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Article 1495-1501
Primary Obligations of the Vendor, Delivery of the Thing Sold, Importance of
Delivery, Modes of Delivery, and Delivery by Public Instrument
Importance of Delivery
It is important because the primary purpose of sale is the transfer of ownership.
When a person buys a thing, his goal is to take become the owner of that thing. Delivery
is essential because it is the manner in which ownership of a thing is transferred. It is
also the act that marks the consummation of the contract of sale.
When we say delivery, does that mean the physical handing of the thing?
Not all the time. The law on sales covers not only movable objects or goods that
we see in malls and shops. It also applies to immovable properties like lands and
buildings, as well as intangible rights, like lease or copyrights.
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Can a third person make the delivery?
Yes, but only if such person is acting as the agent or authorized representative of
the seller. From a legal standpoint, it is still the seller that is effecting the delivery.
Symbolic Tradition
Execution of a public document is closely tied to this mode, which is symbolic
delivery. Most authors actually say that the first mode is an example of symbolic
delivery. Other examples are, giving of keys of the place or depository where the
property being sold is stored or kept. There is delivery because the key represents the
thing.
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Constitutum Possessorium
This is the opposite of brevi manu. The law calls it constitutum possessorium. In
the previous example, let's say that the owner decides to sell his land to another.
However, he wants to retain possession of it. After the sale, he is no longer the owner
but is now a mere lessee of the land, while the buyer of the land becomes his lessor.
Quasi - delivery
This deals with incorporeal properties. It is called quasi-tradition. When the
incorporeal thing or right cannot be delivered through the first mode which is by
execution of a public instrument, the seller may effect the delivery by either by: (1)
placing the title of ownership in the buyer's possession; or (2) allowing the buyer to use
his rights as the new owner.
Article 1502
Contract of Sale on Trial
In a sale on trial, when does ownership over the goods sold pass to the buyer?
When the goods are delivered to you on approval or on trial or on satisfaction,
ownership transfers to the buyer when:
1. The buyer signifies approval or acceptance to the seller;
2. The buyer does not approve or accept the product but retains it without
giving notice of rejection;
3. The parties agreed to a time for the return of the goods, and the period had
lapsed; and
4. No time has been fixed, after the lapse of a reasonable time.
Shipping Terms
1. COD or cash on delivery which means that the carrier acts for you, the seller,
in collecting the purchase price. The buyer must pay for the goods before he
can obtain possession.
2. FOB or free on board. It means the goods will be delivered to the buyer free
of expense to the point where they are FOB. This is tricky because you would
first need to look where the point of FOB is. It can either be FOB shipping
point or FOB destination. In FOB shipping point, the ownership passes to the
buyer the moment the goods are placed on board the carrier's vessel or car
unless of course a contrary stipulation is made in the contract. In FOB
destination, ownership passes only upon delivery to the designated point as
indicated in the contract or in the bill of lading.
3. CIF or cost insurance or freight. It means the price fixed covers not only the
cost but also freight expense and insurance to be borne by the seller up to he
point of destination. Ownership passes to the buyer at the moment of
delivery to the point especially named.
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4. FAS or free alongside vessel. It means the seller pays all charges and bears the
risk until the goods are placed alongside overseas vessel and within reach of
its loading tackle.
5. Ex factory or ex warehouse. This means the price quotes applies only at the
named point of origin or in other words, the factory or warehouse, and the
seller agrees to place the goods at the disposal of the buyer at the agreed
place on the date within the period fixed.
6. Ex dock or named port of importation. This means the seller quotes the price
including the costs of goods on the dock at the named port of importation.
It is important to note that these terms are mere rules of presumption, and
they must yield to proof of contrary intention by the parties.
Under Articles 1523 and 1503, the general rule is that when the seller is
authorized or required to send the goods to the buyer, delivery of goods to the carrier
constitutes delivery to the buyer, whether the carrier is named by the buyer or not.
Hence, from the moment that the seller turns over the thing to the carrier, the buyer will
now assume the risk of loss or damage.
But there are exceptions to this rule:
1. When a contrary intent appears in the contract;
2. When the seller reserves the right of possession or ownership in goods until
certain provisions are fulfilled;
3. Where the goods are shipped and the bill of lading states that the goods are
deliverable to the order of the seller or his agent, the seller reserves
ownership; and
4. Where the goods are shipped and the bill of lading states that the goods are
deliverable to the order of the buyer or his agent, but possession of the bill is
retained by the seller; he likewise reserves his right to the possession of the
goods as against the buyer.
But the fact that ownership in the goods may have passed to the buyer does not
mean that the seller has already fulfilled his duty to the buyer. The following rules
apply:
1. When the seller omits to make such contract with the carrier on behalf of the
buyer as may be reasonable under the circumstances, the buyer may decline
the delivery in case the goods are damaged or lost in the court of transit. The
buyer may also hold the seller responsible for damages.
2. When the seller fails to give notice to the buyer regarding necessity to insure
goods, the risk will be borne by the seller. The buyer will only be liable for
loss or damage of goods if he had all the necessary information to insure.
Warranty
It is a statement or representation made by the seller of goods,
contemporaneously and as part of the contest is sale, having reference to the character,
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quality or title of goods and by which he promises or undertakes to insure that certain
facts are or shall be as he then represents them.
Forms of Warranties
Warranties may be express or implied.
Express Warranty
An express warranty is any affirmation of fact or any promise by the seller
relating to the thing, the natural tendency of which is to induce the buyer to purchase
the thing and the buyer this induced does purchase the same.
Express warranty may be limited or extensive, depending on the agreement by the
parties.
Are exaggerations made by the seller to induce the buyer considered as express
warranties?
Dealer's talk or Seller's opinions are not warranties, even if they are expressly
spoken. Assertions like "our product is the best!" Or "it's better than our rival's product!"
are not warranties.
The principle of "simplex commendatio non obligat" applies. This literally means
simple commendations are not binding. The law permits a seller to exaggerate, puff or
enhance the quality of the product.
But then again, there are exceptions. A seller's opinion will be deemed a
warranty if the seller made the affirmation or statement as an expert and the buyer
relied upon his expertise or special knowledge.
Implied Warranty
Under the Civil Code, there are two implied warranties:
1. That the seller has the right to sell the thing at the time when ownership is to
pass, and that the buyer shall from that time have and enjoy the legal and
peaceful possession of the thing; and
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2. That the thing shall be free from any hidden faults or defects or any charge or
encumbrance not declared or known to the buyer.
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When can warranty against eviction be waived?
As a rule, this warranty can be waived in two ways:
1. Consciente – the waiver is made voluntarily by the buyer without the
knowledge and assumption of the risks of eviction. Here, the buyer shall pay
only the value of the thing at the time if the eviction. This is a case of solutio
indebiti.
2. Intencionada - the waiver is made with knowledge of the risks and
assumption of consequences. The seller here is exempted from the obligation
to answer for eviction, as long as he wasn't in bad faith.
Redhibition
It is the avoidance of a sale on account is some vice or defect in the thing sold
which renders its use impossible or so inconvenient and imperfect that it must be
supposed that the buyer would not have purchased it had he known of the vice.
Redhibitory Action
It is one instituted to avoid a sale on account of some vice or defect in the hung
sold which renders its use impossible or inconvenient and imperfect.
Redhibitory Vice
It is a defect in the article sold against which the seller is blind to warrant.
Can a seller be liable for defects suffered after perfection of the sale?
As a rule, the defect must've been there at the time of the sale. The seller cannot
be liable for defects suffered by the thing after the perfection of the sale.
Can good faith be invoked by the seller in order to be relieved of this obligation?
As a general rule, no. The seller is responsible to the buyer for any hidden defects
existing during the sale, even though the seller was not aware of them.
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Article 1505, 1526-1535
Where the Seller Was Not Really the Owner, Remedies of an Unpaid Seller,
Insolvency, Goods in Transit, Lien, Resale, and Rescission
What is the rule when goods are sold by a person who is not the owner?
Article 1505 states that where goods are sold by a person who is not the owner
thereof, the buyer acquires no better title than what the seller had.
But there's an exception to the rule. That's when the owner of the goods is, by his
conduct, precluded from denying the seller's authority to sell.
Unpaid seller
An unpaid seller is one who has not been paid or tendered the whole of the price;
or has received a bill of exchange or negotiable instrument but later on such was
dishonored.
Lien
It is a charge upon property for the payment or discharge of a debt or duty. It is a
right which the law gives to have the debt satisfied out of a particular thing.
The unpaid seller has a possessory lien on the goods until payment or tender of
price in the following cases:
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
In a possessor lien, the ownership had already passed to the buyer, but the
unpaid seller has the right to keep the goods as the bailee.
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6. The sale must've been on credit to entitle the seller to this right; it cannot be
exercised in a cash sales
In what cases does the right to stop goods in transit not apply?
The following cases do not justify the exercise of the right of stoppage:
1. The buyer was in default in the performance of his obligations;
2. The death of the buyer; and
3. The fact that the goods have been levied on by attaching creditors of the
buyer.
Right of Resale
An unpaid seller can exercise the right of resale only when he has either a right
of lien or has exercised the right to stop the goods in transit, and under any of the
following cases:
1. Where the goods are perishable in nature
2. Where the right to resell is expressly reserved in case gen uterus should make
a default
3. Where the buyer delays in his payment of the price for an unreasonable time
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1. If the right to resell is not based on the perishable nature of the goods
2. When there is express provision in the contract
In those cases, the notice will be relevant in determining whether the buyer was
in default for an unreasonable time before the resale was made.
Article 1506
Seller had voidable title
When can a sale by a person with voidable title, e.g., a minor, be valid?
It is valid when the buyer acquired a good title. The requisites in order for this to
happen are:
1. The buyer bought the goods before the title of the seller has been avoided
2. The buyer bought them in good faith and for value
3. The buyer had no notice of the seller's defect of title
Article 1521
Time of Delivery of Goods Sold
Place of Delivery
We should be guided by these rules:
1. When there is an agreement, express it implied, the place of delivery is that
agreed upon
2. When there is no agreement, the place of delivery is that determined by usage
of trade--that means the common practice in commerce given the particular
circumstances
3. When there is no agreement and 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
5. In case of specific goods made in some other place known by the parties, that
place is the place of delivery
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In a sale, is it the buyer who must go to the seller or is it the seller who must
pursue the buyer?
Under the law, it would seem 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.
When no time is fixed, when is the seller bound to deliver the goods?
With regard to the time, the law states that the agreement must apply. If there is
none, then the usage of trade, and again if there is none then the seller is bound to send
the goods to the buyer within a reasonable time. What is reasonable is a question of fact
that is dependent upon the unique circumstances of each case.
Article 1522
When the Quantity Delivered is Less Than What was Contracted
What is the rule when the quantity delivered is less than what was contracted?
The buyer has the following options:
1. Reject the goods
2. Pay for the goods at the contract rate if he accepts or retains the goods
knowing that the seller is not going to perform the contract in full
3. Pay for the goods received at their fair value if the buyer has used the goods
delivered before he knows that the seller is not going to perform the contract
in full
What about when the opposite happens—when what was delivered is more than
what was contracted?
The buyer then has the following options:
1. He may accept the goods included in the contract and reject the excess
2. He may accept everything and pay for them at the contract rate
Article 1539-1542
Sale of Real Estate Where Area is Greater Than What was Specified in the Contract
and the Payment was in Lump Sum
What is the rule in a sale of real estate where area is greater than what was
specified in the contract?
If the sale of real estate should be made with a statement of its area, the seller
must deliver to the buyer, if the latter should demand it, all that may have been stated
in the contract. But, if this is not possible, the buyer may choose between (a) a
proportional reduction of the price; or (b) the rescission of the contract, but only when
the lack in the area is not less than one-tenth of that stated.
This rule applies not only when there is a decrease in the area, but also when the
area is the same, but some parts are not of the quality specified in the contract. The
rescission, in this case, will only take place at the will of the buyer, when the inferior
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value of the thing sold exceeds one-tenth of the price agreed upon. Nevertheless, if the
buyer would not have bought the land had he known of its smaller area of inferior
quality, he may rescind the sale.
What if instead of selling it in a per unit basis, we decide on a lump sum basis?
In the case of lump sum sales of real estate, there will be no increase or decrease
of the price, although there be a greater or less area or number than that stated in the
contract.
Article 1544
Rule on Double Sale
What happens when there are multiple buyers on the same piece of land? Who is
the owner under the law?
The applicable rule in case of double or multiple Sales would first depend on the
nature of the property. If it is a movable property, the ownership will transfer to the
person who may have first taken possession in good faith.
Should it be immovable property, the priority of ownership is as follows:
1. To the first registrant in good faith;
2. Should there be no inscription, to the first possessor in good faith; and
3. In the absence of those, to the person who presents the oldest title, also
provided there is good faith.
Article 1572-1581
Sale of Animals, No Warranty of Hidden Defects on Public Fairs, Contagious
Disease, Redhibitory Defect, and What if the Animal Dies
What is the effect of the animals sold suffered from contagious diseases?
The sale of animals suffering from contagious diseases is void. A contract of sale
of animals shall also be void if the use or service for which they are acquired has been
stated in the contract, and they are found to be unfit therefor.
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What is the effect is the animal sold dies?
If the animal should die within three days after its purchase, the seller will be
liable if the disease which caused the death existed at the time of the contract.
Note that in the sale of animals with redhibitory defects, the buyer also enjoys
the right mentioned in article 1567 which is--he may elect between (a) withdrawing
from the contract; and (b) demanding a proportionate reduction of the price, with
damages in either case.
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