CHAPTER 10 – REMEDIES OF PARTIES

Caveat Emptor – Let the buyer beware

- Requires buyer to be aware of supposed title of seller to the subject matter and buyer who buys without
checking the seller’s title takes all the risks and losses consequent to such failure
Ex.
- While buyer purchases vessel at its own risk (pertains only to possibility of sale being rescinded)
In absence of formal rescission, it would be erroneous to make buyer liable for value of vessels lost or
order return of vessel without sale being first rescinded

- Also applies to execution sales

- Sheriff does not warrant title to property sold by him and not incumbent upon him to place purchaser in
possession of property

REMEDIES IN CASES OF MOVABLES

A, ORDINARY REMEDIES OF SELLER

1. Movables in General – seller may maintain an action to rescind the sale
If buyer (upon expiration of period fixed for delivery of thing) should not have appeared to receive it, or having
appeared, he should not have tendered the price at the same time UNLESS a longer period has been stipulated
for its payment

2. Sale of Goods
a. Non-Payment of Price by Buyer

1. Ownership transferred to buyer Seller may maintain action against him for price of
(wrongfully neglects or refuses to pay for them goods (action for specific performance)
according to terms of contract)

2. No transfer of ownership to buyer

Cannot readily be sold for reasonable price
Seller may offer to deliver goods to buyer
If buyer refuses to receive them, notify the buyer that
goods are thereafter held by seller as bailee for buyer
Then seller may treat goods as buyers’ and maintain
an action for the price

3. When price payable on certain day Seller may maintain an action for price although
(irrespective of delivery or or transfer of title, ownership in the goods has not passed
and buyer wrongfully neglects or refuses to
pay such price)

b. When buyer wrongfully neglects or refuses to accept goods – seller – action against him for damages for non-
acceptance, provided

1. Damages shall cover estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s
breach of contract
2. When there is an available market for the goods in question, in the absence of special circumstances showing
proximate damage of a different amount, the measure of the damage is = contract price and market or current price
at the time or times when goods ought to have been accepted or if no time was fixed for acceptance, then at time
of refusal to accept
3. Buyer repudiates contract or notifies seller to proceed no further = buyer liable for labor performed or expenses of
material amount is necessary on part of seller to enable him to fulfill his obligations under sale made before receiving
notice of buyer’s repudiation or countermand
4. Profits of seller would have made if contract or sale had been fully performed shall be considered in awarding
damages

B. SPECIAL REMEDIES OF “UNPAID SELLER” OF GOODS

- Minimum requirement: goods in possession of seller

- similar “DOCTRINE OF SELF-HELP” (Art. 429 of Civil Code)

 - Authorizes owner or lawful possessor of thing to use force as may be reasonably necessary to repel or
prevent an actual or threatened unlawful physical invasion or usurpation of his property

 UNPAID SELLER (Art. 1525)

1. Whole of price has not been paid or tendered
2. Bill of exchange or other negotiable instrument has been received as conditional payment
And condition of which it was received has been broken by reason of the dishonor of the instrument, insolvency
of buyer or otherwise

Includes: agent of seller to whom bill of lading has been indorsed

Consignor or agent who has himself paid or is directly responsible for the price
Any other person who is in position of seller

 RIGHTS OF UNPAID SELLER

1. Possessory Lien
2. Stoppage in transitu
3. Special right ot resale
4. Special right to rescind

A. Possessory Lien

GEN: Seller not bound to deliver thing sold if buyer has not paid him price or no period for payment has been fixed in
contract
HOWEVER, IN ABSENCE OF STIPULATION TO CONTRARY: delivery of goods to buyer transfer ownership to latter and
non-payment of price does not prevent such transfer of ownership as a result of tradition to take effect

- Ownership of goods may have passed to buyer – unpaid seller still has a lien on the goods or right to
retain them for the price while he is in possession of them
- Has not passed – unpaid seller has right of withholding delivery similar to and co-extensive with his
right of lien

Not affected by any sale other than disposition of goods which buyer may have made unless seller assented thereto

WHEN EXERCISED:
1. Goods have been sold without any stipulation as to credit
2. Goods have been sold on credit, but term of credit has expired
3. Buyer becomes insolvent

WHEN NEGOTIABLE DOCUMENT OF TITLE ISSUED:

- no seller’s lien shall defeat right of any purchaser for value and in good faith to whom such document
has been negotiated

WHEN PART DELIVERY EFFECTED:

- may exercise his right on lien on the remainder UNLESS part delivery was made under circumstances
to show an intent to waive lien or right of retention

INSTANCES WHEN POSSESORY LIEN LOST

1. Seller delivers goods to carrier or other bailee for purpose of transmission to buyer without reserving ownership in
the goods or right to the possession thereof (still has remedy of stoppage in transit, but only if buyer has become
insolvent)
2. Buyer of his agent lawfully obtains possession of the goods
3. Waiver

B. STOPPAGE IN TRANSITU

“Notwithstanding that the ownership in the goods may have passed to buyer, the unpaid seller of goods has, IN CASE OF
INSOLVENCEY OF THE BUYER, a right of stopping the goods in transit after he has parted with the possession of them.”

Art. 1530 – when buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods,
has the right of stopping them in transit
(may resume possession of the goods at any time while they are in transit; will become entitled to same rights in regard to
the goods as he would have had if he had never parted with the possession)
WHEN NEGOTIABLE DOCUMENT OF TITLE ISSUED: no seller’s right to stoppage in transitu shall defeat the right of any
purchaser for value and in good faith to whom such document has been negotiated (whether such negotiation be prior to or
subsequent to the notification of the carrier, or other bailee who issued such document, of seller’s claim to right of stoppage
in transitu

WHEN BUYER DEEMED INSOLVENT

1. Ceased to pay his debts in ordinary course of his business
2. Cannot pay his debts as they become due (whether insolvency proceedings have been commenced or not)

WHEN GOODS DEEMED “IN TRANSIT”:

1. From time they are delivered to a carrier by land, water, or air or other bailee for 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 goods are rejected by buyer and carrier or other bailee continues in possession of them, even if seller has refused
to receive them back

WHEN GOODS DEEMED NO LONGER IN TRANSIT

1. Buyer or his agent obtains delivery of goods before their arrival at the appointed destination
2. After arrival of the goods at the appointed destination, 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
3. Carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent

WHEN PART DELIVERY ALREADY MADE: remainder of goods may be stopped in transitu, unless such part delivery has
been under such circumstances as to show an agreement with the buyer to give up possession of the whole goods

HOW EXERCISED:
1. Obtaining actual possession of goods
2. Giving notice of his claim to carrier or other bailee in whose possession the goods are

- Either to person in actual possession of goods or to his principal

(be given at such time and circumstances that principal, by the exercise of reasonable diligence, may
prevent a delivery to the buyer)

- To carrier or other bailee in possession of goods

Seller mjust redeliver goods to, or according to directions of, the seller (expenses borne by him)

WHEN GOODS COVERED BY NEGOTIABL DOCUMENT OF TITLE issued by carrier or bailee

- Not obliged to deliver or justified delivering goods to unpaid seller UNLESS document is first
surrendered for cancellation

C. SPECIAL RIGHT TO RESELL GOODS – only under conditions provided by law

WHEN EXERCISABLE:
- Previously exercised either right of possessory lien or stoppage in transitu and under the conditions:
1. Goods are of perishable nature
2. Seller has been expressly reserved in case the buyer should make default
3. Buyer has been in default in payment of price for an unreasonable time

Ex. – sale is still in executory stage, to resell the movables subject matter of sale when buyer fails to pay the purchase price
Ex. – if buyer fails to take delivery and pay purchase price, seller (without need of first rescinding the contract judicially) is
entitled to resell and if he is obliged to sell it for less than contract price, buyer is liable for difference

EFFECT OF HAVING EXERCISED RIGHT OF RESALE

- Unpaid seller shall not be liable to original buyer upon sale or for any profit made by such resale but
may recover from buyer damages for any loss occasioned by breach of sale

TRANSFER OF OWNERSHIP
- Where resale is made by unpaid seller, buyer acquires good title as against original buyer
- Not only able to destroy ownership over the goods in the original buyer but also able to transfer
ownership to subsequent buyer (even if at time of tradition, he no longer had ownership to subsequent
buyer)
NOTICE TO DEFAULTING BUYER

Not essential for validity – notice of an intention to resell goods be given by seller to original buyer
Essential/relevant in determining whether buyer had been in default for an unreasonable time before resale made
- Right to resale not based on perishable nature of goods or express provision of sale

STANDARD OF CARE AND DISQUALIFICATION IN RESALE