ART. 1514.

A person to whom a document surrendered to the bailee or its negotiation

of title has been transferred, but not enjoined.
negotiated, acquires thereby, as against the
transferor, the title to the goods, subject to
the terms of any agreement with the Note: The word “of” between “attachment” and “execution”
transferor. in the third paragraph should more properly read “or”. This
is how Section 34 of the Uniform Sales Act, from which
Article 1514 was adopted, is worded.
If the document is non-negotiable, such
person also acquires the right to notify the
bailee who issued the document of the
ART. 1515. Where a negotiable document of
transfer thereof, and thereby to acquire the
title is transferred for value by delivery, and
direct obligation of such bailee to hold
the indorsement of the transferor is
possession of the goods for him according
essential for negotiation, the transferee
to the terms of the document.
acquires a right against the transferor to
compel him to indorse the document unless
Prior to the notification to such bailee by the
a contrary intention appears. The
transferor or transferee of a non-negotiable
negotiation shall take effect as of the time
document of title, the title of the transferee
when the indorsement is actually made.
to the goods and the right to acquire the
obligation of such bailee may be defeated
Transfer of order document without
by the levy of an attachment of execution
indorsement.
upon the goods by a creditor of the
transferor, or by a notification to such bailee
This article specifies the rights of a person to
by the transferor or a subsequent purchaser
whom an order document of title, which may not
from the transferor of a subsequent sale of
properly be negotiated by mere delivery, has
the goods by the transferor.
been delivered, without indorsement. They are:

(1) The right to the goods as against the

Rights of person to whom document has been
transferor ; and
transferred.
(2) The right to compel the transferor to indorse
(1) The title to the goods as against the
the indorsement.
transferor;
(2) The right to notify the bailee of the transfer
If the intention of the parties is that the
thereof; and
document should be merely transferred, the
(3) The right, thereafter, to acquire the
transferee has no right to require the transferor
obligation of the bailee to hold the goods for
to indorse the document.
him.
Rule where document subsequently indorsed.
The right of the transferee is not absolute as it
is subject to the terms of any agreement with
For the purpose of determining whether the
the transferor. He merely steps into the shoes
transferee is a purchaser for value in good faith
of the transferor.
without notice , the negotiation shall take effect
as of the time when the indorsement is actually
Attachment of goods covered by document
made, not at the time the document is
transferred.
delivered. The reason is that the negotiation
becomes complete only at the time of
(1) The transfer of a non-negotiable document
indorsement. So, if by that time the purchaser
of title does not effect the delivery of the goods
already had notice that the title of the seller was
covered by it. Accordingly, before notification,
defective, he cannot be considered a purchaser
the bailee is not bound to the transferee whose
in good faith though he had no such notice
right may be defeated by a levy of an
when he bought the document.
attachment or execution upon the goods by the
creditor of the transferor or by a notification to
ART. 1516. A person who for value
such bailee of the subsequent sale of the
negotiates or transfers a document of title
goods.
by indorsement or delivery, including one
who assigns for value a claim secured by a
(2) If the document is negotiable, the goods
document of title unless contrary intention
cannot be attached or be levied under an
appears, warrants:
execution unless the document be first
(1) That the document is genuine;
(2) That he has a legal right to negotiate or
transfer it;
(3) That he has knowledge of no fact which
would impair the validity or worth of the
document; and
(4) That he has a right to transfer the title to
the goods and that the goods are
merchantable or fit for a particular purpose,
whenever such warranties would have been
implied if the contract of the parties had
been to transfer without a document of title
the goods represented thereby.
Warranties on sale of documents.
This article treats of the warranties or liabilities
of a person negotiating or transferring a
document. They are similar to those of a person
negotiating an instrument by delivery or by a
qualified indorsement under the Negotiable
Instruments Law. The liability is limited only to
a violation of the four warranties set forth in
Article 1516. Thus, the person negotiating or
transferring a document could be held liable as
when, for example, the document was a
forgery, or he had stolen it, or he had
knowledge that the document was invalid for
want of consideration, or that the goods had
been damaged.
One who assigns for value a claim secured by
a document of title is also liable for the violation
of the four warranties enumerated unless a
contrary intention appears.
It is the duty of every indorsee to know that all
previous indorsements are genuine; otherwise,
he will not acquire a valid title to the instrument.
Under the Negotiable Instruments Law, the last
indorser warrants that all previous
indorsements are genuine.
ART. 1517. The indorsement of a document
of title shall not make the indorser liable for
any failure on the part of the bailee who
issued the document or previous indorsers
thereof to fulfill their respective obligations.
Indorser not a guarantor.
The indorsement of a negotiable instrument has
a double effect. It is at the same time a
conveyance of the instrument and a contract of
the indorser with the indorsee that on certain
conditions the indorser will pay the instrument if
the party primarily
liable fails to do so.
The indorsement of a document of title amounts
merely to a conveyance by the indorser, not a
contract of guaranty. Accordingly, an indorser
of a document of title shall not be liable to the
holder if, for example, the bailee fails to deliver
the goods because they were lost due to his
fault or negligence.
ART. 1518. The validity of the negotiation of
a negotiable document of title is not
impaired by the fact that the negotiation was
a breach of duty on the part of the person
making the negotiation, or by the fact that
the owner of the document was deprived of
the possession of the same by loss, theft,
fraud, accident, mistake, duress, or
conversion, if the person to whom the
document was negotiated or a person to
whom the document was subsequently
negotiated paid value therefor in good faith
without notice of the breach of duty, or loss,
theft, fraud, accident, mistaken, duress
or conversion.
When negotiation not impaired by fraud,
mistake, duress, etc.
Under this article, a negotiable document may
be negotiated by any person in possession of
the same, however such possession may have
been acquired. In other words, it may be
negotiated even by a thief or finder and the
holder thereof would acquire a good title thereto
if he paid value therefor in good faith without
notice of the seller’s defect of title. It will be
remembered that under Article 1512, neither a
thief nor a finder may negotiate a negotiable
document of title. The two provisions thus
appear contradictory to each other.
Under the Warehouse Receipts Law, it is
provided:
“Sec. 47. When negotiation not impaired by fraud, mistake
or duress. — The validity of the negotiation of a receipt is
not impaired by the fact that such negotiation was a breach
of duty on the part of the person making the negotiation or
by the fact that the owner of the document was induced by
fraud, mistake or duress to entrust the possession or
custody thereof to such person, if the person to whom the
document was negotiated or a person to whom the
document was subsequently negotiated paid value
therefor, without notice of the breach of duty or fraud,
mistake or duress.”
ART. 1519. If goods are delivered to a bailee
by
the owner or by a person whose act in
conveying the title to them to a purchaser in
good faith for value would bind the owner
and a negotiable document of title is issued
for them they cannot thereafter, while in
possession of such bailee, be attached by
garnishment or otherwise or be levied under
an execution unless the document be first
surrendered to the bailee or its negotiation
enjoined. The bailee shall in no case be
compelled to deliver up the actual
possession of the goods until the document
is surrendered to him or impounded by the
court.
Attachment or levy upon goods covered by a
negotiable document.
The bailee has the direct obligation to hold
possession of the goods for the original owner
or to the person to whom the negotiable
document of title has been duly negotiated.
While in the possession of such bailee, the
goods cannot be attached or levied under an
execution unless the document be first
surrendered, or its negotiation prohibited by the
court.
The bailee cannot be compelled to deliver up
the possession of the goods until the document
is surrendered to him or impounded by the
court. This prohibition is for the protection of the
bailee since he could be made liable to a
subsequent purchaser for value in good faith.
Where depositor not owner.
The provisions of Article 1519 do not apply if the
person depositing is not the owner of the goods
(like a thief) or one who has no right to convey
title to the goods binding upon the owner.
Neither does it apply to actions for recovery or
manual delivery of goods by the real owner nor
to cases where the attachment is made before
the issuance of the negotiable document of title.
The rights acquired by attaching creditors
cannot be defeated by the issuance of a
negotiable document of title thereafter.
ART. 1520. A creditor whose debtor is the
owner of a negotiable document of title shall
be entitled to such aid from courts of
appropriate jurisdiction by injunction and
otherwise in attaching such document or in
satisfying the claim by means thereof as is
allowed at law or in equity in regard to
property which cannot readily be attached
or levied upon by ordinary legal process.
Creditor’s remedies to reach negotiable
documents.
Inasmuch as the goods themselves cannot
readily be attached or levied upon by ordinary
legal process, as limited by the preceding
article, this article expressly gives the court full
power to aid by injunction and otherwise a
creditor seeking to get a negotiable document
covering such goods. However, if an injunction
is issued but the negotiable document of title is
negotiated to an innocent person, the transfer
is nevertheless effectual.
ART. 1521. Whether it is for the buyer to take
possession of the goods or for the seller to
send them to the buyer is a question
depending in each case on the contract,
express or implied, between the parties.
Apart from any such contract, express or
implied, or usage of trade to the contrary,
the place of delivery is the seller’s place of
business if he has one, and if not, his
residence; but in case of a contract of sale
of specific goods, which to the knowledge
of the parties when the contract or the sale
was made were in some other place, then
that place is the place of delivery.
Where by a contract of sale the seller is
bound to send the goods to the buyer, but
no time for sending them is fixed, the seller
is bound to send them within a reasonable
time.
Where the goods at the time of sale are in
the possession of a third person, the seller
has not fulfilled his obligation to deliver to
the buyer unless and until such third person
acknowledges to the buyer that he holds the
goods on the buyer’s behalf.
Demand or tender of delivery may be treated
as ineffectual unless made at a reasonable
hour. What is a reasonable hour is a
question of fact.
Unless otherwise agreed, the expenses of
and incidental to putting the goods into a
deliverable state must be borne by the
seller.
Place of delivery of goods sold.
The following are the rules:
(1) Where there is an agreement, express or
implied, the place of delivery is that agreed
upon;
(2) Where there is no agreement, the place of
delivery is that determined by usage of trade;
(3) Where there is no agreement and there is
also no prevalent usage, the place of delivery is
the seller’s place of business;
(4) In any other case, the place of delivery is the
seller’s residence; and
(5) In case of specific goods, which to the
knowledge of the parties at the time the contract
was made were in some other place, that place
is the place of delivery, in the absence of any
agreement or usage of trade to the contrary.
From the above, it can be seen that the
presumption is that the buyer must take the
goods from the seller’s place of business or
residence rather than the seller to deliver them
to the buyer.
Wherever the proper place of delivery may be,
either party acquires a right of action by being
ready and willing at that place to perform his
legal duty, if the other party is not there present
or even if present, is not prepared to perform in
a proper manner with what is incumbent upon
him. Where, however, the delivery was not
effected at the place specified in the contract
but the buyer accepted the goods nevertheless
without complaint, the buyer would be deemed
to have waived the seller’s failure to deliver
according to the terms of the contract, and
would be liable to pay the price agreed upon.
Time of delivery of goods sold.
The time of delivery is also determined by the
agreement of the parties or, in the absence
thereof, by the usage of trade.
(1) If no time is fixed by the contract, then the
seller is bound to send the goods to the buyer
within a reasonable time. What is a reasonable
time is properly a question of fact as it is
dependent upon the circumstances attending
the particular transaction, such as the character
of the goods, the purpose for which they are
intended, the ability of the seller to produce the
goods if they are to be manufactured, the
facilities available for transportation and
distance the goods must be carried, and the
usual course of business in the particular trade.
Thus, where the goods are to be manufactured,
the time reasonably necessary to manufacture
and deliver them furnishes the test. Where the
goods are at the time of the bargain in a
deliverable state and perishable in nature, a
reasonable time for delivery would be a very
short time.
(2) If the contract provides a fixed time for
performance, the question is whether time is of
the essence, and if so, whether correct
performance was offered within that time. If
time is not of the essence, the question is
whether correct performance was offered within
a reasonable time.
(3) Where the contract does not specify the time
for delivery so that delivery is to be made within
a reasonable time, time is not of the essence.
In such case, the buyer cannot make time the
essence of the contract without giving the seller
notice of his intention to cancel unless delivery
is made on or before a fixed time.
Delivery of goods in possession of a third
person.
The seller can hardly be discharged from his
obligation where the goods are in the
possession of a third person by simply telling
the buyer that they are there or by notifying the
bailee to deliver to the buyer. It is not enough to
discharge the seller that the bailee has become
by operation of law the agent for the buyer. To
affect third persons, the person holding the
goods must acknowledge being the bailee for
the buyer.
Hour of delivery of goods sold.
The demand or tender of delivery to be effectual
must be made at a reasonable hour of the day.
(1) What is a reasonable hour is a question of
fact largely dependent upon the circumstances.
Generally, however, where all that is required
of the other party is to receive a payment or
performance which can readily be accepted, it
seems probable that any hour when the debtor
could find the creditor would be reasonable for
that purpose.
(2) In case of goods which are bulky or needed
special care, an hour might be unreasonable
which would not be so in an ordinary payment
of a small sum of money.
(3) Where the question is not merely one of
tender but also of demand, reasonableness will
depend on the justifiable expectation that the
hour is reasonable for giving as well as
receiving.
Duty of seller to put goods in deliverable
condition.
Unless otherwise agreed, the seller bears the
expenses to place the thing in a deliverable
state, that is, in such a state that the buyer
would, under the contract, be bound to take
delivery of them. This provision is a necessary
consequence of the duty of the seller to deliver
the goods bargained for.
Note: The buyer is not bound to make tender of
payment until the seller has complied with his
obligations.
ART. 1522. Where the seller delivers to the
buyer a quantity of goods less than he
contracted to sell, the buyer may reject
them, but if the buyer accepts or retains the
goods so delivered, knowing that the seller
is not going to perform the contract in full,
he must pay for them at the contract rate. If,
however, the buyer has used or disposed of
the goods delivered before he knows that
the seller is not going to perform his
contract in full, the buyer shall not be liable
for more than the fair value to him of the
goods so received.
Where the seller delivers to the buyer a
quantity of goods larger than he contracted
to sell, the buyer may accept the goods
included in the contract and reject the rest.
If the buyer accepts the whole of the goods
so delivered he must pay for them at the
contract rate.
Where the seller delivers to the buyer the
goods he contracted to sell mixed with
goods of a different description not
included in the contract, the buyer may
accept the goods which are in accordance
with the contract and reject the rest.
In the preceding two paragraphs, if the
subject matter is indivisible, the buyer may
reject the whole of the goods.
The provisions of this article are subject to
any usage of trade, special agreement, or
course of dealing between the parties.
Delivery of goods less than quantity contracted.
Where the seller is under a contract to deliver a
specific quantity of goods and he delivers a
smaller quantity as full performance of his
obligation, the buyer may reject the goods so
delivered. The buyer may, however, 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 value to him
of the goods, if he did not know that the seller
is going to be guilty of a breach of contract.
“Fair value to him” should be interpreted to
mean the benefit which the buyer may have
received from the goods. It is not necessarily
the market value. Since the defaulting seller is
the wrongdoer, the buyer is not required to pay
the contract price if such
price for the goods is more than fair value to him
of the goods.
Delivery of goods more than quantity
contracted.
Where the seller delivers a quantity larger than
that contracted for, the buyer may accept the
quantity contracted for and reject the excess.
However, if he accepts all the goods delivered,
he makes himself liable for the price of all of
them.
The offer of a quantity not contracted for is a
manifestation of the seller’s willingness to sell
that quantity; and the act of the buyer in
knowingly taking them is sufficient evidence of
assent. If by the terms of the original contract,
the price of the goods was based on their
number, weight, or measure, the same must be
paid for the larger quantity.
Delivery of goods mixed with others.
Where the goods delivered are mixed with
goods of different description not included in the
contract, the buyer may accept those which are
in accordance with the contract and reject the
rest. The buyer, of course, may accept them all
if he so desires.
Effect of indivisibility of subject matter.
If the subject matter of the sale is indivisible, in
case of delivery of a larger quantity of goods or
of mixed goods the buyer may reject the whole
of the goods.
Application of usage of trade, special
agreement, or course of dealing.
(1) A usage of trade is any practice or method
of dealing having such regularity of observance
in a place, vocation or trade as to justify an
expectation that it will be observed with respect
to the transaction in question. The existence
and scope of such a usage are to be proved as
facts.
(2) A course of dealing is a sequence of
previous conduct between the parties to a
particular transaction which is fairly to be
regarded as establishing a common basis of
understanding for interpreting their expressions
and other conduct.
ART. 1523. Where, in pursuance of a
contract of sale, the seller is authorized or
required to send the goods to the buyer,
delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose
of transmission to the buyer is deemed to be
a delivery of the goods to the buyer, except
in the cases provided for in article 1503,
first, second and third paragraphs, or
unless a contrary intent appears.
Unless otherwise authorized by the buyer,
the seller must make such contract with the
carrier on behalf of the buyer as may be
reasonable, having regard to the nature of
the goods and the other circumstances of
the case. If the seller omits so to do, and the
goods are lost or damaged in course of
transit, the buyer may decline to treat the
delivery to the carrier as a delivery to
himself, or may hold the seller responsible
in damages.
Unless otherwise agreed, where goods are
sent by the seller to the buyer under
circumstances in which the seller knows or
ought to know that it is usual to insure, the
seller must give such notice to the buyer as
may enable him to insure them during their
transit, and, if the seller fails to do so, the
goods shall be deemed to be at his risk
during such transit.
Delivery to carrier on behalf of buyer.
(1) General rule. — Where the seller is
authorized or required to send the goods to the
, the general rule is that delivery of such goods
to the carrier6 constitutes delivery to the buyer,
whether the carrier is named by the buyer or
not. In such case, the delivery of the goods on
board the carrying vessel partakes the nature
of actual delivery since from that time, the buyer
assumes the risk of loss of the goods.
(2) Exceptions. — They are those provided for
in paragraphs 1, 2, and 3 of Article 1503 and
when a contrary intent appears, that is, the
parties did not intend the delivery of the goods
to the buyer through the carrier. The seller is not
responsible for misdelivery by the carrier where
the carrier was chosen and authorized by the
buyer to make the delivery.
Seller’s duty after delivery to carrier.
The fact that the ownership in the goods may
have passed to the buyer does not mean that
the seller has already fulfilled his duty to the
buyer.
(1) To enter on behalf of buyer into such
contract reasonable under the circumstances.
— The seller must make such contract with the
carrier on behalf of the buyer as may be
reasonable under the circumstances. If he
omits to do so, the buyer may decline to treat
the delivery to the carrier as a delivery to
himself in case the goods are lost or damaged
in course of transit, or the buyer may hold the
seller responsible in damages. If the buyer
exercises the first right, the transfer of
ownership will be deemed not to have taken
place.
(2) To give notice to buyer regarding necessity
to insure goods. — The seller must give notice
to the buyer as may enable him to insure the
goods during their transit if under the
circumstances it is usual to insure them. If the
seller fails to do so, the risk will be borne by him.
But the seller who had failed to give notice is
not liable for loss of goods, if the buyer had all
the information necessary to insure.
There is delivery to the carrier when the goods are ready
for and have been placed in the exclusive possession,
custody and control of the carrier for the purpose of their
immediate transportation and the carrier has accepted
them. Where such delivery has thus been accepted by the
carrier, its liability commences eo instanti. Ordinarily, a
receipt is not essential to a complete delivery of goods to
the carrier for transportation but, when issued is competent
and prima facie but not conclusive evidence of delivery to
thecarrier.
Definition of shipping terms.
(1) C.O.D. — The initials stand for the words,
“collect on delivery.” If the goods are marked
C.O.D., the carrier acts for the seller in
collecting the purchase price. The buyer must
pay for the goods before he can obtain
possession. C.O.D. terms do not prevent title
from passing to the buyer on delivery to the
carrier where they are solely intended as
security for the purchase price;
(2) F.O.B. — The initials stand for the words,
“free on board”. They mean that the goods are
to be delivered free of expense to the buyer to
the point where they are F.O.B. In general, the
point of F.O.B., either the point of shipment or
the point of destination, determines when the
ownership passes. Here, title presumably
passes when the goods are so delivered
F.O.B.; and
(3) C.I.F. — The initials stand for the words,
“cost, insurance and freight.” They signify that
the price fixed covers not only the cost of the
goods, but the expense of freight and insurance
to be paid by the seller (ibid.) up to the point of
destination. Title passes to the buyer at the
moment of delivery to the point especially
named.
Presumption arising from payment of freight.
Both the terms “F.O.B.” and “C.I.F.” merely
make rules of presumption which yield to proof
of contrary intention.
If the buyer is to pay the freight, it is reasonable
to suppose that he does so because the goods
become his at the point of shipment. On the
other hand, if the seller is to pay the freight, the
inference is equally strong that the duty of the
seller is to have the goods transported to their
ultimate destination and that title to property
does not pass until the goods have reached
their destination.
ART. 1524. The vendor shall not be bound to
deliver the thing sold, if the vendee has not
paid him the price, or if no period for the
payment has been fixed in the contract.
Delivery, simultaneous with payment of price.
As a general rule, the obligation to deliver the
thing subject matter of a contract arises from
the moment of its perfection and from that time
the obligation may be enforced. But the contract
of purchase and sale is bilateral and from it
arises not only the obligation to deliver the thing
but also that of paying the price. The obligations
are reciprocal.
Consequently, if the vendor is bound to deliver
the thing sold, it is no less certain that the
vendee must pay the price. If the vendee does
not pay the price, the consideration for the
obligation of the vendor is absent and if the
consideration is absent, the obligation likewise
does not exist or at least is suspended. The
vendor is not also obliged to make delivery if no
period has been fixed in the contract and the
vendee has not paid the price.
A vendor who continued to effect sales and
deliveries to the vendee even without promptly
getting paid is considered for all intents and
purposes, to have sold on credit.
When delivery must be made before payment
of price.
The provisions of Article 1524 contain a rule
and an exception: the rule is that the thing shall
not be delivered unless the price be paid; and
the exception is that the thing must be delivered
though the price be not first paid, if time for such
payment has been fixed in the contract.
If this period was fixed, the vendor
notwithstanding such period has not
terminated, nor, consequently, that he has not
collected the price, is obliged to deliver the thing
sold. The vendor’s obligation to convey the
thing arises from the force and validity of the
contract. But even if a period has been fixed for
the payment of the price, the vendor is not
bound to deliver in case the vendee has lost the
right to make use of the period and still has not
paid the price.
ART. 1525. The seller of goods is deemed to
be an unpaid seller within the meaning of
this Title:
(1) When the whole of the price has not been
paid or tendered;
(2) When a bill of exchange or other
negotiable instrument has been received as
conditional payment, and the condition on
which it was received has been broken by
reason of the dishonor of the instrument,
the insolvency of the buyer, or otherwise.
In articles 1525 and 1535 the term “seller”
includes an agent of the seller to whom the
bill of lading has been indorsed, or a
consignor or agent who has himself paid, or
is directly responsible for the price, or any
other person who is in the position of a
seller.
Meaning of unpaid seller.
An unpaid seller is one who has not been paid
or tendered the whole price or who has
received a bill of exchange or other negotiable
instrument as conditional payment and the
condition on which it was received has been
broken by reason of the dishonor of the
instrument.
The term “unpaid seller” within the scope of
Articles 1525 up to 1535 includes: (1) an agent
of the seller; (2) a consignor or agent who has
himself paid or is directly responsible for the
price; or (3) any other person in the position of
the seller. A seller is unpaid within the definition
whether title has or has not passed.
Where whole of price has not been paid.
(1) Tender of payment by buyer. — Although
tender of payment is not the same as
performance, and a seller to whom the price of
goods has been tendered is strictly unpaid, and
can, therefore, bring an action subsequently for
the price, which he has refused, yet tender
destroys the seller’s lien. Accordingly, so far as
concerns his rights against the goods, he is not
an unpaid seller after the tender of the price.
(2) Payment of part of price. — Payment of a
part only of the price does not destroy a seller’s
lien. The seller remains an unpaid seller even
if title has passed to the buyer.
(3) Payment by negotiable instrument. —
According to paragraph 2 of Article 1249 (Civil
Code), “the delivery of promissory notes
payable to order, or bills of exchange or other
mercantile documents shall produce the effect
of payment only when they have been cashed
or when through the fault of the creditor they
have been impaired.”
ART. 1526. Subject to the provisions of this
Title, notwithstanding that the ownership in
the goods may have passed to the buyer,
the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them
for the price while he is in possession of
them;
(2) In case of the insolvency of the buyer, a
right of stopping the goods in transitu after
he has parted with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise
limited by this Title.
Where the ownership in the goods has not
passed to the buyer, the unpaid seller has,
in addition to his other remedies, a right of
withholding delivery similar to and co-
extensive with his rights of lien and
stoppage in transitu where the ownership
has passed to the buyer.
Special remedies of an unpaid seller of goods.
Article 1526 gives the unpaid seller of goods
certain remedies but they do not cover an
action for the purchase price. Even if the
ownership in the goods has already passed to
the buyer, the unpaid seller may exercise the
following rights:
(1) A lien on the goods or right to retain them
for the price while in his possession (Arts. 1527-
1529.);
(2) A right of stopping the goods in transitu in
case of insolvency of the buyer (Art. 1530.);
(3) A right of resale (Art. 1533.); and
(4) A right to rescind the sale. (Art. 1534.)
If the unpaid seller still retains ownership in the
goods, he cannot be said to have a lien (on his
goods). But he does have, in addition to his
other remedies, right of withholding delivery.
Nature of unpaid seller’s possessory lien on the
goods.
The right given by this article though
denominated as a lien, is in truth greater than a
lien.
The seller’s position is very nearly that of a
pledgee with power to sell at private sale in
case of default, and the power survives till
payment of the price. An action for the price is
not inconsistent with the later enforcement of
the lien though the buyer must be credited with
any payment of the price in reduction of the lien.
Unpaid seller’s lien on the price.
The possessory lien entitles the seller to retain
possession of the goods as security for the
purchase price. Where the goods are in the
possession of the buyer, the seller has no more
possessory lien but his claim for the unpaid
price is a preferred claim or lien. Simply stated,
upon delivery, the seller’s possessory lien on
the goods is lost, but his lien on the price
remains.
Basis of rights of unpaid seller.
The ground upon which an unpaid seller is
allowed a lien and kindred remedies is the
inherent injustice of depriving him of that he has
not been or will not be paid the price for them
when it is due.
The same principle of justice is applicable in
every case where a possessor of goods is
entitled to receive a price on the surrender of
the goods. Accordingly, the term “unpaid seller’’
has a wider meaning than the literal language
would import.
ART. 1527. Subject to the provisions of this
Title, the unpaid seller of goods who is in
possession of them is entitled to retain
possession of them until payment or tender
of the price in the following cases, namely:
(1) Where the goods have been sold without
any stipulation as to credit;
(2) Where the goods have been sold on
credit, but the term of credit has expired;
(3) Where the buyer becomes insolvent. The
seller may exercise his right of lien
notwithstanding that he is in possession of
the goods as agent or bailee for the buyer.
When unpaid seller’s possessory lien may be
exercised.
(1) Sale without stipulation as to credit. — In a
credit sale, the seller binds himself to give the
goods over to the buyer without receiving at that
time payment for them. Where there is a
“stipulation as to credit” (No. 1.), a period for
payment of the price has been fixed in the
contract.
In the absence of any stipulation as to the
credit, the seller is entitled to the payment of the
price at the same time that he transfers the
possession of the goods. Accordingly, the seller
has always a lien upon the goods which he sells
until payment or tender of the entire price.
(2) Expiration of term of credit. — Even where
the parties agree upon a sale on credit, the
seller’s right of lien may be exercised. By the
nature of a credit sale, the buyer is entitled to
possession of the goods without paying the
price; but if he fails to exercise his right until the
term of credit has expired and the price
becomes due, he loses the right which he
theretofore had. In this case, the obligation of
the buyer to pay will also be governed by Article
1524.
(3) Insolvency of the buyer. — The insolvency
of the buyer is another situation where the lien
of the seller in possession is revived even
though the time for payment of the price has not
yet arrived. This doctrine is only an application
of a general principle in the law of contracts that
when one party to a bilateral contract is
incapacitated from performing his part of the
agreement, the other party also is excused from
performing. It should be noticed that insolvency
does not dissolve the bargain; it merely revives
the seller’s lien.
The insolvency of the debtor is one of the
grounds for the loss of the right to make use of
the period fixed in an obligation. A person is
“insolvent” who either has ceased to pay his
debts in the ordinary course of business or
cannot pay his debts as they become due,
whether insolvency proceedings have been
commenced or not.
Unpaid seller as bailee for the buyer.
It is immaterial that the seller holds the goods
as bailee for the buyer. Indeed, this always is
the situation where the seller’s lien is in
question: for the property having passed, the
seller is necessarily holding the buyer’s goods
and, therefore, acting as bailee for him. And
though he has charged the buyer storage for
the goods, the lien may still be asserted.
ART. 1528. Where an unpaid seller has made
part delivery of the goods, he may exercise
his right of lien on the remainder, unless
such part delivery has been made under
such circumstances as to show an intent to
waive the lien or right of retention.
Lien generally not lost by part delivery.
When part of the goods are delivered, the
unpaid seller has a lien upon the remainder for
the proportion of the price which is due on
account of the goods so retained. However, if
the delivery of the part is intended as symbolical
delivery of the whole, and, therefore, a waiver
of any right of retention as to the remainder, the
lien is lost.
ART. 1529. The unpaid seller of goods loses
his lien thereon:
(1) When he delivers the goods to a carrier
or other bailee for the purpose of
transmission to the buyer without reserving
the ownership in the goods or the right to
the possession thereof;
(2) When the buyer or his agent lawfully
obtains possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien
thereon, does not lose his lien by reason
only that he has obtained judgment or
decree for the price of the goods.
When unpaid seller loses possessory lien.
(1) Delivery to agent or bailee of buyer. — An
unconditional delivery to an agent or bailee for
the buyer is, so far as the seller’s lien is
concerned, the same as delivery to the buyer
himself. It is true that the seller may stop the
goods while on their way to the buyer after
delivery to a bailee for the buyer but it cannot
be said that the seller has still any lien upon
them.
(2) Possession by buyer or his agent. — If the
goods are already in the possession of the
buyer at the time of the bargain, it is plain that
when the ownership is transferred, the seller
has no lien simply because he has no
possession necessary for a lien. The wrongful
taking, however, of the goods by the buyer
without the seller’s consent does not destroy
the lien. Thus, if the goods are put into the
possession of the buyer merely for the purpose
of allowing the latter to examine them, this
would not amount to an assent
to a surrender of the lien.
(3) Waiver of the lien. — The seller may lose his
lien either by express agreement to surrender
it. Thus, it has been held that where the buyer
was allowed to alter the character of the goods
and make them much more valuable, the seller
could no longer assert a lien.
Note that mere judgment by a court obtained by
the unpaid seller for the price of the goods is not
a ground for the loss of his lien.
Revival of lien after delivery.
(1) If the buyer refuses to receive the goods
after they have been delivered to a carrier or
other bailee on his behalf, though the seller has
parted with both the ownership and the
possession, he may reclaim the goods and
revest himself with his lien.
(2) Likewise, if the buyer returns the goods in
wrongful repudiation of the sale, the lien is
revived.
ART. 1530. Subject to the provisions of this
Title, when the buyer of goods is or
becomes insolvent, the unpaid seller who
has parted with the possession of the goods
has the right of stopping them in transitu,
that is to say, he may resume possession of
the goods at any time while they are in
transit, and he will then become entitled to
the same rights in regard to the goods as he
would have had if he had never parted with
the possession.
Right of seller to stop goods in transitu.
If the unpaid seller has already parted with the
possession of the goods, he may still exercise
the second right of stoppage in transitu that is,
he may resume possession of the insolvent.
The right is exercised either by obtaining actual
possession of the goods or by giving notice of
his claim to the carrier or other bailee in
possession. The unpaid seller exercising his
right of stoppage in transitu becomes entitled to
the same rights to the goods as if he had never
parted with the possession thereof.
Take note that the buyer’s insolvency need not
be judicially declared. An insolvent debtor
forfeits his rights to the period stipulated for
payment.
Requisites for the exercise of right of stoppage
in transitu.
The following are the requisites for the
existence of the right:
(1) The seller must be unpaid;
(2) The buyer must be insolvent;
(3) The goods must be in transit;
(4) The seller must either actually take
possession of the goods sold or give notice of
his claim to the carrier or other person in
possession ;
(5) The seller must surrender the negotiable
document of title, if any, issued by the carrier or
bailee ; and
(6) The seller must bear the expenses of
delivery of the goods after the exercise of the
right.
Basis and nature of right of stoppage
in transitu.
(1) The essential basis of the right of stoppage
in transitu is clearly the injustice of allowing the
buyer to acquire ownership and possession of
the goods when he has not paid and, owing to
his insolvency, cannot pay the price which was
to be given in return for the goods. In other
words, the fundamental basis of the right is the
far-reaching principle allowing rescission and
restitution where there is actual or prospective
failure of consideration.
(2) This right does not proceed from any
agreement of the parties but is independently
conferred by law. It may be regarded as a legal
extension of the unpaid seller’s lien.