owner of the goods is to
bear all expenses after they are so delivered.
But the term f.o.b. and f.a.s. merely make rules of PRESUMPTION that yield to proof of contrary intent,
specially if other terms of the contract indicate a contrary intention. They may, for instance, be used only in
connection with the fixing of the price, and in such a case, they will not be construed as fixing the place of
delivery; in other words, they may be used merely to fix the price up to a certain point for it is not uncommon
to impose a duty of the seller to deliver goods at their ultimate destination for a price f.o.b. the point of
shipment. In other words, while delivery is to be made at the farther point, the seller pays for expenses only
up to the place of shipment.

Art. 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 vendor is not bound to deliver

The seller must deliver, and the buyer must pay. If the buyer does not pay, the seller is not required to deliver.
This is because a sale is a reciprocal contract giving rise to reciprocal obligations.

Effect if Period is Fixed for Payment

If a period has been fixed for the payment, the seller must deliver the thing sold even if said period has not
yet arrived. (Florendo v. Foz). He will then have to wait for the end of the period before he can demand the
price, except if the buyer has lost the benefit of the term. (Art. 1198, Warner & Co. v. Inza)

Bar
When is the vendor not obliged to make delivery after the perfection of the contract of sale?
a. If the vendee has not paid him the price for, after all, the delivery and the payment are reciprocal
obligations.
b. If no period for the payment has been fixed in the contract otherwise, the vendor might play a futile
waiting game. (Art. 1524, Civil Code).
c. Even if a period for such payment has been fixed in the contract if the vendee has lost the right to
make use of the period and still refuses to pay. (Arts. 1536 and 1198, Civil Code)

Art. 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 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.

When Seller is Deemed an Unpaid Seller

a. If only part of the price has been paid or tendered, the seller is still an unpaid seller. Notice that the
law uses the whole of the price. (Art. 1525, par. 1, Civil Code)
b. Mere delivery of a negotiable instrument does not extinguish the obligation of the buyer to pay
because it may be dishonored. (Art. 1249, par. 2, Civil Code; US v. Bedova). Therefore, the seller is still
an unpaid seller, if say, a dishonor indeed is made. (Bunde v. Smith)

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:

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 the insolvency 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.

Rights of an Unpaid Seller

This article gives at least 4 rights to the unpaid seller:
a. possessory lien (in the nature of a pledge);
b. right of stoppage in transit (available if seller has parted with the possession);
c. right to resale;
d. right to rescind the sale.

NOTE: This article does not refer to the right of the seller to ask for the purchase price, such right being
granted under other articles. (Robinson v. Kram)
Possessory Lien
a. The possessory lien is lost after the seller loses possession but his lien (no longer possessory) as an
unpaid seller remains; hence, he is still a preferred creditor with respect to the price of the specific
goods sold. His preference can only be defeated by the governments claim to the specific tax on
the goods themselves. (Arts. 2247 and 2241[3], Civil Code)
NOTE: This is the vendors lien on the PRICE.
b. Although the sellers possessory lien is in the nature of a legal pledge, and although the rule in legal
pledges is that in case of a public auction of the thing pledged, there can be no recovery of the
deficiency, notwithstanding a contrary stipulation (Arts. 2115 and 2121, Civil Code), still under Art.
1533, should be properly makes a resale of the property, he may still recover the deficiency, for the
law says he may recover from the buyer damages for any loss occasioned by the breach of the
contract of sale. (Muehlstein and Co., Inc. v. Hickman)

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:

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. (Take Note)

When seller has Possessory Lien

This article refers to the cases when the unpaid seller has a possessory lien.
Example: S sold B a specific car. No term of credit was given. S can possess a possessory lien until he is
paid.

Problem
S sold B a specific diamond ring to be paid 6 months later. By mutual agreement, B is made already the
owner, but S will act as the depositary of the ring in the meantime. If the term expires, and B has not yet paid,
may S still continue possessing the ring even if he is no longer the owner?

Answer: Yes, for he has NOT been paid. His no longer being the owner is not important, for the law says: 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. 1627, last par.)

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. (Take Note)

Possessory lien after Partial Delivery

a.This refers to a possessory lien even after a partial delivery.
b.The lien however may be waived expressly or impliedly.
NOTE: The partial delivery may have been made under such circumstances as to show an intent to waive:
a. the lien;
b. or right of retention.

Art. 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 lien thereon, does not lose his lien by reason only that he has obtained
judgment or decree for the price of the goods.
Art. 1530. Subject to the provisions of this Title, when the buyer of the goods is or becomes insolvent, the
unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, 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 if he had never parted with the
possession. (Take Note)

Right of Stoppage in Transitu

This refers to the right of stoppage in transit, available to the unpaid seller
a. If he has parted with the possession of the goods;
b. And if the buyer is or becomes insolvent. (Art. 1530, 1st part)

NOTE: In the second line, the words is or have been inserted to make it clear that the sellers right exists
even though the buyer was already insolvent at the time of sale.
Meaning of Insolvency in this Article
The insolvency referred to need not be judicially declared. It is enough that the obligations exceed a mans
assets.

Who may exercise Right of Stoppage in Transitu

The right of stoppage in transit may be exercised by any person who as between and himself and a
purchaser, may be regarded as an unpaid vendor. (Weyerhaenser Timber Co. v. First Nat. Bank)

Art. 1531. Goods are in transit within the meaning of the 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 preceding 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 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 transit, 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.

When Goods are in Transit or Not

a. This Article refers to the instances when the goods are still considered in transit and when no longer
in transit.
b. The right to get back the goods exists only when the goods are still in transit.
c. Taking of the property in transit by an unauthorized agent of the buyer does not extinguish the right of
stoppage in transitu. (Kingman and Co. v. Denison)

Effect of Refusal to Receive

If upon arrival the buyer unjustifiably refuses to receive the goods, the goods are still in transit and therefore,
the seller may still exercise the right of stoppage. (Tufts v. Sylvester)

Art. 1532. The unpaid seller may exercise his right of stoppage in transit 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 transit 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.

Art. 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 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 transit 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 a 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
issued involving the question whether the buyer had been in default for an unreasonable time before the
resale was made. (Take Note)

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.

Right of Resale
This article deals when the right of RESALE exists:
a. Perishable goods
b. Express stipulation
c. Unreasonable default

Right, not Duty, to Resell

This article confers on the seller a right to resell (to enforce his lien after title has passed) but does not impose
upon him the duty to resell. (Higgins v. California Prune Growers)

Meaning of Perishable
Goods are perishable if they are of a nature that they deteriorate rapidly. (Perretta v. Vetrone)

Deficiency or Excess in the Price

Note that the deficiency in the price may be obtained as damages. This happens when the resale price is
lower than the original selling price. (Urbansky v. Kutinsky) Indeed the resale is similar to a foreclosure of a lien
held to secure the payment of the purchase price. On the other hand, any excess in the price goes to the
seller.

Art. 1534. An unpaid seller having the right of lien or having stopped the goods in transit, 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 foArtr 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.

This article refers to the right to rescind the transfer of title and to resume the ownership in the goods.
This applies in case there has been:
1. Express stipulation or reservation;
2. Unreasonable default.

Note that damages may be recovered for the breach of contract.

There must be notice to the buyer or there must be an overt act showing an intention to rescind in order
to rescind the transfer of title.

Effect of Replevin Suit

When the seller brings a replevin suit (recovery of personal property), there is an implied rescission of the sale
of the goods sought to be recovered. (Barj State Milling Co. v. Susman). If ownership is claimed over the
property, and it is subsequently offered to a third person, these facts can be presented to indicate an
intention to rescind.

Art. 1535. Subject to the provision of this Title, the unpaid sellers right of lien or stoppage in transit 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 sellers lien or right of stoppage in
transit 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 sellers claim to a lien or right of stoppage in transit.

Effect if Buyer has already sold the goods (Take Note)

a. Generally, the unpaid sellers right of LIEN or STOPPAGE IN TRANSITU remains even if the buyer has sold
or otherwise disposed of the goods.
Except:
1.When the seller has given his consent thereto.
2.When the purchaser or the buyer is a purchaser for value in good faith of a negotiable document of title.
(Roman v. Asia Banking Corp.)
Art. 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make
use of the term as provided in article 1198.

When seller is not bound to deliver because buyer has lost the benefit of the term

Under Art. 1198, the debtor shall lose every right to make use of the period: (Take Note)
a. When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or
security for the debts;
b. When he does not furnish to the creditor the guaranties which he has promised;
c. When by his own acts he has impaired said guaranties or securities after their establishment, and
when through a fortuitous event they disappear, unless he immediately gives new ones equally
satisfactory;
d. When the debtor violates any undertaking, in consideration of which the creditor agreed to the
period;
e. When the debtor attempts to abscond.

In the cases enumerated, the vendor is not bound to deliver.

Example: A purchased goods from B. A promised to give certain securities, as a result of which, A was
given one year within which to pay. A failed to give the securities. Can B be compelled to deliver?

Ans. No. (Of course, if B so desires, he may voluntarily deliver.)

Art. 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in
which they were upon the perfection of the contract.

All the fruits shall pertain to the vendee from the day on when the contract was perfected.

Example of accessions: Fruits

Example of accessories: In the sale of a car, the jack is considered an accessory.

Duty to Preserve
This article implicitly reiterates the duty of the seller to PRESERVE. Naturally a fortuitous event excuses the
seller. But since a fortuitous event is never presumed, the loss of the property because of such event is
naturally to be proved by the seller.

Right to the Fruit

Although under the second paragraph fruits shall pertain to the buyer from the date of perfection, it is
evident that a contrary stipulation may be agreed upon, or a later date may be set. The term fruits here
includes
1. Natural spontaneous products of the soil and the young and other products of animals.
2. Industrial those produced by lands of any kind through cultivation or labor. and
3. Civil fruits are the rents of buildings, the price of leases of lands and other property and the amount
of perpetual or life annuities or similar income.

Art. 1538. In case of loss, deterioration or improvement of the thing before its delivery, the rules in article 1189
shall be observed, the vendor being considered the debtor.

Effect of Loss, Deterioration or Improvement Before Delivery

this reiterates the rule that from time of perfection to delivery, risk is borne by the buyer.

Art. 1189
When the conditions have been imposed with the intention of suspending the efficacy of an obligation to
give, the following rules shall be observed in case of the improvement, loss or deterioration of the things
during the pendency of the condition:
1. If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
2. If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood
that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its
existence is unknown or it cannot be recovered;
3. When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the
creditor;
4. If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of
the obligation and its fulfillment, with indemnity for damages in either case;
5. If the this is improved by its nature, or by time, the improvement shall inure to the benefit of the
creditor;
6. It is improved at the expense of the debtor, he shall have no other right than that granted to the
usufructuary.

Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that
is mentioned in the contract, in conformity with the following rules.
If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of
measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all
that may have been stated in the contract; but, should this be not possible, the vendee may choose
between a proportional reduction of the price and the rescission of the contract, provided that, in the latter
case, the lack in the area be not less than one-tenth of that stated.
The same shall be done, even when the area is the same, if any part of the immovable is not of the quality
specified in the contract.

The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing
sold exceeds one-tenth of the price agreed upon.

Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area or
inferior quality, he may rescind the sale. (Take Note)

Sale of Real Estate by the Unit

a. This refers to the sale of real estate by the unit. Hence, if A buys from B a piece of land supposed to
contain 1,000 sq. m. at the rate of P10,000 per sq. m., but the land has only 800 sq. m., the additional
200 must be given to A should A demand them. If this cannot be done, A may pay only P8M (for the
800 sq. m.) or rescind the contract.
b. If in the above example, there are only 950 sq. m., can A ask for rescission?

Ans. As a rule No, because the lack is only 50 sq. m. (The lack must be at least 1/10 of the area
stated.) However, if A would not have bought the land had he known of its smaller area, he may
rescind the sale.
NOTE: The 1/10 part referred to in the article applies to 1/10 of the area stated in the contract, not to
1/10 of the true or actual area. This is evident because of the wording of the law area stated.

Unit Price Contract

If a contract is a unit price contract (as distinguished from a lump sum contract) payment will be
made only on the basis of contractual items actually performed, in accordance with the given plans
and specifications.

In such unit price contract, the amount agreed upon is generally merely an estimate, and may be
reduced or increased depending upon the quantities performed multiplied by the unit prices
previously agreed upon. For a unit price formula to be applied, there must be a stipulation to such
effect. Incidentally, a contractor may not be awarded a compensation for his services, arising from a
price adjustment due to inflation. (Virgilio Dionisio v. Hon. Vicente Paterno)

Art. 1540. If, in the came of the preceding article, there is a greater area or number in the immovable than
that stated in the contract, the vendee may accept the area included in the contract and reject the rest. If
he accepts the whole area, he must pay for the same at the contract rate.

Rule when actually the area or number is greater

Example: A buys from B a piece of land supposed to contain 1,000 sq. m. at the rate of P10,000 a sq.
m. But the land really contains 1,500 sq. m. What can A do?

Ans. A may accept 1,000 sq. m. and reject the extra 500, in which case he will pay only 10M.
However, A is also allowed to accept all of the 1,500 sq m, but he just pay 15M. A is in no case
allowed to rescind the contract, for such a remedy is not allowed him under this article.

Art. 1541. The provisions of the two preceding articles shall apply to judicial sales.
Arts. 1540 and 1541 apply to judicial sales.

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be non increase or decrease of the price, although there be a greater or less
area or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able
to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless
the contract is rescinded because the vendee does not accede to the failure to deliver what has been
stipulated. (Take Note)

Sale for a Lump Sum (A Cuerpo Cierto)

Here the sale is made for a lump sum (a cuerpo cierto or por precio alzado) not at the rate per unit.
 Example: A buys a piece of land from B at the lump sum of 10M. In the contract, the area is stated to
be 1,000 sq. m. The boundaries are of course mentioned in the contract. Now then it was discovered
that the land within the boundaries really contains 1,500 sq. m. Is B bound to deliver the extra 500?

Ans. Yes. Furthermore, the price should not be increased. This is so because B should deliver all which
are included in the boundaries. If B does not deliver the remaining 500, A has the right
a. Either to rescind the contract for the sellers failure to deliver what has been stipulated; or
b. To pay a reduced proportional price, namely 2/3 of the original price. This is so because he really
gets only 2/3 of the land included within the boundaries (1,000 sq. m. out of 1,500 sq. m.)

Another example:
A buys a piece of land a cuerpo cierto (for a lump sum). The contract states a certain number of sq.
m. but the land included in the boundaries happen to be LESS.
a. Is A entitled to rescind? Ans. No.
b. Is A entitled to pay a reduced price? Ans. No.

The Civil Code presumes that the purchaser had in mind a determinate piece of land and that he
ascertained its area and quality before the contract was perfected. If he did not do so, or if having done so,
he made no objection and consented to the transaction, he can blame no one but himself. (Teron v.
Villanueva Viada de Riosa)

Delivery of All the Land Included in the Boundaries

What is important is the delivery of all the land included in the boundaries:
a. If this is done, there is compliance with the contract and the greater or lesser area is immaterial. So
apply par. 1 of this Article.
b. If this is not done, there is really no faithful compliance with the contract and so par. 2 should be
applied.

Effect of Gross Mistake

Regarding par. 1, although ordinarily there can be no rescission or reduction or increase whether the area
be greater or lesser, still there are instances in which equitable relief may be granted to the purchaser as
where the deficiency is very great, for under such circumstances, GROSS MISTAKE may be inferred. (Asiain v.
Jalandoni)

Effect if Buyer Took the Risk as to Quantity

In one case, the Court was satisfied that although the shortage amounts to practically one-fourth of the total
area, the purchaser clearly intended to take risk of quantity, and that the area has been mentioned in the
contract merely for the purpose of description. From the circumstances that the defendant, before her
purchase of the fishpond, had been in possession and control thereof for two years as a lessee, she can
rightly be presumed to have acquired a good estimate of its value and area, and her subsequent purchase
thereof must have been premised on the knowledge of such value and area. Accordingly, she can now be
heard to claim an equitable re-auction in the purchase price on the pretest that the property is much less
than she thought it was.

Meaning of More or Less

The phrase more or less or others of like import added to a statement of the quantity, can only be
considered as covering inconsiderable or small differences one way or the other. The use of such phrases in
designating the quantity covers only a reasonable excess or deficiency. (Asiain v. Jalandoni)

Art. 1543. The actions arising from Arts. 1639 and 1642 shall prescribe in six months, counted from the day of
delivery.
Period of prescription is six months.

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, 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 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. (Take Note)

Rules of Preference in case of Double Sale (Take Note)

a. Personal property possessor in good faith.
b. Real property
1. Registrant in good faith;
2. Possessor in good faith;
3. Person with the oldest title in good faith.

NOTE:
 a. Registration here requires actual recording: hence, if the property was never really registered as
when the registrar forgot to do so although he has been handed the document, there is NO
registration.
b. Possession here is either actual or constructive since the law makes no distinction. (Take Note)
c. Title in this Article means title because of the sale, and not any other title or mode of acquiring
property. Hence, as between a buyer-possessor whose possession has ripened to ownership because
of prescription, and a registrant in good faith, the possessor-owner is naturally preferred.
d. Note that in all the rules there must be good faith; otherwise, the order of preference does not apply.
(Romeo Paylago and Rosario Dinaandal v. Ines Pastrana Jorabe and the CA).

Purchaser in good faith one who buys the property of another without notice that some other
person has a right to, or interest in such property, and pays a full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or interest of some other person in the
property. (Cui and Joven v. Paez vda. de la Cruz)

However, where two certificates of title are issued to different persons covering the same land in
whole or in part, the earlier in date must prevail as between original parties, and in case of
successive registrations, where more than one certificate is issued over the land, the person holding
under the prior certificate is entitled to the land as against the person who relies on the second
certificate. The purchaser from the owner of the later certificate and his successors should resort to his
vendor for redress, rather than molest the holder of the first certificate and his successors, who should
be permitted to rest secure in their title. (Felix de Villa v. Anacleto Trinidad, et. al.) (Take Note)

Remalate v. Tibe
Where the same parcel of land was allegedly sold to two different persons, Art. 1544 will not apply, despite
the fact that one deed of sale
a. The article, however, applies to double donation. (Cagaoan v. Cagaoan) and to sales made by a
principal and his agent of the same property.
NOTE: In a CA case, however, it was held that the article does not apply where property is first
donated, then sold. (Semana et. Al. vs. Goyena)
b. Reason for the rule on preference:

True, no one can sell what he does not own, but this is merely the general rule. Is Art. 1544 then an exception
to the general rule? In a sense, yes, by reason of public convenience (Aitken v. Lao); in still another sense, it
really reiterates the general rule in that insofar as innocent third persons are concerned, the registered owner
(in the case of real property) is still the owner, with power of disposition.

Illustration of Rules as to Personal Property

In the case of Tomasi v. Villa-Abrille, the Surplus Property Commission sold to a buyer all the movable goods
in a base area in Guiuan , Samar. The buyer then immediately took possession of all the movable properties
located within the area. Subsequently, however, the Commission also sold to another the same properties in
the same area.
The second buyer then filed suit to have himself declared the owner of the properties entitled to the
possession of the same. The SC ruled in favor of the first buyer because it was he who had first taken
possession in good faith of the properties.

Illustration of Rules as to Real Property

A sold land to B. Subsequently, A sold the same land to C who in good faith registered it in his name. Who
should be considered the owner?

Ans. C in view of the registration in good faith.

Astorga v. CA (Take Note)

The second buyer of property (real estate) is preferred over the first buyer if the second buyer was the first to
register the property in good faith in the Registry of Deeds.

Cruzado v. Bustos and Escobar

FACTS: A sold his land to B who began to possess it. Later, C, a stranger, sold the same land to D who in good
faith registered the sale. Who should be considered as the owner?

HELD: B should be considered the owner even if he did not register the land because D who registered the
sale did not buy the land from A. Art. 1544 does not apply for here, in this case, we have two (not one)
sellers.

(NOTE: Had C been the authorized agent of a, Art. 1544 would have applied, for then C would have been
representing his principal, A.)

Guzman vs. CA
Art. 1544 relating to double sales does not apply to a situation where the earlier transaction is pacto de retro
sale of an unregistered land and the subsequent is a donation of the land by the vendor a retro.