Judge Adviento Sales Prefinals Eh408

SALES
PRE FINALS
Arts. 1495-1506
FOR EXCLUSIVE USE OF EH408 2016-2017
the control and possession of the vendee.

(1462a)
General Obligations:
To preserve the thing
ARTICLE 1498. When the sale is made through
Deterioration, loss or improvement
a public instrument, the execution thereof
To deliver the thing sold
shall be equivalent to the delivery of the thing

which is the object of the contract, if from the
ARTICLE 1495. The vendor is bound to
deed the contrary does not appear or cannot
transfer the ownership of and deliver, as well
clearly be inferred.
as warrant the thing which is the object of the
With regard to movable property, its delivery
sale. (1461a)
may also be made by the delivery of the keys

of the place or depository where it is stored or
ARTICLE 1496. The ownership of the thing
kept. (1463a)
sold is acquired by the vendee from the

moment it is delivered to him in any of the
ARTICLE 1499. The delivery of movable
ways specified in articles 1497 to 1501, or in
property may likewise be made by the mere
any other manner signifying an agreement that
consent or agreement of the contracting
the possession is transferred from the vendor
parties, if the thing sold cannot be transferred
to the vendee. (n)
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. (1463a)
After perfection of the contract and before

delivery, what are the obligations of the seller?
ARTICLE 1500.
There may also be traditio
constitutum possessorium. (n)

-
To preserve the thing. Ordinary diligence

of a good father of the family.
ARTICLE 1501. With respect to incorporeal

property, the provisions of the first paragraph
To deliver and transfer the ownership of
of article 1498 shall govern. In any other case
the thing. Under the law, delivery means
wherein said provisions are not applicable, the
not only means transfer of possession but
placing of the titles of ownership in the
also transfer of control. You cannot have
possession of the vendee or the use by the
control without possession, you cannot
vendee of his rights, with the vendor's
have possession without control.
consent, shall be understood as a delivery.

(1464)
Form (Manner) of delivery
Forms of delivery
1. Physical or real
Actual delivery - placing the thing in the hands of
2. Constructive
the buyer in actual possession of the thing
3. De
constituto
(constitutom
possessorium)
Constructive delivery:
ARTICLE 1497. The thing sold shall be
a. Execution of a public instrument - does not
understood as delivered, when it is placed in
always have the effect of delivery if there is a legal
1 | UNIVERSITY OF SAN CARLOS
CONTRERAS | VALLINAS | YANOYAN
SALES
PRE FINALS
impediment in placing the buyer in actual
ex. shares of stocks
possession of the thing.
-delivery of title with respect to shares of stocks -deliver the certificate of stock which represents
What is a public document?
ownership in the corporation
Only constitutes constructive delivery if the seller
-delivery of title does not refer to delivery of
is in the position to place the buyer in actual
property if its not incorporeal property
possession.
Allowing the vendee to use his rights as new
If for example another person is in possession of
owner with the consent of the owner -- refers to
the property, execution of a public document is
incorporeal property
ineffective.
When does the corporation recognize you as new
This does not refer only to real property. This also
owner?
applies to sales of personal property.
It is not binding until the shares are transferred in

a stock transfer certificate. Then the buyer
b. Constitutum possessorium
becomes the registered stockholder.
- the seller is in physical possession but in another
In Cebu City alone there are more than 50,000
capacity. Ex: The seller becomes the leasse
registered corporations. Most of the corporations

are small corporations. In the 90s, we already had
c. Traditio brevi manu
20,000 registered corporations. It is very easy to
- the buyer is already in physical possession
form a corporation. But what they don't know is
maybe as a bailee in commodatum or lessor
that every year you have to make reports. Ex:

annual audited financial statements
It is impractical if the seller takes the thing from

the buyer so he can physically deliver the thing to
For registered property, what is the operative act
the buyer. That is ridiculous.
that binds the property? Even a verbal sale binds

the buyer and the seller, but as far as third
d. Traditio longa manu
persons are concerned it is the execution of a
-the subject matter of the sale is movable property
public document that transfers ownership.
-personal property is not in the actual possession

of the seller
CASES
-thing is in another place, in the possession of
For cases, please take care of the facts
another person who acknowledges that thing is
Kinds of delivery
owned by the buyer
[San Lorenzo Development Corp v. CA]
-if the third person has the right consistent with

that of the seller, traditio longa manu just be
Ruling:
execution of a public document will not result in

delivery
Explicitly, the law provides that the

ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in
e. Traditio symbolica
any of the ways specified in Article 1497 to 1501.
-incorporeal property cannot be touched, cannot
The
be seen
restrictively to mean transfer of actual physical
word
delivered
should
not
be
taken
SALES
PRE FINALS
possession of the property. The law recognizes
transferred to the vendee only upon the delivery of
two principal modes of delivery, to wit: (1) actual
the thing sold.
delivery; and (2) legal or constructive delivery.

When execution of public document is not
Actual delivery consists in placing the
equivalent to delivery
thing sold in the control and possession of the

vendee. Legal or constructive delivery, on the
[Asset Privitization Trust v. TJ Enterprises]
other hand, may be had through any of the

following
instrument
ways:
the
execution
evidencing
the
of
sale;
public
RULING:
symbolical
tradition such as the delivery of the keys of the
In this case, there was no constructive
place where the movable sold is being kept;
delivery of the machinery and equipment upon the
traditio longa manu or by mere consent or
execution of the deed of absolute sale or upon the
agreement if the movable sold cannot yet be
issuance of the gate pass since it was not Asset
transferred to the possession of the buyer at the
but Creative Lines which had actual possession of
time of the sale; traditio brevi manu if the buyer
the property. The presumption of constructive
already had possession of the object even before
delivery is not applicable as it has to yield to the
the sale; and traditio constitutum possessorium,
reality that the purchaser was not placed in
where the seller remains in possession of the
possession and control of the property.
property in a different capacity.

The ownership of a thing sold shall be
Following
disquisition,
transferred to the vendee upon the actual or
respondent Babasanta did not acquire ownership
constructive delivery thereof. As a general rule,
by the mere execution of the receipt by Pacita Lu
when the sale is made through a public
acknowledging receipt of partial payment for the
instrument,
property.
between
equivalent to the delivery of the thing which is the
Babasanta and the Spouses Lu, though valid, was
object of the contract, if from the deed the
not embodied in a public instrument. Hence, no
contrary does not appear or cannot clearly be
constructive delivery of the lands could have been
inferred. In order for the execution of a public
effected.
instrument to effect tradition, the purchaser must
For
the
one,
above
the
agreement
the
execution
thereof
shall
be
be placed in control of the thing sold.

For another, Babasanta had not taken
possession of the property at any time after the
However, the
execution
of
public
perfection of the sale in his favor or exercised acts
instrument only gives rise to a prima facie
of dominion over it despite his assertions that he
presumption of delivery. Such presumption is
was the rightful owner of the lands. Simply stated,
destroyed when the delivery is not effected
there was no delivery to Babasanta, whether
because of a legal impediment. Thus, a person
actual or constructive, which is essential to
who does not have actual possession of the thing
transfer ownership of the property. Thus, even on
sold cannot transfer constructive possession by
the
the execution and delivery of a public instrument.
assumption
that
the
perfected
contract
between the parties was a sale, ownership could

not have passed to Babasanta in the absence of
Rule in sales of registered land
delivery, since in a contract of sale ownership is

SALES
PRE FINALS
contract, since it is consummated upon delivery of
[Heirs of Mascuana v. CA]
the property to the vendee. It is through tradition

The petitioners resolutely contend that the
or delivery that the buyer acquires ownership of
Deed of Absolute Sale dated August 12, 1961
the property sold. As provided in Article 1458 of
between their father and Sumilhig was a mere
the New Civil Code, when the sale is made
contract to sell because at the time of the said
through a public instrument, the execution
sale, the late Mascuana was not yet the registered
thereof is equivalent to the delivery of the
owner of Lot No. 124 or any of its portions. They
thing which is the object of the contract,
assert that Sumilhig could not have acquired any
unless the contrary appears or can be
rights over the lot due to the fact that a person can
inferred. The record of the sale with the
only sell what he owns or is authorized to sell, and
Register of Deeds and the issuance of the
the buyer can acquire no more than what the
certificate of title in the name of the buyer over
seller can transfer legally. Finally, the petitioners
the property merely bind third parties to the
insist that the document in controversy was
sale. As between the seller and the buyer, the
subject to a suspensive condition, not a resolutory
transfer of ownership takes effect upon the
condition, which is a typical attribute of a contract
execution of a public instrument covering the real
of sale.
property. Long before the petitioners secured a

Torrens
title
over
the
property,
the
It was only after the respondents rejected
respondents had been in actual possession of
the proposal of petitioner Renee Tedrew that the
the property and had designated Barte as their
petitioners secured title over the property on
overseer.
March 17, 1986 in the name of Jesus Mascuana

(already deceased at the time), canceling TCT No.
Transfer of ownership to the buyer
967 issued on July 6, 1962 under the name of

Jesus Mascuana, who appears to be a co-owner
General rule
of Lot No. 124 with an undivided two-seventh (2/7)
Exception
portion thereof.
While it is true that Jesus Mascuana
executed the deed of absolute sale over the
property on August 12, 1961 in favor of Diosdado
Case:
Sumilhig for P4,690.00, and that it was only on
consummation of contract for purposes of
July 6, 1962 that TCT No. 967 was issued in his
imposing sales tax
Determination
of
place
of
name as one of the co-owners of Lot No. 124,

Diosdado
Sumilhig
nevertheless
acquired
and
the
ownership
respondents
over
[Butuan Sawmill v CTA]
the
property. The deed of sale executed by Jesus
Yes, it is subject to sales tax.
Mascuana in favor of Diosdado Sumilhig on

August 12, 1961 was a perfected contract of sale
Petitioner
herein
contends
that
the
over the property. It is settled that a perfected
disputed sales were consummated in Japan, and,
contract of sale cannot be challenged on the
therefore, not subject to the taxing jurisdiction of
ground of the non-transfer of ownership of the
our Government.
property sold at that time of the perfection of the

SALES
PRE FINALS
The above contentions of petitioner were
and such measurement was final, thereby
devoid of merit. In a decided case with practically
making the Government of the Philippines
identical set of facts obtaining in the case at bar,
a sort of agent of the Japanese buyers.
this Court declared:

Upon the foregoing facts and the authority
". . . it is admitted that the agreed price
of Bislig Bay Lumber Co., Inc. vs. Collector
was 'F.O.B. Agusan', thus indicating,
Internal Revenue, (G.R. No. L-13186 January 28,
although prima facie, that the parties
1961) Misamis Lumber Co., Inc. vs. Collector of
intended the title to pass to the buyer
Internal Revenue (56 Off. Gaz. 517) and Western
upon delivery of the log in Agusan, on
Mindanao Lumber Development Co., Inc. vs.
board the vessels that took the goods to
Court of Tax Appeals, et al. (G.R. No. L-11710,
Japan. Moreover, said prima facie proof
June 30, 1958), it is clear that said export sales
was
had been consummated in the Philippines and
bolstered
up
by
the
following
circumstances, namely:
were accordingly, subject to sales tax therein."
1. Irrevocable letters of credit were
(Taligaman Lumber Co., Inc. vs. Collector of
opened by the Japanese buyers in favor of the
Internal Revenue, G.R. No. L-15716, March 31,
petitioners.
1962).
2. Payment of freight charges of every

shipment by the Japanese buyers.
That the specification in the bill of lading
3. The Japanese buyers chartered the
to the effect that the goods are deliverable to the
ships that carried the logs they purchased
order of the seller or his agent does not
from the Philippines to Japan.
necessarily negate the passing of title to the
4. The Japanese buyers insured the
goods upon delivery to the carrier is clear from the
shipment
the
second part of paragraph 2 of article 1503 of the
insurance coverage in case of loss in
Civil Code of the Philippines (which appellant's
transit.
counsel improperly omit from his citation):
of
logs and
collected
5. The petitioner collected the purchase

price of every shipment of logs by
Where goods are shipped, and by the bill
surrendering the covering letter of credit,
of lading the goods are deliverable to the seller or
bill of lading, which was indorsed in blank,
his agent, or to the order of the seller or of his
tally sheet, invoice and export entry, to the
agent the seller thereby reserves the ownership in
corresponding bank in Manila of the
the goods. But, if except for the form of the bill of
Japanese agent bank with whom the
lading, the ownership would have passed to the
Japanese buyers opened letters of credit.
buyer on shipment of the goods, the sellers'
6. In case of natural defects in logs
property in the goods shall be deemed to be only
shipped to the buyers discovered in Japan
for the purpose of securing performance by the
instead of returning such defective logs,
buyer of his obligation under the contract.
accepted them, but were granted a

corresponding
credit
based
on
the
contract price.
When delivery does not transfer title
7. The logs purchased by the Japanese
ARTICLE 1502. When goods are delivered to
buyers
the buyer "on sale or return" to give the buyer
representative of the Director of Forestry
an option to return the goods instead of
were
measured
by
SALES
PRE FINALS
paying the price, the ownership passes to the
When is ownership transferred? When the buyer
buyer on delivery, but he may revest the
signifies his acceptance or satisfaction.
ownership in the seller by returning or

tendering the goods within the time fixed in
When should the buyer signify his acceptance or
the contract, or, if no time has been fixed,
satisfaction?
within a reasonable time. (n)

When goods are delivered to the buyer on
If there is a trial period stipulated
Otherwise, upon lapse of reasonable
approval or on trial or on satisfaction, or other
time. This is a question of fact. (whatever
similar terms, the ownership therein passes to
that means)
the buyer:
ARTICLE 1503. Where there is a contract of
(1)
When
he
signifies
his
approval
or
sale of specific goods, the seller may, by the
acceptance to the seller or does any other act
terms of the contract, reserve the right of
adopting the transaction;
possession or ownership in the goods until

certain conditions have been fulfilled. The
(2) If he does not signify his approval or
right of possession or ownership may be thus
acceptance to the seller, but retains the goods
reserved notwithstanding the delivery of the
without giving notice of rejection, then if a
goods to the buyer or to a carrier or other
time has been fixed for the return of the
bailee for the purpose of transmission to the
goods, on the expiration of such time, and, if
buyer.
no time has been fixed, on the expiration of a

reasonable time. What is a reasonable time is
Where goods are shipped, and by the bill of
a question of fact. (n)
lading the goods are deliverable to the seller

or his agent, or to the order of the seller or of
WHEN BUYER UNJUSTIFIABLY REFUSES TO
his agent, the seller thereby reserves the
RECEIVE THE PROPERTY
ownership in the goods. But, if except for the

form of the bill of lading, the ownership would
When goods are delivered to the carrier for
have passed to the buyer on shipment of the
delivery to the buyer.
goods, the seller's property in the goods shall

be deemed to be only for the purpose of
GR: Delivery to the carrier is delivery to the
securing performance by the buyer of his
buyer
obligations under the contract.
Even if the buyer is not yet in actual possession of

the goods

lading the goods are deliverable to order of
EXCEPTION: Delivery on satisfaction
the buyer or of his agent, but possession of

the bill of lading is retained by the seller or his
Advertisements - 30 day free title, if you are not
agent, the seller thereby reserves a right to the
satisfied you can return.
possession of the goods as against the buyer.
There is already delivery in terms of transfer of

possession.
Where the seller of goods draws on the buyer

for the price and transmits the bill of exchange
SALES
PRE FINALS
and bill of lading together to the buyer to
ARTICLE 1505. Subject to the provisions of
secure acceptance or payment of the bill of
this Title, where goods are sold by a person
exchange, the buyer is bound to return the bill
who is not the owner thereof, and who does
of lading if he does not honor the bill of
not sell them under authority or with the
exchange, and if he wrongfully retains the bill
consent of the owner, the buyer acquires no
of lading he acquires no added right thereby.
better title to the goods than the seller had,
If, however, the bill of lading provides that the
unless the owner of the goods is by his
goods are deliverable to the buyer or to the
conduct precluded from denying the seller's
order of the buyer, or is indorsed in blank, or
authority to sell.
to the buyer by the consignee named therein,
Nothing in this Title, however, shall affect:
one who purchases in good faith, for value,

the bill of lading, or goods from the buyer will
(1) The provisions of any factors' acts,
obtain the ownership in the goods, although
recording laws, or any other provision of law
the bill of exchange has not been honored,
enabling the apparent owner of goods to
provided that such purchaser has received
dispose of them as if he were the true owner
delivery of the bill of lading indorsed by the
thereof;
consignee named therein, or of the goods,

without notice of the facts making the transfer
(2) The validity of any contract of sale under
wrongful. (n)
statutory power of sale or under the order of a

court of competent jurisdiction;
ARTICLE 1504. Unless otherwise agreed, the

goods remain at the seller's risk until the
(3) Purchases made in a merchant's store, or
ownership therein is transferred to the buyer,
in fairs, or markets, in accordance with the
but when the ownership therein is transferred
Code of Commerce and special laws. (n)
to the buyer the goods are at the buyer's risk

whether actual delivery has been made or not,
ARTICLE 1506. Where the seller of goods has
except that:
a voidable title thereto, but his title has not

been avoided at the time of the sale, the buyer
(1) Where delivery of the goods has been
acquires a good title to the goods, provided he
made to the buyer or to a bailee for the buyer,
buys them in good faith, for value, and without
in
notice of the seller's defect of title. (n)
pursuance
of
the
contract
and
the
ownership in the goods has been retained by

the seller merely to secure performance by the
WHEN SELLER EXPRESSLY RESERVES TITLE
buyer of his obligations under the contract,

the goods are at the buyer's risk from the time
There is delivery and but no transfer of ownership
of such delivery;
if the seller expressly reserves the right of

ownership until after full payment of purchase
(2) Where actual delivery has been delayed
price.
through the fault of either the buyer or seller

the goods are at the risk of the party in fault.
Ex:
(n)
In a contract to sell, there is delivery of real
property but you are not the owner yet. You are
SALES
PRE FINALS
allowed to take possession but you are not the
my deposit, ownership of the goods, and receipt
owner yet because the seller reserves the right to
of the warehouse man of my goods.
ownership until after payment of purchase price.

Just like the bill of lading, proof of contract of
That's very easy because you can see in the
carriage and proof of receipt by the carrier of the
contract that there is express reservation of title.
goods for carriage to another destination.
WHEN SELLER IMPLIEDLY RESERVES TITLE
MODE OF NEGOTIATION OF NEGOTIABLE

INSTRUMENTS OF TITLE
For example, if we said earlier that the GR is

delivery to carrier is delivery to the buyer.
There are two kinds of documents of title:
But, even if there is delivery to the carrier of the
1. Negotiable documents of title
goods, and the bill of lading expressly says that
2. Non-negotiable documents of title
the carrier will deliver the goods to the buyer.

Negotiable the bailee undertakes to deliver the
Ex:
goods to bearer or to the order of a specified

person or to a specified person or order.
If S sells goods to B who is in Ormoc. And S

delivers the goods to the carrier Roble shipping.
Whats the difference to the order of Maling OR
Generally, delivery to Roble Shipping would have
to Maling or order.
transferred ownership to the buyer.

WHATS THE DIFFERENCE??? Wala gitubag ni
If S impliedly reserved the ownership of the goods
Maam
because the bill of lading states that S is the

consignee. So Roble cannot deliver the goods to
NEGOTIATION is the act in which the negotiable
B, because S is the consignee.
instrument is put in circulation. By being passed

from original party to another person.
Arts. 1507-1520
Ex;
Defined
The carrier Roble Shipping which received the
What is a document of title? A title in the ordinary
goods that I delivered issued to me a bill of lading
course of business.
because Roble undertook to deliver the goods to

B. But, theres a stamp on the face of the
In a contract of sale, the document of title issued
document
of
the
bill
of
lading
NOT
by the carrier which is the bill of lading.
NEGOTIABLE. Is the document negotiable or not

negotiable? Still negotiable.
If I am the seller of goods, and my goods are

stored in a warehouse which I do not own. The
KINDS
warehouse man will issue a warehouse receipt.
Negotiable
That is also a document of title which is proof of
Defined
SALES
PRE FINALS
ARTICLE 1507. A document of title in which it

is stated that the goods referred to therein will
Where by the terms of a negotiable document
be delivered to the bearer, or to the order of
of title the goods are deliverable to bearer or
any person named in such document is a
where a negotiable document of title has been
negotiable document of title. (n)
indorsed in blank or to bearer, any holder may

indorse the same to himself or to any
Effect of the words not negotiable or non
specified person, and in such case the
negotiable
document shall thereafter be negotiated only

by the indorsement of such indorsee. (n)
ARTICLE 1510. If a document of title which

contains
carrier,
ARTICLE 1509. A negotiable document of title
warehouseman or other bailee to deliver the
may be negotiated by the indorsement of the
goods to bearer, to a specified person or order
person to whose order the goods are by the
of a specified person or which contains words
terms of the document deliverable. Such
of like import, has placed upon it the words
indorsement may be in blank, to bearer or to a
"not negotiable," "non-negotiable" or the like,
specified person. If indorsed to a specified
such
be
person, it may be again negotiated by the
negotiated by the holder and is a negotiable
indorsement of such person in blank, to
document of title within the meaning of this
bearer
Title. But nothing in this Title contained shall
Subsequent negotiations may be made in like
be construed as limiting or defining the effect
manner. (n) cd
upon
an
undertaking
document
the
may
obligations
by
1. Ways
nevertheless
of
the
or
to
another
specified
person.
carrier,
warehouseman, or other bailee issuing a

document of title or placing thereon the words
ARTICLE 1511. A document of title which is
"not negotiable," "non-negotiable," or the like.
not in such form that it can be negotiated by
(n)
delivery may be transferred by the holder by

delivery to a purchaser or donee. A non-
Negotiation
Defined
negotiable document cannot be negotiated

and the indorsement of such a document
gives the transferee no additional right. (n)
may be negotiated by delivery:

(1) Where by the terms of the document the
By delivery
carrier, warehouseman or other bailee issuing
By indorsement
the same undertakes to deliver the goods to
Validity of negotiation
the bearer; or
Who may negotiate
(2) Where by the terms of the document the
carrier, warehouseman or other bailee issuing
the same undertakes to deliver the goods to
may be negotiated:
the order of a specified person, and such
(1) By the owner thereof; or
person or a subsequent indorsee of the

document has indorsed it in blank or to the
(2) By any person to whom the possession or
bearer.
custody of the document has been entrusted
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by the owner, if, by the terms of the document

the bailee issuing the document undertakes to
2. Indorsement in blank when you just

sign the document
deliver the goods to the order of the person to

whom the possession or custody of the
3. Indorsement in bearer when you just
document has been entrusted, or if at the time
write BEARER then sign. The effect is
of such entrusting the document is in such
whoever is the bearer of the instrument
form that it may be negotiated by delivery. (n)
can demand for the delivery of the goods.
ARTICLE 1513. A person to whom a negotiable
The transferee may again negotiate the document
document of title has been duly negotiated
depending on how it was last negotiated.
acquires thereby:
(1) Such title to the goods as the person
Example 1 Negotiation of bearer instrument
negotiating the document to him had or had
by indorsement in blank
ability to convey to a purchaser in good faith

for value and also such title to the goods as
Jeric delivered goods to Angelo for safekeeping.
the person to whose order the goods were to
Angelo is the warehouse man. Angelo issued a
be delivered by the terms of the document had
negotiable warehouse receipt to Jeric which
or had ability to convey to a purchaser in good
shows that Angelo undertook to deliver the goods
faith for value; and
to bearer.
(2) The direct obligation of the bailee issuing
Give the warehouse receipt to Jeric that is now
the document to hold possession of the goods
a document of title where Angelo (bailee)
for him according to the terms of the
undertook to deliver the goods to bearer.
document as fully as if such bailee had

contracted directly with him. (n)
So, Angelo is holding a bearer document. Is it a

negotiable document of title? Yes. Specifically it is
a bearer document.
TWO MODES OF NEGOTIATION

HOW TO NEGOTIATE A BEARER DOCUMENT
1. DELIVERY
How can you negotiate it? When you have a
2. INDORSEMENT
bearer document, you can negotiate it in two

ways. Delivery only OR endorsement and
When you go to the bank to encash a check, what
delivery.
does the bank require you to do? The teller will

ask you to endorse by signing the check at the
Example
back. That is the same as negotiable documents.
instrument by special indorsement
THREE KINDS OF INDORSEMENT
Angelo delivered the document to Isha. Isha now
Negotiation
of
bearer
is holding a duly negotiated document of title.

1. Special indorsement when you write
as to whom the instrument is deliverable
10 | U N I V E R S I T Y O F S A N C A R L O S
What kind of document is that? Is it a bearer or

order document? Bearer, because the last mode
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of negotiation is delivery. So, Isha is still a
So even though you issued an order document, it
bearer.
can be converted to bearer document depending

on the last negotiation.
NEGOTIATION BY SPECIAL ENDORSEMENT

OF A BEARER DOCUMENT
What rights did Fabian acquired by virtue of

the delivery of the document of title? He
Isha will endorse the document by special
acquired whatever rights Kimbabs (transferor) had
endorsement. So, she will write the name of the
over the goods, whatever rights Jeric (depositor)
person and sign the document. Then, she
had over the goods, the direct obligation of Angelo
delivered the document to Kimbabs. That was
(bailee) to hold the goods for Fabian without
negotiation of a bearer instrument by special
need of notifying him that Fabian already has the
endorsement.
title over the goods. This is because when you

negotiate, you also transfer whatever title you
Isha did not write words of negotiability such as to
have over the goods, not just transfer of the
bearer or to order. Did it affect the negotiability
document.
of the document? No, but the document is now an

order
document
because
it
was
specially
endorsed by Isha.
Rationale: Try selling a bill of lading without the

right over the goods. No one will buy because the
instrument has no value.
Example
Negotiation
of
an
order
instrument by indorsement in bearer
Compared to a promissory note:
Now, can Kimbabs negotiate the document by
But if A issued a promissory note for 100,000 to C
mere delivery? No, since the last negotiation was
payable on August 31, 2016. But A needs the
a special endorsement. Kimbabs must negotiate it
money now so I sold the promissory note to D. D
by endorsement plus delivery.
discounted the note (D paid A) for 60,000.

However, D will expect to collect 100,000 from C
ORDER
INSTRUMENT
TO
BEARER
INSTRUMENT
over the promissory note. This is the promissory

note by itself
has intrinsic value. BUT A
DOCUMENT OF TITLE HAS NO VALUE IF

Kimbabs wrote bearer then signed the order
THERE ARE NO GOODS REPRESENTED.
document. Kimbabs delivered the document to

Fabian. Now, what kind of document is Fabian
Warranties of the person negotiating
holding? A bearer document, because it was
ARTICLE 1516. A person who for value
endorsed to bearer.
negotiates or transfers a document of title by

indorsement or delivery, including one who
So you see, the kind of document is determined
assigns for value a claim secured by a
by the mode of last negotiation. Can Fabian now
document of title unless a contrary intention
negotiate the instrument by mere delivery? Yes,
appears, warrants:
because it is now a bearer instrument.
(1) That the document is genuine;

(2) That he has a legal right to negotiate or
transfer it;
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If he has no right to transfer or negotiate
(3) That he has knowledge of no fact which
because he stole the document, that is
would impair the validity or worth of the
also a breach of warranty.
document; and
If you knew that the goods were stolen,

that is again a breach of warranty.
(4) That he has a right to transfer the title to

the
goods
and
that
the
goods
are
Ex:
merchantable or fit for a particular purpose,

whenever such warranties would have been
If Fabian goes to bailee Angelo and demands
implied if the contract of the parties had been
delivery of the goods and demands delivery of the
to transfer without a document of title the
goods because Fabian the document is now
goods represented thereby. (n)
negotiated of Fabian. If Angelo fails to deliver to

Fabian, can Fabian go after the transferor
ARTICLE
1517.
The
indorsement
of
Kimbabs?
document of title shall not make the indorser

liable for any failure on the part of the bailee
No, because the transferor does not warrant
who
previous
that the bailee will deliver the goods. This is
indorsers thereof to fulfill their respective
because the warranty of general indorser is if the
obligations. (n)
party primarily liable dishonors the instrument
issued
the
document
or
then the indorser undertakes to pay and after due

ARTICLE 1518. The validity of the negotiation
notice of dishonor.
of a negotiable document of title is not

impaired by the fact that the negotiation was a
The obligation to deliver pertains only to the
breach of duty on the part of the person
bailee. There is no secondary liability to the
making the negotiation, or by the fact that the
transferor for misdelivery or nondelivery of goods.
owner of the document was deprived of the

possession of the same by loss, theft, fraud,
Exception:
accident, mistake, duress, or conversion, if the
warrants that the bailee will deliver the goods. But
person to whom the document was negotiated
that is a different matter. That is a breach of
or a person to whom the document was
express warranty already.
Unless
the
transferor
expressly
subsequently negotiated paid value therefor in

good faith without notice of the breach of duty,
Therefore, the transferor is not liable unless it is
or loss, theft, fraud, accident, mistake, duress
expressly stipulated.
or conversion. (n)
WARRANTIES
Non negotiable
Defined
That the document is genuine.

-
Ex:
Thats why if the document is a forgery,
Fabian is the warehouse man and Isha delivered
the holder can hold the transferor liable
goods for storage. Fabian issued a warehouse
for breach of warranty.
receipt where he undertook to deliver the goods to

Isha. Fabian didnt write words of negotiability but
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sign the document. Take note, the goods were

deliverable to Isha.
If what you had was a nonnegotiable document, if

you transferred the document on June 1, and the
transferee notified the bailee only on June 30, if a
That is a non-negotiable document of title.
creditor of the transferor attaches the goods on

Then, Isha endorsed the document to Vilpa. When
June 15, the bailee is obliged to honour the writ of
you endorse, it did not convert the document into
attachment or the notice of levy. Why? As far as
a negotiable document. It still remains to be a
the bailee is concerned the owner is the
nonnegotiable document. So what Vilpa is holding
transferor.
is still a nonnegotiable document.

But if you notify the bailee on June 15, and the
But has she acquired any right by virtue of the
creditor of the transferor attaches the goods on
transfer of that nonnegotiable document? Yes!
June 30, then the bailee cannot be compelled to
She acquires a better right on the goods over
surrendered the goods because as of this date
Isha. But she did not acquire the direct obligation
(June 15) you have acquired the right of obligation
of the bailee, Fabian, to hold the goods for her.
of the bailee to hold the goods for you. As far as
Unlike earlier, Fabian was the transferee of a duly
the bailee is concerned, you are the owner of the
negotiat-ed document of title, he acquired the
goods starting June 15.
direct obligation of Angelo to hold the goods for

him without him notifying the warehouseman.
Rights acquired by transferee of a document
Vilpa has to notify the bailee that she is now the
of title
new owner of the goods. It is only from the

moment that you notify the bailee that you are the
ARTICLE 1514. A person to whom a document
new owner of the goods, that you acquire the
of
direct obligation for the bailee to hold the goods
negotiated, acquires thereby, as against the
for you.
transferor, the title to the goods, subject to the
title
has
been
transferred,
but
not
terms of any agreement with the transferor.

If the document is non-negotiable, such
So, what is the difference?
person also acquires the right to notify the

If a negotiable document of title was negotiated on
bailee who issued the document of the
June 1, the transferee of the document acquires
transfer thereof, and thereby to acquire the
the direct obligation of the warehouseman to hold
direct obligation of such bailee to hold
the goods for him on this day. So, if a creditor of
possession of the goods for him according to
the transfer or tries to attach the goods in the
the terms of the document.
possession
of
the
bailee,
the
bailee
can
rightfully refuse the order of attachment or the
Prior to the notification to such bailee by the
notice
cannot
transferor or transferee of a non-negotiable
surrender the negotiable document because
document of title, the title of the transferee to
the ware-houseman or the bailee can only be
the goods and the right to acquire the
compelled to surrender the goods covered by
obligation of such bailee may be defeated by
a negotiable document of title if the document
the levy of an attachment of execution upon
itself is surrendered. That is the general rule.
the goods by a creditor of the transferor, or by
of
claim
IF
the
creditor
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a notification to such bailee by the transferor
through delivery of the instrument. Jem acquired a
or a subsequent purchaser from the transferor
better title over the goods than Alvin.
of a subsequent sale of the goods by the

transferor. (n)
So, Jem now is the holder of the document of title.

Jem went to the warehouse and asked Pearl for
ARTICLE 1515. Where a negotiable document
the goods upon presentation of the document of
of title is transferred for value by delivery, and
title.
the indorsement of the transferor is essential

for negotiation, the transferee acquires a right
Can Pearl surrender the goods to Jem? No,
against the transferor to compel him to
because the document was not endorsed to Jem.
indorse the document unless a contrary
Jems right is to demand or compel the transferor
intention appears. The negotiation shall take
Alvin to endorsed the document to her. From the
effect as of the time when the indorsement is
time the document is endorsed, it is considered
actually made. (n)
duly negotiated. Alvin can endorse either through

special, blank or bearer.
VALIDITY OF NEGOTIATON
WHO CAN NEGOTIATE THE DOCUMENT?
The validity of negotiation is not affected by the
fact that negotiation was a breach of duty, the
The owner. If the document is a bearer document,
owner of the goods was deprived of possession.
then a bearer.
Also, between the real owner of the goods and the

transferee, the real owner of the goods has better
The person to whom possession is entrusted by
right.
the owner if by the terms of the document the

bailee undertakes to deliver the goods to whom
Ex:
the person possession is entrusted by the owner.
Pearl is the warehouse man who undertook to

deliver the goods of Alvin. Pearl issued an order
document to Alvin and Alvin delivered the
document to Jem.
Under a negotiable document of title

Which has been duly negotiated
Which has been transferred (not duly
Was the instrument negotiated? No, because
negotiated)
mere delivery does not negotiate an order
Under a non-negotiable document
instrument. An order instrument can only be
Rights of a transferee
negotiated by endorsement coupled with delivery.
Effect of indorsement
What Alvin did was merely a transfer or deliver
Levy, or garnishment of goods covered by a
the document to Jem. Thats not negotiation.
document of title
Did Jem acquire title over the goods? Yes, if
ARTICLE 1519. If goods are delivered to a
the intention was to sell the goods to Jem and
bailee by the owner or by a person whose act
Alvin delivered the title. The title was transferred
in conveying the title to them to a purchaser in

good faith for value would bind the owner and
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a negotiable document of title is issued for

them
they
in
Article 1503. When there is a contract of sale
possession of such bailee, be attached by
of specific goods, the seller may, by the terms
garnishment or otherwise or be levied under
of
an execution unless the document be first
possession or ownership in the goods until
surrendered to the bailee or its negotiation
certain conditions have been ful-filled. The
enjoined. The bailee shall in no case be
right of possession or ownership may be thus
compelled to deliver up the actual possession
reserved notwithstanding the delivery of the
of
is
goods to the buyer or to a carrier or other
surrendered to him or impounded by the
bailee for the purpose of transmission to the
court. (n) cd
buyer.
the
cannot
goods
until
thereafter,
the
while
document
the
con-tract,
reserve
the
right
of

When covered by a negotiable document
lading the goods are deliverable to the seller

or his agent, or to the order of the seller or of
General rule
his agent, the seller thereby reserves the
The goods cannot be attached
ownership in the goods. But, if except for the
Remedy of a creditor of a
form of the bill of lading, the ownership would
holder
have passed to the buyer on shipment of the

goods, the seller's property in the goods shall
ARTICLE 1520. A creditor whose debtor is the
be deemed to be only for the purpose of
owner of a negotiable document of title shall
securing performance by the buyer of his
be entitled to such aid from courts of
obligations under the contract.
appropriate jurisdiction by injunction and

otherwise in attaching such document or in
satisfying the claim by means thereof as is
lading the goods are deliverable to order of
allowed at law or in equity in regard to
the buyer or of his agent, but possession of
property which cannot readily be attached or
the bill of lading is retained by the seller or his
levied upon by ordinary legal process. (n)
agent, the seller thereby reserves a right to the

possession of the goods as against the buyer.
Rights of the bailee

Where the seller of goods draws on the buyer
When covered by a non-negotiable document
for the price and transmits the bill of exchange
of title
and bill of lading together to the buyer to

secure acceptance or payment of the bill of
The goods may be levied upon
exchange, the buyer is bound to return the bill
Requisites
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.
Obligations of the vendor; implied reservation
If, however, the bill of lading provides that the
of title; bill of lading
goods are deliverable to the buyer or to the
1, Obligation to deliver and transfer ownership on
order of the buyer, or is indorsed in blank, or
the part of the seller.
to the buyer by the consignee named therein,
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one who purchases in good faith, for value,
The twist is if what the carrier issued was
the bill of lading, or goods from the buyer will
a negotiable bill of lading, where the carrier
obtain the ownership in the goods, although
undertakes to deliver the goods to the order of the
the bill of exchange has not been honored,
buyer this does not mean the the buyer is together
provided that such purchaser has received
with that bill of ex-change. If the buyer dishonors
delivery of the bill of lading indorsed by the
the bill of exchange, you must return the bill of
consignee named therein, or of the goods,
lading. But what we have is a negotiable bill of
without notice of the facts making the transfer
lading, and he negotiates it with X who is not
wrongful. (n)
aware of his defective title. Why is the buyers title

defective? Because he dishonored the bill of
(a) The seller impliedly reserves the title if
exchange, he refused to pay. But he negotiated
the goods are delivered to the payee or to the
the negotiated the negotiable document of title to
carrier for transmission to the buyer, but the
X who was not aware of his defective title.
carrier issues a bill of lading where the goods are
Between the seller who has impliedly reserved
deliverable to him. That is implied reservation.
title over the goods and X, the buyer of the goods,

the owner of the newly negotiated document of
(b) There is also implied reservation of

title if the carrier issues a bill of lading to the order
title, who has the better right over the goods? X?

(Cannot hear the answer properly, the bell rang.)
of the buyer, but the seller retains possession of

that order document. So how can the buyer
Time and place of delivery
negotiate the docu-ment when it is still in the
Article 1521. Whether it is for the buyer to take
possession of the seller? The buyer cannot even
possession of the goods or of the seller to
demand delivery from the carrier because of the
send them to the buyer is a question
rule is that the bailee cannot be compelled to
depending in each case on the contract,
deliver the goods or surrender the goods unless
express or implied, between the par-ties. Apart
the negotiable document of title is surrendered.
from any such contract, express or implied, or
So this is again an implied reservation of title on
usage of trade to the contrary, the place of
the part of the seller.
delivery is the seller's place of business if he

has one, and if not his residence; but in case
(c) Carrier issues a bill of lading, which is
of a con-tract of sale of specific goods, which
a document of title. Where the other case is to
to the knowledge of the parties when the
deliver the goods to the buyer. Seller sends the bill
contract or the sale was made were in some
of lading to the buyer, but attaches a bill of
other place, then that place is the place of
exchange, a draft, this is an order drawn by the
delivery.
drawer [the drawer is the seller] addressed to the

drawee [who is the buyer] commanding the
Where by a contract of sale the seller is bound
drawee or the buyer to pay. This is an order to
to send the goods to the buyer, but no time for
pay. The law says that the buyer must consent to
sending them is fixed, the seller is bound to
this address to pay. Not immediately pay but he
send them within a reasonable time.
accepts to pay. If he does not agree to pay, then

he acquires no title to the goods and he must
Where the goods at the time of sale are in the
return the bill of lading to the seller.
possession of a third person, the seller has

not fulfilled his obligation to deliver to the
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buyer unless and until such third person
In the preceding two paragraphs, if the subject
acknowledges to the buyer that he holds the
matter is indivisible, the buyer may reject the
goods on the buyer's behalf.
whole of the goods.
Demand or tender of delivery may be treated
The provisions of this article are subject to
as ineffectual unless made at a reasonable
any usage of trade, special agreement, or
hour. What is a reasonable hour is a question
course of dealing between the parties. (n)
of fact.
Article 1523. Where, in pursuance of a
Unless otherwise agreed, the expenses of and
contract of sale, the seller is authorized or
incidental
required to send the goods to the buyer,
deliverable state must be borne by the seller.
delivery of the goods to a carrier, whether
(n)
named by the buyer or not, for the purpose of
to
putting
the
goods
into
transmission to the buyer is deemed to be a

Article 1522. Where the seller delivers to the
delivery of the goods to the buyer, except in
buyer a quantity of goods less than he
the cases provided for in article 1503, first,
contracted to sell, the buyer may reject them,
second and third paragraphs, or unless a
but if the buyer accepts or retains the goods
contrary intent appears.
so delivered, knowing that the seller is not

going to perform the contract in full, he must
Unless otherwise authorized by the buyer, the
pay for them at the contract rate. If, however,
seller must make such contract with the
the buyer has used or disposed of the goods
carrier on behalf of the buyer as may be
delivered before he knows that the seller is not
reasonable, having regard to the nature of the
going to perform his contract in full, the buyer
goods and the other circumstances of the
shall not be liable for more than the fair value
case. If the seller omit so to do, and the goods
to him of the goods so received.
are lost or damaged in course of transit, the

buyer may decline to treat the delivery to the
Where the seller delivers to the buyer a
carrier as a delivery to himself, or may hold
quantity of goods larger than he contracted to
the seller responsible in damages.
sell, the buyer may accept the goods included

in the contract and reject the rest. If the buyer
Unless otherwise agreed, where goods are
accepts the whole of the goods so delivered
sent
he must pay for them at the contract rate.
circumstances in which the seller knows or
by
the
seller
to
the
buyer under
ought to know that it is usual to insure, the

Where the seller delivers to the buyer the
seller must give such notice to the buyer as
goods he contracted to sell mixed with goods
may enable him to insure them during their
of a different description not included in the
transit, and, if the seller fails to do so, the
contract, the buyer may accept the goods
goods shall be deemed to be at his risk during
which are in accordance with the contract and
such transit. (n)
reject the rest.

Article 1524. The vendor shall not be bound to
deliver the thing sold, if the vendee has not
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paid him the price, or if no period for the
If the goods are to be delivered in a place other
payment has been fixed in the contract. (1466)
than the place of business of the seller, the seller

must
When must delivery be made? At the time
make
reasonable
arrangement
for
transportation.
stipulated by the parties. If there is no time

stipulated, within reasonable time. Reasonable
If the goods to be delivered are highly perishable,
time is a question of fact.
is it a reasonable arrangement for the seller to

send the goods through a slow boat? No. So if the
But there are instances where time is of the
seller does not make reasonable arrangement for
essence. Such that when delivery is not made,
transportation, and the buyer suffers loss, then the
then the seller can be liable for damages. What do
seller shall pay for damages.
you consider time is of the essence in a contract

of sale? So what is time considered to be of the
If the sellers usual practice is to ____ the goods,
essence? Can it just be inferred from the
he must notify the buyer; otherwise, the seller will
stipulations of the parties? In the case of Lorenzo
bear the risk of loss. Unless of course, the
Shipping v. BJ Marthel, the Court said there
contract is CIF, Cost Insurance Freight the
should be sufficient manifestation either in the
buyer already paid for the insurance of the freight.
contract itself or in the surrounding circumstances

to that intention. Citing Smith, Bell & Co v. Sotelo
If delivery to the carrier is delivery to the buyer,
Matti, the Court said when the time of delivery is
this will only hold true if the carrier acknowledges
not fixed or stated in general terms, time is not of
holding the goods for the buyer. Because if the
the es-sence of the contract. In such case,
carrier does not acknowledge the holding of the
delivery must be made within reasonable time.
goods of the buyer and in fact withholds the

delivery to the buyer, then delivery to the carrier
In Lorenzo Shipping, the offer made by BJ
does not transfer ownership to the buyer.
Marthel, there was an indication of the period or

time of delivery. In the final purchase order made
But if the terms of the sale include CIF
by Lorenzo Shipping, time of delivery was not
DESTINATION that means that delivery to the
indicated, and there was a delay of a few months.
carrier is not delivery to the buyer. In the case of
The Court said that delivery was made within
Behn, Meyer & Co. v. Yangco, certain goods
reasonable time.
(carabao brand caustic soda from New York), CIF

Manila shipped from New York. Some drums of
Where must delivery be made? In Obligations
caustic soda were lost because they were seized
and Contracts, where must payment be made by
somewhere. Who bore the loss of the several
the debtor? In the place stipulated by the parties.
drums of caustic soda? Was it the buyer or the
If there is no place stipulated, the place of
seller? The Court said that it was the seller
business or his residence. If the obligation is to
because ownership of the goods did not transfer
deliver a determinate thing and it is in another
until the goods reach Manila, because of that CIF
place, the place of payment is where the thing is
Manila.
located at the time when there is perfection of the

contract of sale.
Rights of the unpaid seller
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Article 1525. The seller of goods is deemed to

be an unpaid seller within the meaning of this
Article 1527. Subject to the provisions of this
Title:
Title, the unpaid seller of goods who is in
(1) When the whole of the price has not been
possession of them is entitled to retain
paid or tendered;
possession of them until payment or tender of
(2) When a bill of exchange or other negotiable
the price in the following cases, namely:
instrument has been received as conditional

payment, and the condition on which it was
(1) Where the goods have been sold without
received has been broken by reason of the
any stipulation as to credit;
dishonor of the instrument, the insolvency of

the buyer, or otherwise.
(2) Where the goods have been sold on credit,

but the term of credit has expired;
In articles 1525 to 1535 the term "seller"

includes an agent of the seller to whom the bill
(3) Where the buyer becomes insolvent.
of lading has been indorsed, or a consignor or

agent who has himself paid, or is directly
The seller may exercise his right of lien
responsible for the price, or any other person
notwithstanding that he is in possession of
who is in the position of a seller. (n)
the goods as agent or bailee for the buyer. (n)
Article 1528. Where an unpaid seller has made
Title, notwithstanding that the ownership in
part delivery of the goods, he may exercise his
the goods may have passed to the buyer, the
right of lien on the remainder, unless such
unpaid seller of goods, as such, has:
part delivery has been made under such

circumstances as to show an intent to waive
(1) A lien on the goods or right to retain them
the lien or right of retention. (n)
for the price while he is in possession of them;

Article 1529. The unpaid seller of goods loses
(2) In case of the insolvency of the buyer, a
his lien thereon:
right of stopping the goods in transitu after he

has parted with the possession of them;
(1) When he delivers the goods to a carrier or

other bailee for the purpose of transmission to
(3) A right of resale as limited by this Title;
the buyer without reserving the ownership in

the goods or the right to the possession
(4) A right to rescind the sale as likewise
thereof;
limited by this Title.

(2) When the buyer or his agent lawfully
Where the ownership in the goods has not
obtains possession of the goods;
passed to the buyer, the unpaid seller has, in

addition to his other remedies a right of
withholding
delivery
similar
to
(3) By waiver thereof.
and
coextensive with his rights of lien and
The unpaid seller of goods, having a lien
stoppage in transitu where the ownership has
thereon, does not lose his lien by reason only
passed to the buyer. (n)

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that he has obtained judgment or decree for

the price of the goods. (n)
If the goods are delivered to a ship, freight

train, truck, or airplane chartered by the buyer,
it
is
ques-tion
depending
on
the
Title, when the buyer of goods is or becomes
circumstances of the particular case, whether
insolvent, the unpaid seller who has parted
they are in the possession of the carrier as
with the possession of the goods has the right
such or as agent of the buyer.
of stopping them in transitu, that is to say, he

may resume possession of the goods at any
If part delivery of the goods has been made to
time while they are in transit, and he will then
the buyer, or his agent in that behalf, the
become entitled to the same rights in regard to
remainder of the goods may be stopped in
the goods as he would have had if he had
transitu, unless such part delivery has been
never parted with the possession. (n)
under such circumstances as to show an

agreement
Article 1531. Goods are in transit within the
with
the
buyer
to
give
up
possession of the whole of the goods. (n)
meaning of the preceding article:

(1) From the time when they are delivered to a
Article 1532. The unpaid seller may exercise
carrier by land, water, or air, or other bailee for
his right of stoppage in transitu either by
the pur-pose of transmission to the buyer,
obtaining actual possession of the goods or
until the buyer, or his agent in that behalf,
by giving notice of his claim to the carrier or
takes delivery of them from such carrier or
other bailee in whose pos-session the goods
other bailee;
are. Such notice may be given either to the
(2) If the goods are rejected by the buyer, and
person in actual possession of the goods or to
the carrier or other bailee continues in
his principal. In the latter case the notice, to be
possession of them, even if the seller has
effectual, must be given at such time and
refused to receive them back.
under such circumstances that the principal,

by the exercise of reasonable diligence, may
Goods are no longer in transit within the
prevent a delivery to the buyer.
meaning of the preceding article:

(1) If the buyer, or his agent in that behalf,
When notice of stoppage in transitu is given
obtains delivery of the goods before their
by the seller to the carrier, or other bailee in
arrival at the appointed destination;
possession of the goods, he must redeliver
(2) If, after the arrival of the goods at the
the goods to, or according to the directions of,
appointed destination, the carrier or other
the seller. The expenses of such delivery must
bailee acknowledges to the buyer or his agent
be
that he holds the goods on his behalf and
negotiable document of title representing the
continues in possession of them as bailee for
goods has been issued by the carrier or other
the buyer or his agent; and it is immaterial that
bailee, he shall not be obliged to deliver or
further destination for the goods may have
justified in delivering the goods to the seller
been indicated by the buyer;
unless such document is first surrendered for
(3) If the carrier or other bailee wrongfully
cancellation. (n)
borne
by
the
seller.
If,
however,
refuses to deliver the goods to the buyer or

his agent in that behalf.
SALES
Article
PRE FINALS
1533.
of
Article 1534. An unpaid seller having the right
seller
of lien or having stopped the goods in
expressly reserves the right of resale in case
transitu, may rescind the transfer of title and
the buyer should make default, or where the
resume the ownership in the goods, where he
buyer has been in default in the payment of
expressly reserved the right to do so in case
the price for an unreasonable time, an unpaid
the buyer should make default, or where the
seller having a right of lien or having stopped
buyer has been in default in the payment of
the goods in transitu may resell the goods. He
the price for an unreasonable time. The seller
shall not thereafter be liable to the original
shall not thereafter be liable to the buyer upon
buyer upon the contract of sale or for any
the contract of sale, but may recover from the
profit made by such resale, but may recover
buyer damages for any loss occasioned by the
from
breach of the contract.
perishable
the
Where
nature,
buyer
the
or
goods
where
damages
for
are
the
any
loss
occasioned by the breach of the contract of

sale.
The transfer of title shall not be held to have

been rescinded by an unpaid seller until he
Where a resale is made, as authorized in this
has manifest-ed by notice to the buyer or by
article, the buyer acquires a good title as
some other overt act an intention to rescind. It
against the original buyer.
is not necessary that such overt act should be

communicated to the buyer, but the giving or
It is not essential to the validity of resale that
failure to give notice to the buy-er of the
notice of an intention to resell the goods be
intention to rescind shall be relevant in any
given by the seller to the original buyer. But
issue involving the question whether the buyer
where the right to resell is not based on the
had been in default for an unreasonable time
perishable nature of the goods or upon an
before the right of rescission was asserted. (n)
express provision of the contract of sale, the

giving or failure to give such notice shall be
relevant in any issue involving the question
Title, the unpaid seller's right of lien or
whether the buyer had been in default for an
stoppage in transitu is not affected by any
un-reasonable time before the resale was
sale, or other disposition of the goods which
made.
the buyer may have made, unless the seller

has assented thereto.
It is not essential to the validity of a resale that

notice of the time and place of such resale
If, however, a negotiable document of title has
should be given by the seller to the original
been issued for goods, no seller's lien or right
buyer.
of stop-page in transitu shall defeat the right

of any purchaser for value in good faith to
The seller is bound to exercise reasonable
whom such document has been negotiated,
care and judgment in making a resale, and
whether
subject to this requirement may make a resale
subsequent to the notification to the carrier, or
either by public or private sale. He cannot,
other bailee who issued such document, of the
however, directly or indirectly buy the goods.
seller's claim to a lien or right of stoppage in
(n)
transitu. (n)
such
negotiation
be
prior
or
SALES
PRE FINALS
Unpaid seller one not yet paid. Also he is one
If the seller has made partial delivery,
who has been paid with a negotiable instrument,
then he exercises possessory lien over the
but was dishonoured. Cash, bill of exchange
remainder. Yes, generally, unless partial delivery
(check is special kind of bill of exchange.)
signifies his waiver to exercise possessory lien.
A check is dishonoured when the drawee bank

refuses to pay, either because the drawer has
Second
right
of
unpaid
seller:
Exercise
stoppage in transitu
stopped payment, or there is sufficient funds in the
Literally, to stop goods in transit. Why?
bank. [due to insufficiency of funds DAIF or closed
Because he no longer has possession of the
account.]
goods. Seller already delivered the goods to the

carrier for transmission to the buyer.
Payment
by
way
of
negotiable
instrument
produces the effect of payment when only the

check is encashed.
When do you consider the goods to be

in transit?
1, From the time they are delivered to the
An unpaid seller is one who is still in possession

and title one the goods.
2. If the buyer unjustifiably refuses to take
An unpaid seller is one who has possession but

parted ownership of the goods.
An unpaid
seller is one
carrier
delivery.
When
who
has parted
the
buyer
unjustifiably
refuses to take delivery, the goods are considered
possession but ownership of the goods.
in transit. But if it is the carrier refuses to deliver
An unpaid seller is one who has neither
the goods to the buyer, that it unjustifiably
possession nor title over the goods.
withholds devilry to the buyer, the goods are

considered not in transit anymore. Considered in
Where the unpaid seller parted ownership over
transit only if the buyer rejects. If it is the bailee
the goods. What are the rights of the unpaid seller
who refuses to deliver or withholds delivery to the
who has parted ownership over the goods?
buyer, goods are considered not in transit. So

when the goods are not in transit, the seller
First right of unpaid seller: POSSESSORY
cannot exercise stoppage in transitu.
LIEN
If he is still in possession, and he is
If the seller can exercise possessory
unpaid seller because (1) the goods have been
lien in three instances: (1) the goods have been
sold without any stipulation as to credit; (2) the
sold with-out any stipulation as to credit; (2) the
goods were sold on credit, but the term of the
goods were sold on credit, but the term of the
credit expired, or (3) buyer becomes insolvent, he
credit expired, or (3) buyer becomes insolvent, he
may exercise possessory lien over the goods.
may exercise possessory lien over the goods.
Meaning, retain possession over the goods.
Meaning, retain posses-sion over the goods.
The ___ is lost if the goods are given to

the carrier for the transmission to the buyer
There is only one instance in which the
without him reserving ownership. (A scenario
seller can exercise stoppage in transitu and that is
where the seller parted ownership over the
when the buyer is insolvent.
goods.)
SALES
PRE FINALS
If you look at the last article in Sales,
1, Goods are perishable
insolvency does not need judicial declaration.

Although, Tolentino says there should be judicial
2, If he expressly reserved the right to

resell the goods if the buyer defaults
declaration.
3, If the buyer is in default for an

unreasonable time.
The law does not require that notice be
How does the seller exercise stoppage
given by seller for the intention to resell, or notice
in transitu?
By taking actual possession or
giving notice to the person in actual possession.
of time and place of resale. BUT if the reason for

the resale is the default of the buyer for an
unreasonable time, notice of the intention to resell
If the goods are already onboard the ship
is relevant if only to establish the fact of default.

Because the buyer can challenge that.
in the middle of the ocean, contact the master of
Why will the buyer challenge that? BECAUSE if
the ship.
the goods were resold at a loss (a price lower),

If you cannot notify the person in actual
the seller can recover the loss from the buyer.
possession, then you notify the principal the
The law says that if that is the reason for the
office of the common carrier. The law requires
resale, then notice of intention is relevant to
sufficient time to notify.
establish the fact of default. BUT it will not affect

the validity of sale.
STOPPING the goods in transit because

Fourth right of the unpaid seller:
the seller wants to take possession again of the

goods. Thus, it is the obligation of the carrier to re-
RIGHT TO CANCEL THE SALE

Because
deliver the goods to the seller. And who will
remember
that
shoulder the ex-penses during the delivery? The
ownership has already been transferred to the
seller.
buyer.
Two instances in which the seller
But if the goods are governed by a
can cancel the sale: (1) he expressly reserves the
RULE: Bailee
right to rescind in case of default; and (2) if the
cannot be com-pelled to deliver the goods unless
buyer has been in default for an unreasonable
that negotiable document of title is surrendered.
time.
negotiable document of title.
Can the seller exercise stoppage in
How does he rescind? By giving notice
transitu if the goods are covered by a negotiable
the intention to rescind or by performing overt acts
document? ONLY IF HE CAN SURRENDER THE
when he has the intention to rescind.
NEGOTIABLE DOCUMENT.
NOTE: in the third and fourth instances,
Third right of the unpaid seller: RIGHT
TO RESELL OR RIGHT OF RESALE.
Can only exercise this right if the
the seller has already exercised possessory lien

or stoppage in transitu. Hence, the seller is in
possession of the goods.
seller has previously excessed possessory or

stoppage in transitu.
Three instances where he can exercise
this right:
What are these overt acts?

Offering the goods for sale. That is an
overt act manifesting the intention to rescind.
SALES
PRE FINALS
IN the right to exercise the right to resell
In case of incomplete delivery and the sale is on
the goods, must the sale be in a public sale or in a
per unit or number. Can the buyer be compelled to
private sale? Either public or private sale, BUT the
accept delivery which is less than the area
seller cannot buy the goods. Imagine a scenario in
stipulated in the contract?
which it al-lows the seller to buy. He can buy the
No, he cannot. But if he has already received
goods at a lower price. Because remember the
delivery and finds out that there is a deficiency in
seller can recover the loss from the buyer.IF he
the area, then he is entitled to either recession if
was able to sell the goods at a higher price, the
the deficiency is at least 10% of the area
seller has no obligation to share the profits to the
stipulated or reduction of the price corresponding
buyer. BUT IF he sells the goods at a loss, then
to the area.
the seller can recover the loss from the buyer by

way of damages.
What if there is an excess in the area delivered?
Thus if the reason for the resale is default
The buyer can always reject the excess but he
for an unreasonable time, notice of resell is
must accept the area stipulated. He cannot say
relevant to establish the fact of default for
that he will not accept because the area is more
unreasonable time.
than that stipulated.
Completeness of Delivery
But if he does accept the excess then he must pay
A. General consideration
at the contract price.
In ObliCon we learned that the creditor cannot be
Case:
compelled to accept partial delivery, right?
[Cebu Winland Development Corp. v. Ong Siao

Hua]
Now, what are the rules in the contract of sale?

Article 1497 above contemplates what is known
In the same manner that the creditor generally
as real or actual delivery, when the thing sold is
cannot be compelled to accept partial delivery, the
placed in the control and possession of the
buyer cannot also be compelled to accept partial
vendee. Article 1498, on the one hand, refers to
delivery. And when I say complete delivery, just
symbolic delivery by the execution of a public
like in ObliCon, the seller is oblige to deliver not
instrument. Delivery is an act by which one party
only the thing that is sold but also the accessions
parts with the title to and the possession of the
and accessories.
property, and the other acquires the right to and

the possession of the same. In its natural sense,
What about sale of real property?
delivery means something in addition to the

delivery of property or title; it means transfer of
There are two types of sale of real property. You
possession.
have sale per unit or number and you also have

lump sum.
Delivery as used in the Law on Sales refers to

the
B. Real Estate
a. Where it is sold per unit or number
concurrent
transfer
of
two
things:
(1)
possession and (2) ownership. This is the

rationale behind the jurisprudential doctrine that
SALES
PRE FINALS
presumptive delivery via execution of a public
a unit of measure or number, there shall be no
instrument is negated by the reality that the
increase or decrease of the price, although there
vendee
be a greater or less area or number than that
actually
failed
to
obtain
material
possession of the land subject of the sale. In the
stated in the contract.
same vein, if the vendee is placed in actual

possession of the property, but by agreement of
In sale by lump sum, it also indicates not only the
the parties ownership of the same is retained by
boundaries but also the area.
the vendor until the vendee has fully paid the

price, the mere transfer of the possession of the
But which prevails, is it the area or the
property subject of the sale is not the delivery
boundaries?
contemplated in the Law on Sales or as used in

Article 1543 of the Civil Code.
Boundaries. Everything within the boundaries

must be delivered to the buyer regardless the
In the case at bar, it appears that Cebu Windland
actual area. And if there is deficiency in the area,
was already placed in possession of the subject
there is no reduction or price and where there is
properties. However, it is crystal clear that the
excess in the area, there is no payment of
deeds of absolute sale were still to be executed by
additional price. But the deficiency must be
the parties upon payment of the last installment.
reasonable.
This fact shows that ownership of the said

properties was withheld by petitioner. Following
Cases:
case law, it is evident that the parties did not

intend to immediately transfer ownership of the
Distinction
subject properties until full payment and the
contract) and Art 1542 (lump sum contract)
execution
of
the
deeds
of
absolute
between
Art
1539
(unit
per
sale.
Consequently, there is no delivery to speak of in
[Rudolf Lietz, Inc. v. CA]
this case since what was transferred was

possession only and not ownership of the subject
Difference of the two articles:
properties.
Article 1539 governs a sale of immovable by the

unit, that is, at a stated rate per unit area. In a unit
The transfer of possession of the subject
price contract, the statement of area of immovable
properties on October 10, 1996 to Hua cannot be
is not conclusive and the price may be reduced or
considered as delivery within the purview of
increased
Article 1543 of the Civil Code. It follows that since
delivered. If the vendor delivers less than the area
there has been no transfer of ownership of the
agreed upon, the vendee may oblige the vendor to
subject properties since the deeds of absolute
deliver all that may be stated in the contract or
sale have not yet been executed by the parties,
demand for the proportionate reduction of the
the action filed by Hua has not prescribed.
purchase price if delivery is not possible. If the
depending
on
the
area
actually
vendor delivers more than the area stated in the

b. Where it is sold for a lump sum or a
contract, the vendee has the option to accept only
single price
the amount agreed upon or to accept the whole

area, provided he pays for the additional area at
Article 1542. In the sale of real estate, made for a
the contract rate.
lump sum and not at the rate of a certain sum for

SALES
PRE FINALS
In some instances, a sale of an immovable may
enable one to identify it. An error as to the
be made for a lump sum and not at a rate per unit.
superficial area is immaterial. Thus, the obligation
The parties agree on a stated purchase price for
of the vendor is to deliver everything within the
an immovable the area of which may be declared
boundaries, inasmuch as it is the entirety thereof
based on an estimate or where both the area and
that distinguishes the determinate object.
boundaries are stated.

CASE AT BAR:
In the case where the area of the immovable is
stated in the contract based on an estimate, the
As correctly noted by the trial court and the Court
actual area delivered may not measure up exactly
of Appeals, the sale between petitioner and
with the area stated in the contract. According to
respondent Buriol involving the latters property is
Article 1542 of the Civil Code, in the sale of real
one made for a lump sum. The Deed of Absolute
estate, made for a lump sum and not at the rate of
Sale shows that the parties agreed on the
a certain sum for a unit of measure or number,
purchase price on a predetermined area of five
there shall be no increase or decrease of the price
hectares within the specified boundaries and not
although there be a greater or lesser area or
based on a particular rate per area. In accordance
number than that stated in the contract. However,
with Article 1542, there shall be no reduction in
the discrepancy must not be substantial. A vendee
the purchase price even if the area delivered to
of land, when sold in gross or with the description
petitioner is less than that stated in the contract. In
more or less with reference to its area, does not
the instant case, the area within the boundaries as
thereby ipso facto take all risk of quantity in the
stated in the contract shall control over the area
land. The use of more or less or similar words in
agreed upon in the contract.
designating quantity covers only a reasonable

The Court rejects petitioners contention that the
excess or deficiency.
propertys boundaries as stated in the Deed of

Where both the area and the boundaries of the
Absolute Sale are superficial and unintelligible
immovable are declared, the area covered within
and, therefore, cannot prevail over the area stated
the boundaries of the immovable prevails over the
in the contract. First, as pointed out by the Court
stated area. In cases of conflict between areas
of Appeals, at an ocular inspection prior to the
and boundaries, it is the latter which should
perfection of the contract of sale, respondent
prevail. What really defines a piece of ground is
Buriol pointed to petitioner the boundaries of the
not the area, calculated with more or less
property. Hence, petitioner gained a fair estimate
certainty, mentioned in its description, but the
of the area of the property sold to him. Second,
boundaries therein laid down, as enclosing the
petitioner cannot now assail the contents of the
land and indicating its limits. In a contract of sale
Deed of Absolute Sale, particularly the description
of land in a mass, it is well established that the
of the boundaries of the property, because
specific boundaries stated in the contract must
petitioners subscription to the Deed of Absolute
control over any statement with respect to the
Sale indicates his assent to the correct description
area contained within its boundaries. It is not of
of the boundaries of the property.
vital consequence that a deed or contract of sale

of
land
should
disclose
the
area
with
2) Sale indicated by boundaries
mathematical accuracy. It is sufficient if its extent

is objectively indicated with sufficient precision to
[Roble v. Arbasa]
SALES
PRE FINALS
South, by Seashore; and West, by Cristito

We have repeatedly ruled that where land is sold
Manipes, having an approximate area of 240
for lump sum and not so much per unit of
square meters more or less, with all improvements
measure or number, the boundaries of the land
thereon:
stated in the contract determine the effects and

scope of the sale, not the area thereof. Hence, the
An area of 644 square meters more is not
vendors are obligated to deliver all the land
reasonable excess or deficiency, to be deemed
included within the boundaries regardless of
included in the deed of sale.
whether the real area should be greater or smaller

than that recited in the deed. This is particularly
c. Prescription of the action
true when the area is described as humigit
When must the buyer bring the action for
kumulang, that is, more or less.
recession or reduction of price?
The sale that transpired on January 2, 1976
Six months from the delivery. Delivery is that
between vendor Fidela and vendee Adelaida was
which transfer not only the ownership but also the
one of cuerpo cierto or a sale for lump sum.
possession.
Pursuant to Article 1542, Civil Code of the

Philippines, in the sale of real estate, made for a
[Cebu Winland Development Corp. v. Ong Siao
lump sum and not at the rate of a certain sum for
Hua]
a unit of measure or number, there shall be no

increase or decrease of the price although there
Title was reserved by the seller so even if the
be a greater or lesser area or number than that
buyer was in possession, so the 6 months period
stated in the contract. Thus, the obligation of the
has not even started to run.
vendor
is
to
deliver
everything
within
the
boundaries, inasmuch as it is the entirety thereof
The general rule again is that it is only in the sale
that distinguishes the determinate object.
of per unit measure that the buyer can sue either

for recession of the contract or reduction of the
However, this rule admits of an exception. A
price.
vendee of land, when sold in gross or with the

description more or less with reference to its area,
B. Movables
does not thereby ipso facto take all risk of quantity

in the land. The use of more or less or similar
Article 1522. Where the seller delivers to the
words in designating quantity covers only a
buyer a quantity of goods less than he
reasonable excess or deficiency.
contracted to sell, the buyer may reject them,

but if the buyer accepts or retains the goods
In the case at bar, the parties to the agreement
so delivered, knowing that the seller is not
described the land subject of the sale in this wise:
going to perform the contract in full, he must

pay for them at the contract rate. If, however,
This is a whole parcel of residential land, located
the buyer has used or disposed of the goods
at Poblacion, Isabel, Leyte, per Tax Declaration
delivered before he knows that the seller is not
No. 5108-R-5, under the name of Fidela Roble,
going to perform his contract in full, the buyer
being
shall not be liable for more than the fair value
bounded
in
the
North,
by
Matilde
Evangelista; East, by Harrison now Roxas Street;

to him of the goods so received.
SALES
PRE FINALS
Where the seller delivers to the buyer a
D. Delivery in instalments
quantity of goods larger than he contracted to
E. Delivery is to include fruits
sell, the buyer may accept the goods included

in the contract and reject the rest. If the buyer
I.
When seller is excused from delivering
accepts the whole of the goods so delivered

he must pay for them at the contract rate.
Article 1527.Subject to the provisions of this

Title, the unpaid seller of goods who is in
Where the seller delivers to the buyer the
possession of them is entitled to retain
goods he contracted to sell mixed with goods
possession of them until payment or tender of
of a different description not included in the
the price in the following cases, namely:
contract, the buyer may accept the goods
(1) Where the goods have been sold without
which are in accordance with the contract and
any stipulation as to credit;
reject the rest.
(2) Where the goods have been sold on

credit, but the term of credit has expired;
In the preceding two paragraphs, if the subject
(3)Where the buyer becomes insolvent.
matter is indivisible, the buyer may reject the
The seller may exercise his right of lien
whole of the goods.
notwithstanding that he is in possession of

the goods as agent or bailee for the buyer.
The provisions of this article are subject to
(n)
any usage of trade, special agreement, or

course of dealing between the parties. (n)
a. Rules on delivery of goods
b. Where there is deficiency in quantity
or quality
The buyer may reject the goods so delivered; or
A. In cash sales
Article 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. (1466)
accept the goods in which case he must pay for

their (1) price at the contract rate if he knew that
no more were to be delivered or (2) the fair market
value of the goods if he did not know that the
seller is going to be guilty of a breach of contract.
c. Where there is an excess
B. In sales on credit
Article 1536.The vendor is not bound to deliver
accept the contracted quantity
the thing sold in case the vendee should lose
and reject the excess; or accept all the goods
the right to make use of the terms as provided
delivered and make himself liable for the price of
in article 1198. (1467a)
The buyer may
all of them.
d. Where goods are mixed with others
Art. 1544
The buyer may accept those which are in
I. Sales to two different persons
accordance with the contract and reject the rest;
Article 1544.If the same thing should have
or he may accept them all if he so desires.
been sold to different vendees, the ownership
e. When goods are held by third party

shall be transferred to the person who may
SALES
PRE FINALS
have first taken possession thereof in good
to X through a private document and took physical
faith, if it should be movable property.
possession of the property. Who has a better

right, you or X?
Should
it
ownership
be
immovable
shall
belong
property,
to
the
the
person
You have a better right because you have
acquiring it who in good faith first recorded it
constructive
possession
of
the
property.
in the Registry of Property.
Remember that execution of public document is
Should there be no inscription, the ownership
equivalent to delivery.
shall pertain to the person who in good faith

was first in the possession; and, in the
[Sanchez v. Ramos, 40 Phil 614]
absence thereof, to the person who presents

the oldest title, provided there is good faith.
To the petitioner. That, according to article 1473 of
(1473)
the Civil Code, Marcelino Gomez and Narcisa

Sanchez were the first to take possession of the
When were talking about double sale, were
land and, consequently, the sale executed in their
talking about 1 seller, selling the same property to
favor is preferable.
two different buyers and accepting 2 different

interests.
This article provides:
Youre not talking about 2 sellers, selling the same
"ART. 1473. If the same thing should have been
property to two different buyers.
sold to different vendees, the ownership shall be

transferred to the person who may have first taken
A. Rules as to immovable
possession thereof in good faith, if it should be

personal property.
Case: Ownership of immovable subject of a
"Should it be real property, it shall belong to the
double sale
purchaser who first recorded it in the registry of

deeds.
[Gabriel v. Mabanta]
"Should it not be recorded, the property shall

belong to the person who first took possession of
a. To the one who registers the sale in
it in good faith, or, in default of possession, to the
good faith
person who presents the oldest title, provided

there is good faith."
When we say the first to register in good faith, the

law actually requires good faith in the possession
The possession mentioned in article 1473 (for
and good faith in the registration.
determining who has better right when the same

piece of land has been sold several times by the
[Tanedo v. CA]
same vendor) includes not only the material but

also the symbolic possession, which is acquired
b. To the first in possession in good faith
by the execution of a public instrument.
You purchased a parcel of land, I execute a public
Not one of the documents of sale in this case
document but you did not take actual possession
having been recorded, preference must be
of the property. After that I sold the same property
decided in favor of the vendee who first took
SALES
PRE FINALS
possession. And the kind of possession referred is

acquired by the material occupancy of the thing or
How do you prove that you are the first buyer?
right possessed, or by the fact that the latter is

subjected to the action of our will, or by the
Your proof here is a private document. Because if
appropriate acts and legal formalities established
one has a public document then he already has a
for acquiring possession (art. 438, Civil Code.). By
constructive possession.
a simple reasoning, it appears that, because the

law does not mention to which of these kinds of
possession
the
article
refers,
it
must
be
understood that it refers to all of these kinds. It is

said that the law, in the gradation of the causes of
B. Rules as to movables
(Art. 1544)
C. Good faith in the buyer
preference between several sales, fixes, first,
But what is good faith? Good faith is a state of
possession and then the date of the title and, as a
mind.
public instrument is a title, it is claimed that the

inference is that the law has deliberately intended
Take note that you cannot be considered a buyer
to place the symbolic possession, which the
in good faith even if you are the first to register if
execution of the public document implies, after the
at the time of registration there is already an
material possession..
affidavit of adverse claim or a notice of lis

pendens annotated on the title.
Furthermore, Article 1473 is more in consonance

with the principles of justice. The execution of a
A buyer in good faith is one who has no
public instrument is equivalent to the delivery of
knowledge of fact that impaired the title of the
the realty sold (art. 1462, Civil Code) and its
seller and paid the fair and full purchase price.
possession by the vendee (art. 438).
So if you take an inadequate price, you cannot be

considered a buyer in good faith. Ultimately, fair
From the foregoing it follows that the plaintiff was
price is a question of fact because the law also
the first to take possession of the land, and
acknowledges that the party can stipulate in the
consequently
price they want.
the
sale
executed
to
him is
preferable.
a. Cases
Wherefore, the judgment appealed from is hereby
reversed; the plaintiff is declared owner of the land
1) What good faith consists?

[Cui v. Henson]
in question; and the defendant is ordered to

deliver the possession of the land to the plaintiff.
[Leung Yee v. Frank L. Strong Mach. Co]
No special findings as to costs. So ordered.

D. When rules do not apply
c. To the one who presents the oldest
[Consolidated Rural Bank]
title, if in good faith

Section 3 Conditions and Warranties
Dont tell me this is about certificate of title
because if you present to me two certificate of
Art. 1545 1547
title, the other one is cancelled already.

SALES
PRE FINALS
I. Conditions
by which he induces the buyer to purchase the
Article 1545. Where the obligation of either
same relying on said representation.
party to a contract of sale is subject to any

condition which is not performed, such party
A representation that a fact is true.
may refuse to proceed with the contract or he

may waive performance of the condition. If the
This is an incidental element of a contract
other party has promised that the condition
because it is agreed by the parties.
should happen or be performed, such first

mentioned
party
may
also
treat
the
nonperformance of the condition as a breach

of warranty.
a. Condition v. Warranties
B. Kinds
a. Express
Where the ownership in the thing has not

passed, the buyer may treat the fulfillment by
Any affirmation of fact or any promise by the seller
the seller of his obligation to deliver the same
relating to the thing, the natural tendency of which
as described and as warranted expressly or by
is to induce the buyer to purchase the thing, and
implication in the contract of sale as a
the buyer thus induced, does purchase the same.
condition of the obligation of the buyer to

perform his promise to accept and pay for the
Article 1546.Any affirmation of fact or any
thing. (n)
promise by the seller relating to the thing is an

express warranty if the natural tendency of
A. Concept
such affirmation or promise is to induce the
A future and uncertain event or contingency on
buyer to purchase the same, and if the buyer
the happening of which the obligation of the
purchases the thing relying thereon. No
contract depends.
affirmation of the value of the thing, nor any

statement purporting to be a statement of the
B.
Consequence
of
non-fulfilment
of
suspensive condition
seller's opinion only, shall be construed as a

warranty,
unless
the
seller
made
such
affirmation or statement as an expert and it

Such party may either:
was relied upon by the buyer. (n)
a) refuse to proceed with the contract; or

b) proceed with the contract, waiving the
performance of the condition
b. Implied
But an implied warranty deemed included in the
contract.
C. Effect if condition is in the nature of a

promise that it should happen
Article 1547. In a contract of sale, unless a

contrary intention appears, there is:
The non-performance of such condition may be
(1)An implied warranty on the part of the seller
treated by the other party as a breach of warranty.
that he has a right to sell the thing at the time
II. Warranties:
when the ownership is to pass, and that the
A. Concept
buyer shall from that time have and enjoy the

legal and peaceful possession of the thing;
Any representation made by the seller of the thing
(2)An implied warranty that the thing shall be
with respect to its character, quality, or ownership,
free from any hidden faults or defects, or any
SALES
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charge or encumbrance not declared or known
relying on such affirmation or promise.
It
to the buyer.
includes all warranties which are derived from

express language, whether the language is in
This article shall not, however, be held to
the form of a promise or representation.
render liable a sheriff, auctioneer, mortgagee,
Presumably, therefore, Navarro would not have
pledgee, or other person professing to sell by
purchased the two (2) Elf trucks were it not for
virtue of authority in fact or law, for the sale of
petitioner's assertion and assurance that all
a thing in which a third person has a legal or
taxes on its imported parts were already settled.
equitable interest. (n)

This express warranty was breached the
C. Statement of sellers opinion
moment Harrison refused to furnish Navarro

with the corresponding receipts since such
Now if I sell to you my car and I tell you that this is
documents were the best evidence she could
in A1 condition, this is good as new. This is a
present to the government to prove that all BIR
2012 model but this is good as new. And you
taxes and customs duties on the imported
believed me and you purchased it and it turned
component parts were fully paid. Under Art.
out that there are many defects. Can you sue me
1599 of the Civil Code, once an express
for breach of warranty?
warranty is breached the buyer can accept or

keep the goods and maintain an action against
Mere opinion of the seller is not considered as
the seller for damages.
warranty unless the seller is an expert. So its not

even a breach of express warranty.
(Art. 1546)
b. Interpretation of warranty that the

land
is
free
from
all
liens
and
encumbrances
(see also Art 1341)
[Investment and Development, Inc v. CA]
D. Cases
a. Express representation of payment
of taxes and customs duties
There were two sales here. Investment and

Development, Inc said that the property was
free from any liens and encumbrances but it
turned out that there are tenants in the property.
[Harrison Motors Corp. v. Navarro]

It is true that the ownership of the trucks shifted
to private respondent after the sale. When
c. Effect of non-fulfillment of express

representation
Harrison prior to its consummation it expressly

intimated to Navarro that it had already paid the
[Soler v. Chesley]
taxes and customs duties. Such representation

shall be considered as a seller's express
Mr. Chesley is discharged from all the obligations
warranty under Art. 1546 of the Civil Code
contracted by him with Anderson and Co., relative
which covers any affirmation of fact or any
to the payment of the price of the machinery. SC
promise by the seller which induces the buyer to
find that the Mr. Soler has failed to carry out his
purchase the thing and actually purchases it
obligation and, therefore, has no right to compel
SALES
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the defendant to comply with his obligation to pay
defendant, he could not have charged Messrs.
the plaintiff the sum claimed in the complaint.
Anderson and Co. so much, who in their contract
With regard to the counterclaim set up by the
did not guarantee the delivery nor the amount of
defendant, it appears from the record that he sold
the price. The plaintiff having bound himself in
the aforesaid machinery to a third person, the
favor of the defendant for more than what
Philippine Refining Co. In cases like this, the
Anderson and Co. had bound themselves for in
rescission of the contract does not lie (art. 1295,
his favor, we entertain no doubt that he acted in
Civil Code).
good faith, encouraged by the information of

Anderson and Co., but it was he, not Anderson
It appears sufficiently established in the record
and Co., who contracted the obligation, and,
that if Mr. Chesley gave his consent to this
therefore, he is the only one to be responsible for
contract, it was because he expected that said
the obligation arising from the contract. He who
machinery would arrive within a short time, the
contracts and assumes an obligation is presumed
time reasonably necessary for such machinery to
to know the circumstances under which said
reach Manila from America, as Mr. Soler
obligation can be complied with.
asserted
in
the
document
itself
that
said
machinery was then on the way. The act of the
E. Prescriptive period
defendant in insisting that this guaranty as to the

arrival of the machinery be stated in the contract,
Its not very clear actually. The Court said that
his repeated complaints and protests when he
well, under the general prescription of contract, its
afterwards made payments as the parts arrived,
4 years. 4 years from when? But what did you
and his letter of April 1919, leave no room for
learn in ObliCon under 1389? You recon it from
doubt that the arrival of said machinery within a
when the cause of action accrued. But does the
reasonably short time was one of the determining
cause of action accrued?
elements of his consent. These acts of the

defendant disclose the fact that he intented the
[Villostas v. CA]
arrival of the machinery to be an essential

element of the contract (art. 1282, Civil Code).
The contention that an action for rescission is

barred by prescription under Art. 1571 of the Civil
We hold that in the case at bar the arrival of the
Code, is bereft of merit. It must be pointed out that
machinery within a reasonable time was an
at the time the Electrolux Aqua Guard water
essential element of the contract, such time to be
purifier was delivered and installed at petitioner
determined by taking into account the fact that is
Villostas' residence, a Warranty Certificate was
was then on the way to Manila.
issued by private respondent Electrolux which

reads:
The fact that the plaintiff had no control of the
"ELECTROLUX MARKETING, INCORPORATED
prompt transportation of the said machinery to
WARRANTS
Manila, does not relieve the plaintiff from making
PRODUCT TO PERFORM EFFICIENTLY FOR
good the guaranty inserted in the contract that
ONE FULL YEAR FROM DATE OF ORIGINAL
said machinery was already on the way to Manila.
PURCHASE."
THIS
QUALITY
ELECTROLUX
The plaintiff elected to bind himself in that way,

although he knew, as he ought to have known
The foregoing is clearly an express warranty
that, had his rights not been transferred to the
regarding the efficiency of the water purifier. On
SALES
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this regard the court said that while it is true that
prescriptive period is completed after the
Article 1571 of the Civil Code provides for a
transfer, the vendor shall not be liable for
prescriptive period of six months for a redhibitory
eviction. (n)
action, a cursory reading of the ten preceding

articles to which it refers will reveal that said rule
Article 1551.If the property is sold for
may be applied only in case of implied warranties.
nonpayment of taxes due and not made

known to the vendee before the sale, the
The present case involves one with an express
vendor is liable for eviction. (n)
warranty. Consequently, the general rule on

rescission of contract, which is four years (Article
Article 1552.The judgment debtor is also
1389, Civil Code) shall apply. Inasmuch as the
responsible for eviction in judicial sales,
instant case involves an express warranty, the
unless
filing
judgment.
of
petitioner's
amended
answer
on
it
is
otherwise
decreed
in
the
September 30, 1988 is well within the four-year
(n)
prescriptive period for rescission of contract from
Article 1553.Any stipulation exempting the
September 13, 1986, which was the delivery date
vendor from the obligation to answer for
of the unit.
eviction shall be void, if he acted in bad faith.

(1476)
The
sale
of
the
water
purifier
is
hereby
RESCINDED.
Article 1554. If the vendee has renounced the

right to warranty in case of eviction, and
Subsection I Warranty In Case of Eviction
eviction should take place, the vendor shall
Arts. 1548 1559 Warranty against eviction
only pay the value which the thing sold had at

the time of the eviction. Should the vendee
Article
1548.Eviction
shall
take
place
have made the waiver with knowledge of the
whenever by a final judgment based on a
risks
of
eviction
and
assumed
its
right prior to the sale or an act imputable to
consequences, the vendor shall not be liable.
the vendor, the vendee is deprived of the
(1477)
whole or of a part of the thing purchased.

Article 1557.The warranty cannot be enforced
The vendor shall answer for the eviction even
until a final judgment has been rendered,
though nothing has been said in the contract
whereby the vendee loses the thing acquired
on the subject.
or a part thereof. (1480)
The
contracting
parties,
however,
may
increase, diminish, or suppress this legal
Article 1558.Thevendor shall not be obliged
obligation of the vendor. (1475a)
to make good the proper warranty, unless he

is summoned in the suit for eviction at the
Article 1549.The vendee need not appeal from
instance of the vendee. (1481a)
the decision in order that the vendor may

become liable for eviction. (n)
Article 1559.The defendant vendee shall ask,

within the time fixed in the Rules of Court for
Article 1550. When adverse possession had
answering the complaint, that the vendor be
been commenced before the sale but the
made a co-defendant. (1482a)
SALES
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I. Concept
breach
of
this
warranty
requires
the
concurrence of the following circumstances:

Eviction is not just you purchasing a property and
(1) The purchaser has been deprived of the whole
youre told by a person, Im the owner of this
or part of the thing sold;
property get out! and you got out and your
(2) This eviction is by a final judgment;
surrendered the property to that person and then
(3) The basis thereof is by virtue of a right prior to
you claimed breach of warranty against eviction.
the sale made by the vendor; and

(4) The vendor has been summoned and made
Is that eviction?
co-defendant in the suit for eviction at the instance

of the vendee.
No. it should be through a judicial process. There
In the absence of these requisites, a breach of the
must be a final judgement by the court, depriving
warranty against eviction under Article 1547
you the buyer either the whole or part of the
cannot be declared.
property.
As correctly pointed out by Respondent Court, the
Not only that. The cause for eviction must have
presence of lessees does not constitute an
accrued prior to sale.
encumbrance of the land, nor does it deprive

petitioner of its control thereof.
A. Requisites (of warranty)

(1) The vendee is deprived in whole or in part if
We note, however, that petitioners deprivation of
the thing purchased;
ownership and control finally occurred when it
(2) He is so deprived by virtue of a final
failed
judgement;
amortizations on the mortgage, causing the lot to
(3) The judgement is based on a right prior to the
be foreclosed and sold at public auction. But this
sale or an act imputable to the vendor;
deprivation is due to petitioners fault, and not to
(4) The vendor was summoned in the suit for
any act attributable to the vendor-spouses.
eviction at the instance of the vendee; &
Because petitioner failed to impugn its integrity,
(5) There is no waiver on the part of the vendee.
the contract is presumed, under the law, to be
and/or
discontinued
paying
the
valid and subsisting.

[Power Commercial and Industrial Corp. v. CA]
B. Kinds of deprivation or trespass
Obvious to us in the ambivalent stance of
a. Deprivation in law
petitioner is its failure to establish any breach of

the
warranty
its
What is required is that a person goes to the
protestation that its acquisition of the lot was to
courts of justice claiming the thing sold, or part
enable it to set up a warehouse for its asbestos
thereof, and giving reasons.
products
and
against
that
eviction.
failure
to
Despite
deliver actual
b. Deprivation in fact
possession thereof defeated this purpose, still no

breach of warranty against eviction can be
It does not give rise to the application of the
appreciated because the facts of the case do not
doctrine of eviction.
show that the requisites for such breach have

been satisfied.
C. Effect of warranty
SALES
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He may exercise this right of action, instead

Article 1555. When the warranty has been
of enforcing the vendor's liability for eviction.
agreed upon or nothing has been stipulated
The same rule shall be observed when two or
on this point, in case eviction occurs, the
more things have been jointly sold for a lump
vendee shall have the right to demand of the
sum, or for a separate price for each of them,
vendor:
if it should clearly appear that the vendee
(1)The return of the value which the thing sold
would not have purchased one without the
had at the time of the eviction, be it greater or
other. (1479a)
less than the price of the sale;

(2)The income or fruits, if he has been ordered
The buyer can either opt for indemnity or
to deliver them to the party who won the suit
recission of the contract.
against him;
(3)The costs of the suit which caused the
Case:
eviction, and, in a proper case, those of the

suit brought against the vendor for the
1. Effect of sale of property

excluded from the chattel mortgage
warranty;
(4)The expenses of the contract, if the vendee
[De la Riva v. Ah Kee]
has paid them;

(5)The damages and interests, and ornamental
expenses, if the sale was made in bad faith.
The vendor is bound to deliver and warrant the
(1478)
thing which is the subject matter of the sale

a. On the seller in good faith
When he is not aware of the risk of eviction
(article
1461,
Civil
Code);
and
shall
be
responsible to the vendee for the legal and

peaceful possession of the thing sold and for any
He must return the value of the thing at the time
hidden faults or defects therein (article 1474,
of the sale and return the income or the fruits and
Civil Code), in case the vendee, by a final
the expenses of the contract if it is the buyer who
judgment based upon a right prior to the sale, is
shoulders the expenses of the contract.
deprived of the whole or of any part of the thing

purchased
b. On the seller in bad faith
(article
1475,
Civil
Code),
the
warranty consisting in the restitution of the value
When he is aware of the risk of eviction then oin
which the thing, sold had at the time of the
top of that, he is liable for damages.
eviction, whether it be greater or less than the
c. Loss of an important part

(Partial Eviction)
price for which it was sold (article 1478, Civil

Code).
The declaration of nullity of the chattel mortgage
Article 1556.Should the vendee lose, by
in question, with respect to the real properties
reason of the eviction, a part of the thing sold
included therein, is equivalent to a final judgment
of such importance, in relation to the whole,
that the vendor thereof, Philippine National Bank,
that he would not have bought it without said
had no right to sell them and the purchaser,
part, he may demand the rescission of the
Antonio de la Riva, acquired no right to the
contract; but with the obligation to return the
ownership by virtue of the sale and can,
thing without other encumbrances that those
therefore, be dispossessed thereof, which is
which it had when he acquired it.
equivalent to eviction. Consequently the vendor,
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Philippine National Bank, is bound to warrant the
interest thereon from the date of the filing of the
real properties sold by restoring to the purchaser
complaint until fully paid, with the costs against
Antonio de la Riva the value thereof at the time of
the
the eviction amounted to P11,000.
Bank.
However, part of said real properties excluded
The plaintiff-appellant, Antonio de la Riva, is
from the chattel mortgage, valued at P8,500, was
absolved
sold or otherwise disposed of by the purchaser
defendant-appellant Ah Kee, without special
Antonio de la Riva and the other part thereof
pronouncement as to costs.
valued at P2,500 was abandoned by him at the
The defendant-appellant Jose Bucoy, provincial
disposal of whomsoever believed himself entitled
sheriff of Zamboanga, is likewise absolved from
to its possession. As the purchaser, Antonio de la
the complaint, with costs against the plaintiff-
Riva, had not used the real properties valued at
appellant Antonio de la Riva. So ordered.
defendant-appellant
from
the
Philippine
National
cross-complaint
of
the
P2,500 which were excluded from the chattel

mortgage and sold to him by the Philippine
National Bank, the latter is bound to indemnify
D. Waiver of warranty against eviction

by the buyer (vendee)
him for the value thereof at the time of the
a. Must be express
eviction.
b. Kinds of waiver
III. NO
1) Consciente
For the foregoing considerations, this court is of

the opinion and so holds: (1) That a mortgage
The waiver is voluntarily made by the vendee
creditor, who purchases real properties at an
without the knowledge and assumption of the
extrajudicial foreclosure sale thereof by virtue of
risks of eviction.
a chattel mortgage constituted in his favor, which
Wala lang, pro forma.
mortgage has been declared null and void with
2) Intencionada
respect to said properties, acquires no right
The waiver is made by the vendee with
thereto by virtue of said purchase; and (2) neither
knowledge of the risk of eviction and assumption
does
of its consequences.
the
subsequent
purchaser
of
said
properties acquire any right to the real properties

which were excluded from the chattel mortgage,
Now you have to distinguish which type of waiver
and upon being evicted therefrom by virtue of a
that the buyer made because if its merely
judgment declaring that the vendor had no right
consciente, then the seller can still be liable for
the properties which had been excluded from the
the eviction but only for that value.
chattel mortgage constituted in the latter's favor

and which said vendor purchased in the
But if it is intencionada, then the buyer cannot
foreclosure
recover anything from the seller.
sale
thereof,
said
subsequent
purchaser is entitled to be indemnified for the

value thereof at the time of the eviction. virtual
IF THE SELLER ACTED IN BAD FAITH,
law library
INTENTIONALLY WITHHOLDING THE RISK OF

THE FACT THAT HE HAS KNOWLEDGE OF
Wherefore, the appealed judgment is modified
THE RISK OF EVICTION, THEN THAT WAIVER
and the defendant-appellant Philippine National
IS VOID. Even if it is intencionada.
Bank is ordered to pay to the plaintiff-appellant

Antonio de la Riva the sum of P2,500, plus legal
SALES
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i)
Cases
of
intentional waiver
When the vendee has waived the right to

warranty in case of eviction, and eviction shall
occur, the vendor shall only pay the price which
[Andaya v. Manansala]
the thing sold had at the time of the eviction,

unless the vendee has made the waiver with
Yes, the lower court erred in holding Manansala
knowledge of the danger of eviction and
liable as in rescission of sale. He is not even
assumed its consequences." (Same as Art. 1554
obliged to restore to them the price of the land at
of the new Code)
the time of eviction, but is completely exempt

from liability whatsoever.
As already stated, appellees knew of the danger

of eviction at the time they purchased the land in
The vendor's liability for warranty against eviction
question
from
appellant,
and
assumed
its
in a contract of sale is waivable and may be
consequences. Therefore, the appellant is not
renounced by the vendee (last par., Art. 1475,
even obliged to restore to them the price of the
Old Code; last par., Art. 1548, New). The
land at the time of eviction, but is completely
contract of sale between herein appellant and the
exempt from liability whatsoever.
appellees included a stipulation as to the

warranty; but the lower court found that the
Neither may appellant be condemned to return
parties understood that such stipulation was
the price received from appellees on the theory
merely p r o f o r m a and that the appellant
of rescission of their contract of sale, as held by
vendor was not to be bound thereby, in view of
the court below. In the first place, the remedy of
the fact that the same land had been previously
rescission contemplates that the one demanding
bought by appellees from Maria Viloria and that
it is able to return whatever he has received
their only purpose in buying the same again from
under the contract; and when this cannot be
appellant was to enable them to register their
done, rescission cannot be carried out (Art.
prior deed of sale; and the further fact that when
1295, Old Code; Art. 1385, New). It is for this
the sale between appellant and appellee was
reason that the law on sales does not make
made, the property was already the subject of a
rescission a remedy in case the vendee is totally
pending litigation between appellees and one
evicted from the thing sold, as in this case, for he
Eustaquia Llanes, who claimed its title and
can no longer restore the thing to the vendor. It is
possession by virtue of an earlier sale from the
only when the vendee loses "a part of the thing
original owner, and it was by final judgment in
sold of such importance, in relation to the whole,
this litigation that appellees were evicted from
that he would not have purchased it without said
said land. Not having appealed from the decision
part" that he may ask for rescission, but he has
of the court below, appellees are bound by these
"the obligation to return the thing without other
findings, the implication of which is that they not
encumbrances than those which it had when he
only renounced or waived the warranty against
acquired it" (Art. 1479, old Code; 1556, New). In
eviction, but that they knew of the danger of
the second place, appellees, as already stated,
eviction and assumed its consequences.
assumed the risk of eviction, which stops them
Now, according to Article 1477 of the old Code
from asking for rescission even were it possible
(the law applicable when the contract in this case
for them to restore what they had received under
was made),
the contract.
SALES
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On their part, appellees claim that in view of their

eviction from the land in question, they are
I. Warranty against hidden encumbrances
entitled to recover from appellant more items of
I dont even know if this is still applicable now. If
damages under Article 1555 of the New Code
youre the owner of the property, is it possible that
than the mere return of the price with interests as
there is a hidden encumbrance in your property?
ordered by the trial court. The claim is untenable,
Because the common example is non-acquaint
not only because appellant, as we have held, is
easement of aqueduct.
exempt from any liability for appellees' eviction,
Art. 1560. If the immovable sold should be
but also because not having appealed from the
encumbered with any non-apparent burden or
decision of the court below, appellees cannot ask
servitude, not mentioned in the agreement, of
for a modication thereof or an award of damages
such a nature that it must be presumed that
not included therein
the vendee would not have acquired it had he

been aware thereof, he may ask for the
Wherefore,
the
decision
appealed
from
is
rescission of the contract, unless he should
reversed and the complaint dismissed, with costs
prefer the appropriate indemnity. Neither right
against appellees Ariston Andaya, et al.
can be exercised if the non-apparent burden

or servitude is recorded in the Registry of
[Angelo v. Pacheco]
Property, unless there is an express warranty

that the thing is free from all burdens and
encumbrances.
E. Obligation of the buyer in case of

Eviction
Article 1560. If the immovable sold should be
encumbered with any non-apparent burden or
servitude, not mentioned in the agreement, of
such a nature that it must be presumed that
the vendee would not have acquired it had he
been aware thereof, he may ask for the
Within one year, to be computed from the

execution of the deed, the vendee may bring
the action for rescission, or sue for damages.
One year having elapsed, he may only bring an
action for damages within an equal period, to
be counted from the date on which he
discovered the burden or servitude. (1483a)
rescission of the contract, unless he should

prefer the appropriate indemnity. Neither right
A. Requisites
can be exercised if the non-apparent burden

or servitude is recorded in the Registry of
Property, unless there is an express warranty
that the thing is free from all burdens and
encumbrances.
Within one year, to be computed from the
execution of the deed, the vendee may bring
the action for rescission, or sue for damages.
B. Effects: Buyers action

But granting that there is any encumbrance that
you are not aware of, what is your remedy?
1) Within one year from the sale, you can sue for
rescission or sue for damages.
2) If after one year, you can only bring an action
for damages.
One year having elapsed, he may only bring an

action for damages within an equal period, to
be counted from the date on which he
discovered the burden or servitude. (1483a)
Subsection 2 Warranty Against Hidden

Defects of or Encumbrances Upon the Thing
Sold
SALES
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Article 1562. In a sale of goods, there is an

By the way, does it matter if the seller does not
implied warranty or condition as to the quality
know of the existence of such hidden defect?
or fitness of the goods, as follows:

(1)
Where
the
buyer,
expressly
or
by
Can the seller deny the liability by claiming that
implication, makes known to the seller the
he was not aware? No. whether he knew of the
particular purpose for which the goods are
defect or not, he is liable for breach of contract.
acquired, and it appears that the buyer relies

on the seller's skill or judgment (whether he
When must the action be brought?
be the grower or manufacturer or not), there is

an implied warranty that the goods shall be
6 months from the delivery. I want you to take
reasonably fit for such purpose;
note because if were talking about animals, its
(2)
40 days.
description from a seller who deals in goods
Where
the
goods
are
brought
by
of that description (whether he be the grower

I sell to you my car which is 4 years old and then
or manufacturer or not), there is an implied
after 2 month, you discover that there is a crack
warranty
in the tail gate ky akong gi bangga ug concrete
merchantable quality. (n)
fence, can you sue me for breach because I did
Article 1563. In the case of contract of sale of
not reveal to you that theres hidden crack?
a specified article under its patent or other
that
the
goods
shall
be
of
trade name, there is no warranty as to its

Did I sell to you a brand new movable?
fitness for any particular purpose, unless

there is a stipulation to the contrary. (n)
No. there is no warranty in case of sale of
Article 1564.An implied warranty or condition
second hand movable.
as to the quality or fitness for a particular

purpose may be annexed by the usage of
Dibuh mao biya na ug mag sale ug movable,as
trade. (n)
is/were is
Article 1565. In the case of a contract of sale

by sample, if the seller is a dealer in goods of
Arts. 1561 1571
that kind, there is an implied warranty that the

goods shall be free from any defect rendering
Article 1561.The vendor shall be responsible
the mun merchantable which would not be
for warranty against the hidden defects which
apparent on reasonable examination of the
the thing sold may have, should they render it
sample. (n)
unfit for the use for which it is intended, or
xxx
should they diminish its fitness for such use
Article 1569.If the thing sold had any hidden
to such an extent that, had the vendee been
fault at the time of the sale, and should
aware thereof, he would not have acquired it
thereafter be lost by a fortuitous event or
or would have given a lower price for it; but
through the fault of the vendee, the latter may
said vendor shall not be answerable for patent
demand of the vendor the price which he paid,
defects or those which may be visible, or for
less the value which the thing had when it was
those which are not visible if the vendee is an
lost.
expert who, by reason of his trade or
If the vendor acted in bad faith, he shall pay
profession, should have known them. (1484a)
damages to the vendee. (1488a)
SALES
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Article 1570.The preceding articles of this
(2) Whether there was an expressed warranty in
Subsection shall be applicable to judicial
this case.
sales, except that the judgment debtor shall
(3) Whether the hidden defects in the machine is
not be liable for damages. (1489a)
redhibitory and sufficient to warrant a rescission of
Article
1571.
Actions
arising
from
the
the contract between the parties.
provisions of the preceding ten articles shall
(4) Whether such action for rescission is barred by
be barred after six months, from the delivery
prescription.
of the thing sold. (1490)

Ruling:
I.
Warranty
against
Redhibitory
(Hidden,
(1) Yes, under some circumstances. It is generally

held that in the sale of a designated and specific
Physical) Vices (of movables)
article sold as secondhand, there is no implied

warranty as to its quality or fitness for the purpose
A. Requisites
a.
Case:
applicability
of
intended, at least where it is subject to inspection

at the time of the sale.
warranty to sale of second-hand article
However, there are exceptions to this general

rule. In a sale of secondhand articles there may
[Moles v. IAC]
be, under some circumstances, an implied

Facts: Moles bought a secondhand linotype
warranty of fitness for the ordinary purpose of the
printing machine from Mariano Diolosa (owner of
article sold or for the particular purpose of the
Diolosa Publishing House) for P50,0000. Moles
buyer.
promised Diolosa that he will pay the full amount
Article 1562 of our Civil Code, which was taken
after his DBP loan worth P50,000.00 will be
from the Uniform Sales Act, provides:
released. Diolosa in return issued a certification
"Art. 1562. In a sale of goods, there is an implied
wherein he warranted that the machine was in A-1
warranty or condition as to the quality or fitness of
condition, together with other express warranties.
the goods, as follows:
On November 29, 1977, Moles wrote Diolosa that

the machine was not functioning properly. The
1. Where the buyer, expressly or by implication,
petitioner found out that the said machine was not
makes known to the seller the particular purpose
in
experts.
for which the goods are acquired, and it appears
Furthermore, it was revealed by subsequent
that the buyer relies on the seller's skill or
examination that it the machine was actually worth
judgment
les than the purchase price. After several
manufacturer or not), there is an implied warranty
telephone calls regarding the defects in the
that the goods shall be reasonably fit for such
machine, Diolosa sent two technicians to make
purpose;"
good
condition
as
attested
by
(whether
he
be
the
grower
or
necessary repairs but they failed to put the

machine in running condition. Moles was never
able to make use of the machine hence he sought
(2) Yes. A certification to the effect that the
relief from the courts.
linotype machine bought by petitioner was in A-1

condition was issued by private respondent in
Issues:
favor of the former is considered as an express
(1) Whether there is an implied warranty of the
warranty. However, it is private respondent's
quality or fitness for secondhand items.
submission that the same is not binding on him,
SALES
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not being a part of the contract of sale between

them. This contention is bereft of substance.
(4) No. While it is true that Article 1571 of the Civil
It must be remembered that the certification was a
Code provides for a prescriptive period of six
condition sine qua non for the release of
months for a redhibitory action, a cursory reading
petitioner's loan which was to be used as payment
of the ten preceding articles to which it refers will
for the purchase price of the machine. Private
reveal that said rule may be applied only in case
respondent failed to refute this material fact.
of implied warranties. The present case involves
Neither does he explain why he made that
one with an express warranty. Consequently, the
express warranty on the condition of the machine
general rule on rescission of contract, which is
if he had not intended to be bound by it. In fact,
four years shall apply.
the respondent court, in declaring that petitioner
original case for rescission was filed only one year
should have availed of the remedy of requiring
after the delivery of the subject machine, the
repairs as provided for in said certification,
same is well within the prescriptive period. This is
thereby considered the same as part and parcel of
aside from the doctrinal rule that the defense of
the verbal contract between the parties.
prescription is waived and cannot be considered
On the basis of the foregoing circumstances, the
on appeal if not raised in the trial court, and this
inescapable conclusion is that private respondent
case does not have the features for an exception
is indeed bound by the express warranty he
to said rule.
Considering that the
executed in favor of herein petitioner.

We disagree with respondent court that private
respondents express warranty as to the A-1
B. Knowledge of the vendor
condition of the machine was merely dealer's talk.

Private respondent was not a dealer of printing or
Article 1566.The vendor is responsible to the
linotype machines to whom could be ascribed the
vendee for any hidden faults or defects in the
supposed resort to the usual exaggerations of
thing sold, even though he was not aware
trade in said items.
thereof.
This provision shall not apply if the contrary
A redhibitory defect must be an
has been stipulated, and the vendor was not
imperfection or defect of such nature as to
aware of the hidden faults or defects in the
engender a certain degree of importance. As
thing sold. (1485)
(3) Yes.
already narrated, an expert witness for the

petitioner
categorically
established
that
the
machine required major repairs before it could be

used.
This, plus the fact that petitioner never
C. Effects of warranty against defects

or vices:
a. Choices of the vendee
made appropriate use of the machine from the

time of purchase until an action was filed, attest to
Article 1567. In the cases of articles1561, 1562,
the major defects in said machine, by reason of
1564, 1565 and 1566, the vendee may elect
which the rescission of the contract of sale is
between withdrawing from the contract and
sought. The factual finding, therefore, of the trial
demanding a proportionate reduction of the
court that the machine is not reasonably fit for the
price, with damages in either case. (1486a)
particular purpose for which it was intended must

be upheld, there being ample evidence to sustain
Case: Effect of sale of car with hidden defects
the same.
SALES
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[Supercars Mgmt. & Devt Corp v. Flores]
[Guzman v. Toyota Cubao, Inc.]
The findings of the RTC and CA that Supercars
Facts:
committed a breach of warranty is fully supported
Petitioner Percival de Guzman is engaged in the
by the records.
business of manufacturing and selling reinforced

concrete pipes. October 1987 to November 1988,
b. If the thing is lost due to
he purchased large quantities of steel bars from
hidden vices
respondent Triangle Ace Corporation.
Article 1568. If the thing sold should be lost in
Some of the steel bars were used by petitioner in
consequence of the hidden faults, and the
the manufacture of reinforced concrete pipes
vendor was aware of them, he shall bear the
which
loss, and shall be obliged to return the price
Corporation. Respondent brought suit against
and refund the expenses of the contract, with
petitioner for recovery of the unpaid price of the
damages. If he was not aware of them, he shall
steel bars in the amount of P124,277.00 and
only return the price and interest thereon, and
obtained a writ of attachment against petitioner.
he
delivered
to
the
Vinnel
Belvoir
reimburse the expenses of the contract which

the vendee might have paid. (1487a)
Petitioner did not deny liability but claimed that his
If the seller is not aware, returns the price and
total liability amounted to P115,863.00 only, of
the expenses it it was the buyer who
which P36,353.00 had been paid, leaving an
shoulders the expenses.
unpaid balance of P79,510.00. He filed a
But if the seller acted in bad faith, then plus
counterclaim for damages the fact that the steel
damages.
bars delivered by respondent measured only 8

mm. X 20 ft. instead of 9 mm. X 20 ft. as agreed
c. If the thing is lost by
upon by them.
fortuitous event or by the fault of the buyer

Trial Court Ruling
But the cause of the loss is not the hidden defect
The trial court gave judgment for respondent and
but the fortuitous event, can the seller be still held
ordered
liable?
P87,924.00 with 12% annual interest counted
petitioner
to
pay
the
amount
of
from the date of the filing of the complaint.

Yes, but not for the price. Return the price less the
value at the time
Court of Appeals Ruling

The Court of Appeals affirmed The appeals court
Because
certainly,
the
value
has
already
depreciated.
ruled that petitioner had waived his right to claim

damages for the alleged deliveries of undersized
steel bars as he failed to give notice of such fact
D. Period to bring action for breach of
to respondent within six months from the date of
warranty
the delivery of the steel bars. It based its ruling on
6 months
Art. 1586, in relation to Art. 1571, of the Civil

a. Cases: Effect of action to
Code.
recover purchase price filed after 6 months

Issue:
SALES
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Whether the act of the petitioner of what was
within six months from his receipt thereof or at any
delivered to him and his retention thereof
time before the filing of the complaint by petitioner.
constitutes acceptance; whether the respondent

has an action for the price.
Contrary to petitioner's contention, Art. 1144(1)

cannot apply to this case, not only because such
Petitioners contention:
provision refers to the prescriptive period for filing
He has ten years within which to notify the seller
of actions, but also because the period of ten
of the breach of warranty. Since the orders for
years, counted from the date of the delivery of the
steel bars were covered by invoices issued by
goods, is too long a time within which to notify the
respondent, Art. 1144 (1), which pertains to the
seller of the breach of warranty.
ten-year prescriptive period for filing of actions

based upon a written contract, is applicable.
Even assuming that the alleged deliveries of the
Petitioner adds that since he filed his counterclaim
undersized steel bars do not constitute a breach
on April 28, 1999, or within ten years from the
of warranty but of the terms of the sale itself,
deliveries of the steel bars in 1987 and 1988, he
respondent's counterclaim cannot prosper. Art.
should be deemed to have timely notified
1595 provides that if the ownership of the goods
respondent of the breach of warranty.
has passed to the buyer and he wrongfully refuses

to pay for such, the seller may maintain an action
for the price of the goods. A buyer is deemed to
have accepted the goods when he does an act
SUPREME COURT RULING:
inconsistent with the ownership of the seller, or

when, after the lapse of a reasonable time, he
The contention has no merit.
retains the goods without intimating to the seller

that he has rejected them (Civil Code, Art. 1585).
Art. 1586 provides that the seller shall not be
In the case at bar, there is no dispute that the
liable if after the acceptance of the goods the
steel bars purchased by petitioner were received
buyer fails to give notice to the seller of the breach
by him. It is also not disputed that petitioner made
in any warranty within a reasonable time after the
partial payments for the goods and that some of
buyer knows, or ought to know of such breach.
the steel bars were in fact used by him to
The CA correctly ruled that the "reasonable time"
manufacture reinforced concrete pipes although
provided in Art. 1571, involves the period for the
they were allegedly rejected on the ground that
filing of actions for breach of implied warranty. At
the steel bars were undersized. The retention and
any rate, the buyer must notify the seller of the
use of the steel bars by petitioner clearly show
breach of warranty at any time before the latter
that he accepted the goods and for this reason he
has filed the suit for the collection of the unpaid
should pay of the price of the same.
price since the purpose of the rule requiring notice

is to prevent the buyer from interposing belated
Hence, the petition is denied.
claims for damages as an offset to a suit begun by

the seller for the purchase price. In this case,
petitioner has failed to establish by satisfactory
Arts 1572 1581
evidence that he notified respondent of the

delivery of the alleged undersized steel bars either
Article 1572. If two or more animals are sold

together, whether for a lump sum or for a
SALES
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separate
price
for
each
of
them,
the
redhibitory defect of one shall only give rise to
it,
the
defect
shall
be
considered
as
redhibitory.
its redhibition, and not that of the others;

unless it should appear that the vendee would
But if the veterinarian, through ignorance or
not have purchased the sound animal or
bad faith should fail to discover or disclose it,
animals without the defective one.
he shall be liable for damages.(1495)
The latter case shall be presumed when a

team, yoke pair, or set is bought, even if a
B. Presumption of Redhibitory vice
separate price has been fixed for each one of

the animals composing the same. (1491)
Article 1578.If the animal should die within

three days after its purchase, the vendor shall
Article 1573.The provisions of the preceding
be liable if the disease which cause the death
article with respect to the sale of animals shall
existed at the time of the contract. (1497a)
in like manner be applicable to the sale of

other things. (1492)
C. Effects of warranty (buyers options)
xxx
Article 1579.If the sale be rescinded, the
Article 1581.The form of sale of large cattle
animal shall be returned in the condition in
shall be governed by special laws. (n)
which it was sold and delivered, the vendee

being answerable for any injury due to his
I. Warranty against hidden vices of animals
negligence,
(Redhibitory vices)
redhibitory fault or defect. (1498)
A. When no warrant exists
and
not
arising
from
the
Article 1580. In the sale of animals with

redhibitory defects, the vendee shall also
Article 1574.There is no warranty against
enjoy the right mentioned in article 1567; but
hidden defects of animals sold at fairs or at
he must make use thereof within the same
public auctions, or of livestock sold as
period which has been fixed for the exercise of
condemned. (1493a)
the redhibitory action. (1499)
Article 1575.The sale of animals suffering from
D. Prescription of action
contagious diseases shall be void.

A contract of sale of animals shall also be void
Article 1577.The redhibitory action, based on
if the use or service for which they are
the faults or defects of animals, must be
acquired has been stated in the contract, and
brought within forty days from the date of their
they are found to be unfit therefor. (1494a)
delivery to the vendee.
Article 1576.If the hidden defect of animals,
This action can only be exercised with respect
even in case a professional inspection has
to faults and defects which are determined by
been made, should be of such a nature that
law or by local customs. (1496a)
expert knowledge is not sufficient to discover
SALES
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SALES

FOR EXCLUSIVE USE OF EH408 2016-2017

the control and possession of the vendee.

ARTICLE 1498. When the sale is made through

Deterioration, loss or improvement

a public instrument, the execution thereof

To deliver the thing sold

shall be equivalent to the delivery of the thing

ARTICLE 1495. The vendor is bound to

deed the contrary does not appear or cannot

transfer the ownership of and deliver, as well

as warrant the thing which is the object of the

With regard to movable property, its delivery

may also be made by the delivery of the keys

ARTICLE 1496. The ownership of the thing

sold is acquired by the vendee from the

ARTICLE 1499. The delivery of movable

ways specified in articles 1497 to 1501, or in

property may likewise be made by the mere

any other manner signifying an agreement that

consent or agreement of the contracting

the possession is transferred from the vendor

parties, if the thing sold cannot be transferred

to the vendee. (n)

to the possession of the vendee at the time of

After perfection of the contract and before

There may also be traditio

constitutum possessorium. (n)

To preserve the thing. Ordinary diligence

ARTICLE 1501. With respect to incorporeal

To deliver and transfer the ownership of

of article 1498 shall govern. In any other case

the thing. Under the law, delivery means

wherein said provisions are not applicable, the

not only means transfer of possession but

placing of the titles of ownership in the

also transfer of control. You cannot have

possession of the vendee or the use by the

control without possession, you cannot

vendee of his rights, with the vendor's

have possession without control.

consent, shall be understood as a delivery.

Form (Manner) of delivery

Actual delivery - placing the thing in the hands of

the buyer in actual possession of the thing

ARTICLE 1497. The thing sold shall be

a. Execution of a public instrument - does not

understood as delivered, when it is placed in

always have the effect of delivery if there is a legal

1 | UNIVERSITY OF SAN CARLOS

CONTRERAS | VALLINAS | YANOYAN

FOR EXCLUSIVE USE OF EH408 2016-2017

impediment in placing the buyer in actual

ex. shares of stocks

possession of the thing.

What is a public document?

ownership in the corporation

Only constitutes constructive delivery if the seller

-delivery of title does not refer to delivery of

is in the position to place the buyer in actual

property if its not incorporeal property

owner with the consent of the owner -- refers to

the property, execution of a public document is

applies to sales of personal property.