Sections 1503- 1511

Alisa Mae Albay

Section 1503

Delivery of Specific Goods

 Delivery of specific goods sold generally passes title

(1) Delivery to carrier

As a general rule, delivery, be it only constructive, passes title in the thing
sold (Art. 1496) and delivery to the carrier is deemed to be a delivery to the
buyer. (Art 1523,par.1.)

(2) Redelivery by carrier to seller himself

If the seller directs the carrier to redeliver the goods at their destination to
the seller himself, or to his order, it indicates an intention that the carrier shall be
the bailee for the seller and the ownership will remain in the latter.
 Reservation of right of possession or ownership
when specific goods are shipped

As a general rule, the ownership in the goods sold passes to the buyer upon
their delivery to the carrier. There are, however, certain exceptions and they
are:
(1) If a contrary intention appears by the terms of the contract
(Art.1523,par.1; Art. 1503,par.1; Art. 1478.);

(2) In the cases provided in the second and third paragraphs of Article 1523;
and

(3) In the cases provided in the second, third, and last paragraphs of Article
1503.
 Where seller or his agent is consignee

(1) Carrier becomes bailee for seller

Where goods are shipped and by the bill of lading (Art. 1507) the goods
are deliverable to the seller or his agent or to the order of the seller or his
agent, the seller thereby reserves the ownership in the goods (par.2) and the
carrier is a bailee for him and not the buyer.

(2) Rights of seller

The seller may not only retain the goods until the buyer performs his
obligation under the Contract, but he may, even in violation of the contract,
dispose of them to third persons.
 Where seller’s title only for purpose of security.

(1) Form of bill of lading not conclusive

The circumstances may be such that were it not for the form of the bill of
landing, the ownership would have passed to the buyer on shipment of the
goods. (par.2, 2nd sentence ) This is true when the object of the seller in
reserving ownership is simply to secure himself in regard to the performance
by the buyer of the latter's obligation.

(2) Where ownership would have passed but for the form of the bill of lading
By shipping the goods, the seller has definitely lost all use of them to the
buyer. Where the title to the goods is held merely for the purpose of security
the beneficial owner (buyer), not the one who holds for security (seller), bears
the risk of loss or deterioration.
 Where buyer or his agent is consignee but seller
retains the bill of lading

(1) Right to possession of goods as against buyer

Where goods are shipped and by the bill of lading the goods are
deliverable to the 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 retains a
right to the possession of the goods as against the buyer. (par.3)

(2) Effect of retention

Although the property in the goods will ordinarily pass to the buyer on
delivery, the latter is unable to obtain the goods without the bill. The effect of
the retention of the bill of lading, under such circumstances, controlling as it
does the possession of the goods, is, therefore; closely analogous to the
retention of a lien by the seller after the property has passed to the buyer.
 Where bill of lading is sent forward with draft attached

(1) Delivery conditional

Where the seller draws on the buyer for the price and transmits the
bill of exchange and the bill of lading together to the buyer to secure
acceptance or payment of the bill of exchange (par.4), the title is regarded as
retained in the seller until the bill of exchange is paid.

(2) Duty of buyer if draft not honored

The buyer is bound to return the bill of lading if he does not honor
the bill of exchange. If he wrongfully retains the bill of lading, he acquires no
additional right thereby.
 Where bill of lading is sent forward with draft attached

(3) Right innocent third persons

As regard third persons, however, if the bill of lading provides that the
goods are deliverable to the buyer or to the order of the buyer (Art. 1507) or
is indorsed in blank (Art. 1508 ) or is indorsed to the buyer by the consignee
named therein (Art. 1509 ) ,a purchaser in good faith for value of the bill of
Iading or goods from the buyer will obtain the ownership in the goods
although the bill of exchange has not been honored.
Section 1504

Risk of Loss
 Risk of loss generally attends title

As a general rule, if the thing is lost by fortuitous event, the risk is

borne by the owner of the thing at the time of the loss (res peril domino)
Article 1504 states the exceptions.

(1) Where the seller reserves the ownership of the goods merely to secure
the performance by the buyer of his obligation under the contract, the
ownership is considered transferred to the buyer who, therefore, assumes the
risk from the time of delivery.

(2) Where actual delivery has been delayed through the fault of either the
buyer or seller, the goods are at the risk of the party at fault with respect to
any loss which might not have occurred but for such fault. In this case, the
law punishes the party at fault.
 Risk of loss by fortuitous event after perfection
but before delivery

Under Article 1480, if the thing is lost after perfection of the

contract but before its delivery, that is, even before the ownership is
transferred to the buyer, the risk of loss by a fortuitous event
without the seller’s fault is borne by the buyer as an exception to
the rule of res perit domino. Consequently, the buyer’s obligation to
pay the price subsist if he has not yet paid the same or if he had, he
cannot recover it from the seller although the latter's obligation to
deliver the thing is extinguished by its loss.
 Risk of loss by fortuitous event after perfection
but before delivery

Taken from the American law on Sales it provides that: "Unless

otherwise agreed, the goods remain at the seller’s risk until the ownership
therein is transferred to the buyer.”

By Article 1480, as already pointed out, the risk of loss of the thing
after perfection is shifted from the seller to the buyer even though the
buyer has not yet acquired ownership thereof.

This conflict can only be resolved by legislation.

 Section 1505

Sale by a person not the owner

 Sale by a person not the owner

It is a fundamental doctrine of law that no one can give what he has not. Sale
is a derivative mode of acquiring ownership and the buyer gets only such
rights as the seller had. The exceptions to the rule are given below.

(1) Where the owner of the goods is, by his conduct, precluded from denying
the seller’s authority to sell.

(2) Where the law enables the apparent owner to dispose of the goods as if
he were the true owner thereof.

(3) Where the sale is sanctioned by statutory or" judicial authority.

 Sale by a person not the owner

(4) Where the sale is made at merchant’s stores, fairs, or markets.

(5) Where the seller has a voidable title which has not been avoided at the
time of the sale. (Art.1506)

(6) Where seller subsequently acquires title.

 Section 1506

Sale by one having a voidable title

 Sale by one having a voidable title

Requisites for acquisition of good title by buyer

If the seller has only a voidable title to the goods, the buyer acquires a good
title to the goods provided he buys them:

(a) Before the title of the seller has been avoided;

(b) In good faith for value (see Art. 1636[1].); and
(c) Without notice of the seller’s defect of title.
 Definition of terms

(1) Document of title to goods

Includes any bill of lading, dock warrant, “quedan” or warehouse
receipt or order for the delivery of goods or any other document used in the
ordinary course of business in the sale or transfer of goods, as proof of the
possession or control of the goods, or authorizing or purporting to authorize
the possessor of the document to transfer or receive, either by indorsement
or by delivery, goods represented by such document. ( Art. 1636)
 Definition of terms

2) Goods
Includes all chattels personal but not things in action or money of legal
tender in the Philippines. The term ' includes growing fruits or crops.

(3) Order
Relating to documents of title means an order by indorsement on the
documents.
 Section 1507

Nature and Function of Documents of

Title
 Nature and function of documents of title.

(1) Receipts of, orders upon, a bailee of goods represented

Documents of title (Art. 1636 ) refer to goods and not to money.

They all have this in common: that they are receipts of a bailee, or
orders upon a bailee.
 Nature and function of documents of title.

(2) Evidence of transfer of title and possession of goods and contract between
the parties
A document of title is a symbol of the goods covered by it, serving as:
(a) transfer of title
(b) transfer of possession
(c) contract between the parties who are bound by its terms.
So far as concerns the transfer of property between the parties, their
intention would be effectual without the document, but where third parties
rights are involved, the form of the document becomes important.
 Most common forms of documents of title

(1) Bill of Iading

It is a contract or receipt for the transport of goods and their delivery
to the person named therein, to order, or to bearer. lt usually involves three
(3) persons: the carrier, the shipper, and the consignee. The shipper and the
consignee may be one and the same person;

(2) Dock warrant

It is an instrument given by dock owners to an importer of goods
warehoused on the dock recognizing the importer’s title to the said goods;
and
 Most common forms of documents of title

(3) Warehouse receipt

It is a contract or receipt for goods deposited with a warehouseman
containing the latter’s undertaking to hold and deliver the said goods to a
specified person, to order, or to bearer. Quedan is a warehouse receipt usually
for sugar received by a warehouseman
 Classes of documents of titles

(1) Negotiable documents of title or those by the terms of which the bailee
undertakes to deliver the goods to the bearer and those by the terms of
which the bailee undertakes to deliver the goods to the order of a
specified person; or

(2) Non-negotiable documents of title or those by the terms of which the

goods covered are deliverable to a specified person.

The term "negotiation applies only to a negotiable document of title. A non-

negotiable document of title can be transferred, but not negotiated. (Art.
1511 )
 Section 1508

Negotiation of Negotiable documents by

Delivery
 Negotiation of a negotiable document by delivery

A negotiable document of title is negotiable by delivery if the goods are

deliverable to the bearer, or when it is indorsed in blank or to the bearer by
the person to whose order the goods are deliverable or by subsequent
indorsee. An indorsement is in blank when the holder merely signs his name at
the back of the receipt without specifying to whom the goods are to be
delivered.

If the document is specially indorsed, it becomes an order document of

title and negotiation can only be effected by the indorsement of the indorsee.
A special indorsement specifies the person whom or whose order, the goods are
to be delivered.
 Section 1509

Negotiation of Negotiable Document by

Indorsement
 Negotiation of Negotiable Document by Indorsement

A negotiable document of title by the term which the goods are

deliverable to a person specified therein may be negotiated only by the
indorsement of such person.

(1) If indorsed in blank or to bearer, the document becomes negotiable by

delivery. (Art.1508)

(2) If indorsed to a specified person, it may be again negotiated by the

indorsement of such person in blank, to be bearer, or to another specified
person. Delivery alone is not sufficient.
 Section 1510

Negotiable Document of Title marked as

“ Non- Negotiable”
 Negotiable Documents of Title Marked “Non-negotiable”

Under Article 1510, the words “not negotiable”, “ non-negotiable” and

the like when placed upon a document of title in which the goods are to be
delivered to “order” or to “bearer” have no effect and the document continues
to be negotiable.

When the document of title is to order, the bailee is obliged to take it up

before delivering the goods. Accordingly, he is liable to the holder of an order
document if the goods are delivered to the consignee without surrender of the
document even though the latter was marked “non-negotiable.”
 Section 1511

Transfer of Non-negotiable Document

 Transfer of non-negotiable documents

A non-negotiable document of title cannot be negotiated. Nevertheless,

it can be transferred or assigned by delivery. In such a case, the transferee or
assignee acquires only the rights stated in Article 1514.

Even if the document is indorsed, the transferee acquires no additional

right.