OBLIGATIONS OF THE VENDOR

Principal obligations of the vendor.(Art. 1495)

a. To transfer ownership of the determinate thing
b. To deliver the thing
c. To warrant against eviction and hidden defects
d. To preserve the thing from perfection to delivery with proper diligence
e. To pay for the expenses for the execution and registration of the deed of sale, unless there is
stipulation to the contrary.

The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him
(actual or constructive) or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee. (Art. 1496)

Delivery of the Thing Sold

Concept of tradition or delivery

It 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.

Ways of effecting delivery.

A. Actual or real delivery.

When the thing sold is placed in the control and possession of the vendee (Art.
1497). This involves the physical delivery if the thing and is usually done by passing
of a movable thing from hand to hand.

B. Constructive or legal delivery

i. execution of public instrument

ii. symbolical tradition or traditio symbolica - when the parties make use of a token to
represent the thing delivered.
iii. traditio longa manu - by mere consent or agreement of the contracting parties.
iv. traditio brevi manu - if the buyer had already the possession of the object even before the
purchase.
v. traditio constitutum possessorium - the vendor continues in possession of the property
sold not as owner but in some other capacity.
vi. quasi-delivery or quasi-tradition (delivery of rights, credits or incorporeal rights, made by:
 placing titles of ownership in the hands of a buyer
 or allowing the buyer to make use of the right

EXAMPLE: S sold to B 100 shares of stocks. If S endorsed the certificate of stock to B, the ownership is
transferred. This transfer or delivery is called “quasi-tradition”)
Sale or return or on approval (Art. 1502)
a. On sale or return - 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 other time has been fixed, within a reasonable time.

Sale on Approval or on Trial or on Satisfaction, or other similar terms, the ownership do not pass to
the buyer except:

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.

DISTINCTION BETWEEN “SALE OR RETURN” AND “SALE ON APPROVAL”

SALE OR RETURN SALE ON APPROVAL

Ownership of the goods passes to the buyer
upon delivery
The risk of loss is on the buyer
The buyer may return the goods even if he is
satisfied of its quality
Ownership passes to the buyer upon his
acceptance of the goods and the expiration of the
time given to him to signify acceptance
The risk of loss is on the seller
The buyer has no right to return the goods if he is
satisfied of its quality.

Transfer of ownership by delivery if specific goods to carrier or other bailee

General Rule: Ownership of the goods sold passes to the buyer upon their delivery to the carrier

Exception:
a. When there is stipulation to that effect.
b. When by the terms of the bill of lading, the goods are to be delivered to the seller or his agent
or to the order of the seller or his agent.
c. When by the terms of the bill of lading, the goods are to be delivered to the order of the buyer
or his agent, but the bill of lading is retained by the seller or his agent.
d. When the seller draws on the buyer a bill of exchange for the price of the goods and transmits
the bill of exchange and the bill of lading to the buyer to secure acceptance or payment of the
bill of exchange, but the buyer dishonors such bill of exchange.
However, if the bill of lading is negotiated to a purchaser for value in good faith, ownership of the goods
is passed to him. (Art. 1503)

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

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. (Art. 1506)

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

Document of title to goods. This includes any 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 the document. (Art. 1636)

Classes of documents of titles.

a. Negotiable document of title - a document of title in which it is stated that the goods referred
therein will be delivered to the bearer or to the order of any person named in such document.
The following are the kinds of negotiable documents of titles:
i. bill of lading - a contract or receipt for the transport of goods and their delivery to the person
named therein,; to order, or to bearer.
ii. dock warrant - an instrument given by dock owners to an importer of goods warehoused on
the dock recognizing the importer’s title to the said goods.
iii. quedan - a warehouse receipt usually for sugar received by a warehouseman.
iv. warehouse receipts or order - a contract or receipt for the 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.
v. any other document used as proof of possession or as authority to transfer the goods
represented by it.
How negotiable document of title is negotiated.
a. Mere delivery
b. Indorsement plus delivery

EXAMPLE: The document says “deliver to the order of Mr. X.” To negotiate it, Mr. X must sign his name
at the back and then deliver. Mere delivery without signing is not sufficient

Negotiable documents of title marked non-negotiable. A negotiable document of title even if marked
“non-negotiable” remains to be negotiable. (Art. 1510)

Effect of delivery when document cannot be negotiated by mere delivery. The delivery of an order
document of title without any indorsement does not constitute negotiation, but a mere assignment by the
holder to the purchaser or donee. (Art. 1511) The transferee shall have a right to the goods as against
the transferor; and the right to compel the transferor to indorse the indorsement.

Effect of negotiation and indorsement of non-negotiable instrument. A non-negotiable document of

title cannot be negotiated. It can only be transferred or assigned. Its indorsement does not constitute
negotiation and gives the transferee no additional rights. (Art. 1511)

Who may negotiate negotiable document of title (Art. 1512)

a. By the owner thereof

b. By the person to whom the possession or custody of the document has been entrusted by the
owner in the following cases:
i. If, by the terms of the document, the bailee issuing the document, undertakes to
deliver the goods to the person to whom the possession or custody of the document
has been entrusted.
ii. If at the time of such entrusting the document, it is in such form that it may be
negotiated by delivery.

IMPLIED Warranties of the person who negotiates a document of title by indorsement or delivery

a. That the document is genuine;

b. That he has legal right to negotiate or transfer it;
c. That he has knowledge of no fact which would impair validity or worth of the document; and
That he has a right to transfer the title to the goods and that the goods are merchantable or fit
for particular purpose.

Time and place of delivery of thing sold (Art. 1521)

a. Place of delivery
i. Place stipulated
ii. If there is no stipulation, placed fixed by usage or trade
 iii. In the absence of both, the seller’s place of business if he has one; if none, the seller’s
place of residence. However in the case of sale of specific goods, which to the
knowledge of the parties when the contract was made were in some other place, that
place shall be the place of delivery.

b. Time for delivery of goods

i. Time stipulated
ii. If there is no stipulation, delivery must be made within a reasonable time from the
execution of the contract

c. Goods in the possession of a third person. The seller has not fulfilled his obligation to deliver
the goods unless such third person acknowledges to the buyer that he holds the goods on the
buyer’s behalf

d. Demand or tender of delivery. It must be made at a reasonable hour to be effectual.

e. Expenses of delivery. The seller bears the expenses unless otherwise stipulated.

DELIVERY OF GOODS IN TERMS OF QUANTITY (ARTICLE 1522)

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.

** However, if 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.

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.
(b) Buyer may accept the goods agreed upon and reject the rest.
(c) If he gets all, he must pay for them at the contract rate.

Implied Acceptance
Acceptance, even if not express, is implied when the buyer exercises acts of ownership over the excess
goods.

Rule When Quality is Different

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

**If the sale is indivisible, the buyer may reject the whole of the goods.
 DELIVERY TO CARRIER (ARTICLE 1523)

General Rule: Delivery to carrier is delivery to buyer, if it is the duty of the seller to send the goods to
the buyer.

Kinds of Delivery to Carrier

Delivery to carrier may be:
1. 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.

**So all charges up to the place of destination must be paid by the seller.

2. F.O.B. (free on board)

The sale may be:
a) f.o.b. at the place of shipment (here, the buyer must pay the freight).
b) 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).
c) f.o.b. at the place of destination (here, the seller must pay the freight, since the contract states
“free on board till destination).

WHEN VENDOR IS NOT BOUND TO DELIVER (ARTICLE 1524)

General Rule: If the buyer does not pay, the seller is not required to deliver.

Effect if Period is Fixed for Payment

General Rule: The seller must deliver the thing sold even if said period has not yet arrived. He will then
have to wait for the end of the period before he can demand the price.
EXCEPTION: If the buyer has lost the benefit of the term (ARTICLE 1536).
RIGHTS OF UNPAID SELLER (ARTICLE 1526)

 possessory lien (in the nature of a pledge ART. 1527);

 right of stoppage in transitu (available if seller has parted with the possession) ART. 1530;
 right of resale ART. 533;
 right to rescind the sale ART. 1534.

WHEN UNPAID SELLER HAS POSSESSORY LIEN (ARTICLE 1527)

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.

POSSESSORY LIEN AFTER PARTIAL DELIVERY (ARTICLE 1528)

General Rule: Where an unpaid seller has made part delivery of the goods he may exercise his right of
lien on the remainder.
Exception: Part delivery has been made under such circumstances as to show an intent to waive the
lien or right of retention

** Waiver may be express or implied.

WHEN POSSESSORY LIEN IS LOST (ARTICLE 1529)

1. When he delivers the goods to a carrier or other bailee for the purpose of transmission to the
buyer without reserving the ownership in the goods or the right to the possession thereof
2. When the buyer or his agent lawfully obtains possession of the goods;
3. By waiver thereof.
**The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has
obtained judgment or decree for the price of the goods.

WHEN GOODS ARE IN TRANSIT OR NOT (ARTICLE 1531)

GOODS IN TRANSIT GOODS ARE NO LONGER IN TRANSIT

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;
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
If the buyer, or his agent in that behalf, obtains
delivery of the goods before their arrival at the
appointed destination;
If, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledges to
the buyer or his agent that he holds the goods on his
behalf and continues in possession of them as bailee
for the buyer or his agent; and it is immaterial that
further destination for the goods may have been
indicated by the buyer;
If the carrier or other bailee wrongfully refuses to deliver
the goods to the buyer or his agent in that behalf.
RIGHT OF RESALE (ARTICLE 1533)
Right of RESALE exists:
a. perishable goods
b. express stipulation
c. unreasonable default

RIGHT TO RESCIND THE TRANSFER OF TITLE AND TO RESUME THE OWNERSHIP OF THE
GOODS (ARTICLE 1534)

1. express stipulation or reservation;

2. unreasonable default.

**The damages may be recovered for the breach of contract.

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

WHEN THE BUYER ALREADY SOLD THE GOODS (ARTICLE 1535)

General Rule: The unpaid seller’s right of LIEN or STOPPAGE IN TRANSITU remains.
Exception:
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.

EFFECT OF LOSS, DETERIORATION OR IMPROVEMENT BEFORE DELIVER (ARTICLE 1538)

**Rules in Art. 1189 shall be observed.

Without Debtor’s With Debtor’s Fault

fault
LOSS Obligation is Damages
extinguished
DETERIORATION Impairment to be Rescission + Damages
borne by the Creditor Fulfillment + Damages
IMPROVEMENT Nature or Time = With Debtor’s Expense = Rights
Benefit of Creditor of usufructuary on the part of the
Debtor