Sales Reviewer

OBLIGATIONS OF THE VENDOR Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. Principal obligations of the vendor 1. To transfer the ownership of the determinate thing sold; 2. To deliver the thing, with its accessions and accessories, if any, in the condition in which they were upon the perfection of the contract (Art.1537); 3. To warrant against eviction and against hidden defects (Arts. 1495,1547); 4. To take care of the thing, pending delivery, with proper diligence (see Art.1163); and 5. To pay for the expenses of the deed of sale, unless there is a stipulation to the contrary (Art.1487).
 The vendor need not be the owner of the thing at the time of perfection of the contract; it is sufficient that he has a right to transfer the ownership thereof at the time it is delivered.  One who sells something he does not yet own is bound by the sale when he acquires it later.  When a property belonging to a person is unlawfully taken by another, the former has the right of action against the latter for the recovery of the property. Such right may be transferred by the sale or assignment of the property and the transferee can maintain such action against the wrongdoer. The transfer of ownership and the delivery of the thing sold are not essential to the perfection of the contract. But if the seller does not deliver at the time stipulated, the buyer may ask for the rescission of the contract or fulfillment with the right to damages in either case. The purchaser in execution sales, however, is not entitled to immediate possession of the property sold. The effective conveyance of the land is accomplished by the deed which is issued only after the period of redemption has expired.  In all cases of extra-judicial foreclosure sale, the mortgagor may redeem the real property sold within 1 year from the date of registration of the sale.  In judicial foreclosure of real estate mortgage, the general rule is that the mortgagor cannot exercise his right of redemption after the sale is confirmed by the court. The purchaser is entitled to recover the money paid by him where the contract is set aside by reason of the mutual material mistake of the

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parties as to the identity or quantity of the land sold. And where the purchaser recovers the purchase price from a vendor who fails or refuses to deliver the title, he is entitled, as a general rule, to interest on the money paid from the time of payment.

Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. Ways of effecting delivery The ownership of the thing sold shall be transferred to the vendee upon the delivery thereof, which may be effected in any of the following: 1. By actual or real delivery (Art.1497); 2. By constructive or legal delivery (Arts.1498-1501); or 3. By delivery in any other manner signifying an agreement that the possession is transferred to the vendee (Arts.1496-1499).
 In all the different modes of delivery, the critical factor which gives legal effect to the act is the actual intention of the vendor to deliver, and its acceptance by the vendee. The act, without the intention, is insufficient. There is no tradition. Although the transfer of ownership is the primary purpose of sale, delivery remains an indispensable requisite as our law does not admit the doctrine of transfer of ownership of property by mere consent. The delivery must be made to the vendee or his authorized representative. Where the vendee did not name any person to whom the delivery shall be made in his behalf, the vendor is bound to deliver exclusively to him.

Ways of effecting constructive delivery Constructive delivery is a general term comprehending all those acts which, although not conferring physical possession of the thing, have been held by construction of law equivalent to acts of real delivery. It may be effected in any of the following ways: 1. By the execution of a public instrument (Art.1498,par.1); 2. By symbolical tradition or tradition symbolica (ibid.,par.2); 3. By tradition longa manu (Art.1499); 4. By tradition brevi manu (ibid);

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5. By tradition constitutum possessorium (Art.1500); or 6. By quasi-delivery or quasi-traditio (Art.1501).
 The parties, however, may stipulate that ownership in the thing shall pass to the purchaser only after he has fully paid the price or fulfilled certain conditions.

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from the deed the contrary does not appear or cannot clearly be inferred. With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept.  The execution of a public instrument as a manner of delivery applies to movable as well as immovable property since the law does not make any distinction.  Since the execution of the deed of conveyance is deemed equivalent to delivery, prior physical delivery or possession is not legally required.  Exceptions:  Even if in a public instrument, if there is no control or not in possession;  The subject is not under the control of the seller; and  There is no ability to transfer ownership  The phrase the execution thereof shall be equivalent is only a presumptive (not conclusive) delivery which can be rebutted by evidence to the contrary.  If it appears from the document or it can be inferred therefrom that it was not the intention of the parties to make delivery, no tradition can be deemed to have taken place.  Presumptive delivery by execution of public instrument can also be negated by failure of the vendee to take material possession of the land subject of the sale in the concept of purchaser-owner.  Symbolic delivery by the execution of a public instrument is equivalent to actual delivery only where the thing is subject to the control of the vendor and there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. Hence, the vendor who executes said public instrument fails in his obligation to deliver it, if the vendee cannot enjoy its material possession because of the opposition or resistance of a third person who is in actual possession.  It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control in order that it can be said that delivery has been effected.  If the sale had been made under the express agreement of imposing upon

DELIVERY OF THE THING SOLD Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. Tradition a derivative mode of acquiring ownership by virtue of which one who has the right and intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same.
 When the thing subject of the sale is placed in the control and possession of the vendee or his agent, the delivery is complete and the vendee cannot avoid liability in case the thing is subsequently lost without the fault of the vendor. Where the buyer has not become the owner for lack of delivery, his action is not accion reinvindicatoria but one against the vendor for specific performance or rescission, with damages in either case. The delivery of the thing together with the payment of the price marks the consummation of the contract of sale. Perfection of the contract, on the other hand, relates to the moment when the meeting of minds between the parties takes place.

 

Actual delivery of the thing sold There is actual delivery when the thing sold is placed in the control and possession of the vendee. This involves the physical delivery of the thing and is usually done by the passing of a movable thing from hand to hand.
 The actual or manual delivery of an article sold is not always essential to the passing of title thereto. The parties to the contract may agree when and on what conditions the ownership in the subject of the contract shall pass to the buyer.

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if

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the vendee the obligation to take the necessary steps to obtain the material possession of the thing sold and if it were proven that he knew that the thing was in the possession of a third person claiming to have property rights thereon, such agreement would be perfectly valid. Art. 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred 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. Traditio longa manu It is the mode of delivery that takes place by the mere consent or agreement of the contracting parties as when the vendor merely points to the thing sold which shall thereafter be at the control and disposal of the vendee. Tradition brevi manu It is the mode of legal delivery that happens when the vendee has already the possession of the thing sold by virtue of another title as when the lessor sells the thing leased to the lessee. Instead of turning over the thing to the vendor so that the latter may, in turn, deliver it, all these are considered done by action of law. Art. 1500. There may also be tradition constitutum possessorium. Tradition constitutum possessorium This is the opposite of tradition brevi manu. It takes place when the vendor continues in possession of the property sold not as owner but in some other capacity. Ex. When the vendor stays as a tenant of the vendee. In this case, instead of the vendor delivering the thing to the vendee so that the latter may, in turn, deliver it back to the vendor, the law considers that all these have taken place by mere consent or agreement of the parties. Art. 1501. With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, with

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the vendors consent, shall be understood as a delivery. Quasi-traditio It is the mode of delivery of incorporeal things or rights. It is effected through the following: 1. By the execution of a public instrument; or 2. When that mode of delivery is not applicable, by the placing of the titles of ownership in the possession of the vendee; or 3. By allowing the vendee to use his rights as new owner with the consent of the vendor.  In all forms of delivery, it is necessary that the act be coupled with the intention of delivering the thing. The act, without the intention to deliver it, is insufficient. Art. 1502. When goods are delivered to the buyer on sale or return to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time. When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer. 1. When he signifies his approval or acceptance to the seller r does any other act adopting the transaction; 2. If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.  The duty of the buyer with regard to the return of the goods requires, ordinarily, that they be returned in the same or substantially the same condition in which they were when the contract was made. Undoubtedly, if they are injured or damaged substantially through negligence or misuse of the buyer, his right to return is lost and the sale becomes absolute.

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Sale or return It is a contract by which property is sold but the buyer, who becomes the owner of the property on delivery, has the option to return the same to the seller instead of paying the price.  The buyer may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time, otherwise, the sale becomes absolute and the buyer is liable for the price.  The seller cannot, in this type of sale, prevent the revesting of title by refusing to accept the return of the property.  Since title passes to the buyer on delivery, the loss or destruction of the property prior to the exercise of the buyers option to return falls upon him and renders him responsible to the seller for the purchase price or such part thereof as remains unpaid.  The word return itself implies a previous transfer of title. Sale on trial or approval It is a contract in the nature of an option to purchase if the goods prove satisfactory, the approval of the buyer being a condition precedent.  In this contract, the title shall continue in the seller until the sale has become absolute either by the buyers approval of the goods, or by his failing to comply with the express or implied conditions of the contract as to giving notice of dissatisfaction or as to returning the goods or by his doing any other act adopting the transaction such as mortgaging the property or selling it to a third person.  Since the title to the goods does not pass and the relationship between the seller and the purchase is that or bailor and bailee, the risk of loss or injury to the article pending the exercise by the buyer of his option to purchase or return it, is upon the seller except as the buyer may be at fault in respect of the case and condition of the article, or may have agreed to stand the loss. Sale or return distinguished from sale on trial Sale or return Sale on trial Subject to a resolutory Subject to a condition suspensive condition Depends entirely on the will of the buyer Ownership of the goods passes to the buyer on delivery and subsequent return of the goods reverts ownership in the seller The risk of loss or injury rests upon the buyer

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Depends on the character or quality of the goods Ownership remains in the seller until the buyer signifies his approval or acceptance to the seller The risk still remains with the seller

Art. 1503. Where there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer. Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But if, except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the sellers property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract. Where goods are shipped, and by the bill of lading the goods are deliverable to the order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer. Where the seller of goods draws on the buyer for the priced and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill 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. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, on who purchases in good faith, for value, the bill of

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lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.  As a general rule, the ownership in the goods sold passes to the buyer upon their delivery to the carrier, except: 1. If a contrary intention appears by the terms of the contract; 2. In the cases provided in the second and third paragraphs of Article 1523; and 3. In the cases provided in the first, second, and third paragraphs of Article 1503.  The general rule is that delivery, be it only constructive, passes title in the thing sold and delivery to the carrier is deemed to be a delivery to the buyer. The risk of loss, therefore, as between the buyer and the seller, falls upon the buyer.  Where goods are shipped and by the bill of lading, the goods are deliverable to the seller or his agent or to the order of the seller or his agent, the seller thereby reserved the ownership in the goods and the carrier is a bailee for him and not the buyer. This principle is applicable even though the goods are shipped on the buyers vessel.  The seller may not only retain the goods until the buyer performs his obligation under the contract, but he may, even in violation of the contract, dispose of them to third persons. If the seller does this, of course, he is liable for damages to the buyer but the second purchaser from the seller acquires a better right. Significance where title held merely as security Risk of loss on buyer 1. The beneficial owner (buyer), not the one who holds for security (seller), will be subject to the risk of loss or deterioration from the time the goods are delivered to the carrier even though the legal title remains in the seller. That the risk should be borne by the buyer if the seller retains title merely to secure performance by the buyer of his obligations under the contract is a consequence of the theory that such a

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bargain is, in effect, although not in form, a sale to the buyer and a mortgage back by him of the goods to secure the price. The title does not pass to the buyer until he received the order bill of lading properly indorsed. Buyers right of action based on ownership 2. The buyer has more than a mere contract right in regards to the goods. As beneficial owner, he may, as against any one except an innocent purchaser for value of the bill of lading from the consignee, bring an action based on ownership on making tender of the price. Where buyer or his agent is consignee but seller retains order bill of lading Where goods are shipped and by the bill of lading the goods are deliverable to the order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby retains a right to the possession of the goods as against the buyer. Where a third person who retains the bill if consignee Two devices have already been considered by which the seller of goods retains a hold upon them by means of the bill of lading after he has shipped them: first, by consigning the goods to himself, either by an order bill or a straight bill and second, by consigning the goods to the order of the buyer and retaining possession of the bill of lading. Distinction in regard to the form of the bill of lading 1. If the seller has named the buyer as consignee, the property has passed to the consignee or at least it seems to have been so to one who inspects the document; 2. If the bill of lading, though naming the seller as consignee, is indorsed by him to the buyer or in blank, the possession of the document by the buyer gives him, if not the actual title, at least an apparent ownership; and 3. If the bill of lading names the seller or a third person as consignee and no endorsement of the document had been made, possession by the buyer would not indicate that the buyer had title.

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Where the document gives the buyer apparent ownership and a third person purchases the goods relying thereon, it seems clear on broad principles of justice that since one of two innocent parties must suffer, he should suffer whose act has brought about the loss. Consequently, the seller ought not to be allowed to recover the goods from the third person. Art. 1504. Unless otherwise agreed, the goods remain at the sellers risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer, the goods are at the buyers risk whether actual delivery has been made or not, except that: 1. Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyers risk from the time of such delivery; 2. Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault. Risk of loss generally attends title If the thing is lost by fortuitous event, the risk is borne by the owner of the thing at the time of the loss under the principle of res perit domino, except: 1. Where the seller reserves the ownership of the goods merely to secure the performance by the buyer of his obligations under the contract, the ownership is considered transferred to the buyer who, therefore, assumes the risk from the time of delivery. 2. Where actual delivery had been delayed through the fault of either the buyer or seller, the goods are at the risk of the party at fault with respect to any loss which might not have occurred but for such fault. In this case, the law punishes the party at fault. Risk of loss by fortuitous event after perfection but before delivery Under Article 1480, if the thing sold is lost after perfection of the contract but before its delivery, that is, even before the ownership is transferred to the buyer, the risk of loss by fortuitous event

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without the sellers fault is borne by the buyer as an exception to the rule of res perit domino. Consequently, the buyers obligation to pay the price subsists if he has not yet paid the same or if he had, he cannot recover it from the seller although the latters obligation to deliver the thing is extinguished by its loss. The risk of loss of the thing after perfection is shifted from the seller to the buyer even though the buyer has not yet acquired ownership thereof. To avoid conflict, to wit: Article 1504 should be restricted in its application to sale of goods and Article 1480, to sales of things. This would make Article 1480 the general rule on risk of loss and Article 1504, the exception. Art. 1505. Subject to the provisions of this Title where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell. Nothing in this title, however, shall affect: 1. The provisions of any factors acts, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; 2. The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction; 3. Purchases made in a merchants store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. It is a fundamental doctrine of law that no one can give what he has not or transfer a greater right to another than he himself has. Exceptions: 1. Where the owner of the goods, is by his conduct, precluded from denying the sellers authority to sell. 2. Where the law enables the apparent ownership to dispose of the good as if he were the true owner thereof.  Our country has no Factors Act. Such is designed to protect third persons who (under specified conditions) deal with an agent

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believing him to be the owner of goods. Where the sale is sanctioned by statutory or judicial authority.  According to Art.559 of the CC, the possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who has lost any movable, or has been unlawfully deprived therefor, may recover it from the person in possession of the same. This refers to the Doctrine of Ireinvindicatoria. Exception: If the possessor of a movable lost or of which the owner has unlawfully been deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. Where the sale is made at merchants stores, fairs or markets. Where the seller has a voidable title which has not been avoided at the time of the sale. Where seller subsequently acquires title. when a person conveys property to another of which at the time he is not the owner, his subsequent acquisition of title validates his previous conveyance.

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3.

4. 5. 6.

Document of title to goods includes any bill of lading, dock warrant, quedan, or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, goods represented by such document.  A document of title is symbol of the goods covered by it, serving as evidence of a. Transfer of title; b. Transfer of possession; and c. A contract between the parties who are bound by its terms.  So far as concerns the transfer of property between the parties, their intention would be effectual without the document, but where third parties rights are involved, the form of the document (negotiable or non-negotiable) becomes important. 3 Most common forms or documents of title 1. Bill of lading It is a contract and a receipt for the transport of goods and their delivery to the person named therein, to order, or to bearer. It involves the carrier, the shipper, and the consignee. 2. Dock warrant It is an instrument given by dock owners to an importer of goods warehoused on the dock as a recognition of the importers title to the said goods, upon production of the bill of lading. 3. Warehouse receipt It is a contract or receipt for goods deposited with a warehouseman containing the latters undertaking to hold and deliver the said goods to a specified person, to order, or to bearer. Quedan is a warehouse receipt usually for sugar received by a warehouseman. Laws governing documents of title 1. The Civil Code; 2. The Warehouse Receipts Law; and 3. The Code of Commerce Classes of documents of titles 1. Negotiable documents of title those by the terms of which the bailee undertakes to deliver the goods to the bearer and

Art. 506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the sellers defect of title. Requisites for acquisition of good title by buyer If the seller has only a voidable title to the goods, the buyer acquires a good title to the goods provided he buys them: a. Before the title of the seller has been avoided; b. In good faith for value; and c. Without notice of the sellers defect of title. Art. 1507. A document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document is a negotiable document of title.

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those by the terms of which the bailee undertakes to deliver the goods to the order of a specified person (Art.1508); or 2. Non-negotiable documents of title those by the terms of which the goods covered are deliverable to a specified person (Art.1511). Art. 1508. A negotiable document of title may be negotiated by delivery: 1. Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer; or 2. Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the document has indorsed it in blank or to the bearer. Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any specified person, and in such case the document shall thereafter be negotiated only by the indorsement of such indorsee. Negotiation of negotiable document by delivery A negotiable document of title is negotiable by delivery if: 1. The goods are deliverable to the bearer; or 2. When it is indorsed in blank or to the bearer by the person to whose order the goods are deliverable or by a subsequent indorsee. An indorsement is in blank when the holder merely signs his name at the back of the receipt without specifying to whom the goods are to be delivered. If the document is specially indorsed, it becomes an order document of title and negotiation can only be effected by the indorsement of the indorsee. A special indorsement specifies the person to whom or to whose order the goods are to be delivered. Art. 1509. A negotiable document of title may be negotiated by the indorsement of the person to whose order the goods are by the terms of the document deliverable. Such indorsement may

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be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer or to another specified person. Subsequent negotiations may be made in like manner. Negotiation of negotiable document by indorsement A negotiable document of title by the terms of which the goods are deliverable to a person specified therein may be negotiated only by the indorsement of such person. 1. If indorsed in blank or to bearer, the document becomes negotiable by delivery (Art.1508). 2. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer, or to another specified person. Delivery alone is not sufficient. (If delivery alone without indorsement, it is merely a transfer) 3. A party is liable only as guarantor and not as indorser if his indorsement is made for the purpose of identification only. Art. 1510. If a document of title which contains an undertaking by a carrier, warehouseman or other bailee to deliver the goods to bearer, to a specified person or order of a specified person or which contains words of like import, has placed upon it the words not negotiable, nonnegotiable, or the like, such document may nevertheless be negotiated by the holder and is a negotiable document of title within the meaning of this Title. But nothing in this Title contained shall be construed as limiting or defining the effect upon the obligations of the carrier, warehouseman, or other bailee issuing a document of title or placing thereon the words not negotiable, non-negotiable, or the like. Negotiable documents of title marked nonnegotiable It has no effect and the document continues to be negotiable. When the document of title is to order, the bailee is obliged to take it p before delivering the goods. Accordingly, he is liable to the holder of an order document if the goods are delivered to the consignee without surrender of the document even though the latter was marked not negotiable.

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Art. 1511. A document of title which is not in such form that it can be negotiated by delivery may be transferred by the holder by delivery to a purchaser or done. A non-negotiable document cannot be negotiated and the indorsement of such a document gives the transferee no additional right. A non-negotiable document of title cannot be negotiated. Nevertheless, it can be transferred or assigned by delivery. In such a case, the transferee or assignee acquires only the rights stated in Art.1514. Even if the document is indorsed, the transferee acquires no additional right. Art. 1512. A negotiable document of title may be negotiated: 1. By the owner thereof; or 2. By any person to whom the possession or custody of the document has been entrusted by the owner, if, by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted, or if at the time of such entrusting the document is in such form that it may be negotiated by delivery. Art. 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby: 1. Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value; and 2. The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. Rights of person to whom document has been negotiated 1. The title of the person negotiating the document, over the goods covered by the document;

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2. The title of the person (depositor or owner) to whose order by the terms of the document the goods were to be delivered, over such goods; and 3. The direct obligation of the bailee (warehouseman or carrier) to hold possession of the goods for him, as if the bailee had contracted directly with him. One who purchases, therefore, a negotiable document of title issued to a thief acquires no right over the goods as the thief has no right to transfer, notwithstanding that such purchaser is innocent. But the purchaser acquires a good title where the owner, by his conduct, is stopped from asserting his title. Art. 1514. A person to whom a document of title has been transferred, but not negotiated, acquires thereby, as against the transferor, the title to the goods, subject to the terms of any agreement with the transferor. If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document. Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. Rights of person to whom document has been transferred Such person acquires: 1. The title to the goods as against the transferor; 2. The right to notify the bailee of the transfer thereof; and 3. The right, thereafter, to acquire the obligation of the bailee to hold the goods for him. The right of the transferee is not absolute as it is subject to the terms of any agreement with the transferor. Attachment of goods covered by document transferred

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The transfer of a non-negotiable document of title does not effect the delivery of the goods covered by it. Accordingly, before notification, the bailee is not bound to the transferee whose right may be defeated by a levy of an attachment or execution upon the goods by the creditor of the transferor or by a notification to such bailee of the subsequent sale of the goods. If the document is negotiable, the goods cannot be attached or be levied under an execution unless: a. The document be first surrendered to the bailee; or b. Its negotiation enjoined. Art. 1515. Where a negotiable document of title is transferred for value by delivery, and the indorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to indorse the document unless a contrary intention appears. The negotiation shall take effect as of the time when the indorsement is actually made. Transfer of order document without indorsement The rights of a person to whom an order document of title, which may not properly be negotiated by mere delivery, has been delivered, without indorsement, are: 1. The right to the goods as against the transferor (Art.1514); and 2. The right to compel the transferor to indorse the indorsement,. If the intention of the parties is that the document should be merely transferred, the transferee has no right to require the transferor to indorse the document. Rule where document subsequently indorsed For the purpose of determining whether the transferee is a purchaser for value in good faith without notice, the negotiation shall take effect as of the time when the indorsement is actually made, not at the time the document is delivered. The reason is that the negotiation becomes complete only at the time of indorsement. So, if by that time the purchaser already had notice that the title of the seller was defective, he cannot be considered a purchaser in good faith though he had no such notice when he bought the document. (warranties/liabilities of a person negotiating/transferring)

Adrienne O. Espares

Art. 1516. A person who for value negotiates or transfers a document of title by indorsement or delivery, including one who assigns for value a claim secured by a document of title unless contrary intention appears, warrants: 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. A person negotiating or transferring a document could be held liable as when 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. 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. Double effects of the indorsement of a negotiable instrument 1. It is a conveyance of the instrument; and 2. 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, the bailee fails to deliver the goods because they were lost due to his fault of 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

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Sales Reviewer
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. 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 sellers defect of title. 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. 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. This article do not apply of 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 case where the attachment is made before the issuance of the negotiable document of title. 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. Creditors remedies to reach negotiable documents 1. Injunction; 2. Attachment or levy.

Adrienne O. Espares

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. Place of delivery of goods sold: 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 sellers place of business; 4. In any other case, the place of delivery is the sellers 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. The presumption is that the buyer must take the goods from the sellers place of business or residence rather than the seller to deliver them to the buyer. 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 sellers failure to deliver according to the terms of the contract, and would be liable to pay the price agreed upon. Delivery of goods in possession of a third person The seller can hardly be discharged from his obligations 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. 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. What is a reasonable hour is a question of fact. The buyer is not bound to make tender of payment until the seller has complied with his obligations. Art. 1522.

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 Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may 1. reject them; or 2. 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. Fair value to him the benefit which the buyer may have received from the goods; it is not necessarily the market value. Usage of trade any practice or method of dealing having such regularity

Adrienne O. Espares

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Sales Reviewer

Adrienne O. Espares

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