Article 1493

loss of the object even before the perfection of the contract

no cause or consideration; hence, the contract is void.
seller bears the loss

Complete lost
Partial lost (Remedies: withdrawal or rescission or avoidance; specific performance as to the remainder)

Article 1494
This is only a reiteration of Article 1494
Same remedies

Article 1495
Obligations of Vendor
(a) to transfer ownership (cannot be waived)
(b) to deliver (cannot be waived)
(c) to warrant the object sold (this can be waived or modified since warranty is not an essential element of the
contract of sale)
(d) to preserve the thing from perfection to delivery, otherwise he can be held liable for damages. (See Art.
1163, Civil Code).

Failure to Deliver on Time

(a) If the seller promised to deliver at a stipulated period, and such period is of the essence of the contract, but
did not comply with his obligation on time, he has no right to demand payment of the price. As a matter of fact,
the vendee-buyer may ask for the rescission or resolution of the sale.
(b) If failure by seller to deliver on time is not due to his fault, as when it was the buyer who failed to supply the
necessary credit for the transportation of the goods, delay on the part of the seller may be said to be sufficiently
excused.

Effect of Non-Delivery
If the seller fails to deliver, and the buyer has no fault, the latter may ask for the resolution or rescission of the
contract.

Duty to Deliver at Execution Sales

When the property is sold at an execution sale, the judgment debtor is not required to deliver the property sold
right away. Reason: He has a period of one year within which to redeem the property. In the meantime, the
buyer should not take actual physical possession of the property. If he does so, an action of forcible entry may
be brought against him.

Article 1496
Ownership is Transferred Generally Only by Delivery
As a rule, in the absence of agreement, ownership is not transferred, even if sold, unless there has been a
delivery.

Article 1497
Real or actual delivery (tradition)
SEE: article 1478

Kinds of Delivery or Tradition

(a) Actual or real. (Art. 1497, Civil Code).

(b) Legal or constructive

1) legal formalities. (Art. 1498, Civil Code).
2) symbolical tradition or traditio simbolica (such as the delivery of the key of the place where the movable
sold is being kept). (Art. 1498, par. 2, Civil Code).
3) traditio longa manu (by mere consent or agreement) if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale. (Art.1499, Civil Code).
4) traditio brevi manu (if the buyer had already the possession of the object even before the purchase, as when
the tenant of a car buys the car, that is, his possession as an owner). (Art. 1499, Civil Code).
5) traditio constitutum possessorium (opposite of traditio brevi manu) possession as owner changed, for
example, to possession as a lessee.
Example: I sold my car but continued to possess it as a lessee of the purchaser. (Art. 1500, Civil Code).
(c) Quasi-tradition — delivery of rights, credits, or incorporeal property, made by:
1) placing titles of ownership in the hands of a lawyer;
2) or allowing the buyer to make use of the rights. (Art. 1501, Civil Code).

Article 1498
Two Kinds of Constructive Delivery (Thru Legal Formalities and Thru Traditio Simbolica)
Art. 1498 treats of two kinds of constructive delivery:
(a) by legal formalities (1st par.) applies to real and personal property since the law does not distinguish.
(b) traditio simbolica. (2nd par.)

Article 1499
Traditio Longa Manu and Traditio Brevi Manu
(a) The first part deals with traditio longa manu.
(b) The second part deals with traditio brevi manu.

Art. 1499 speaks of “movable” property.

Article 1500
The basis here is consent.

Article 1501
Delivery of Incorporeal Property
Incorporeal properties may be delivered:
(a) by constructive tradition — execution of public instrument.
(b) by quasi-tradition — placing of titles of ownership in the possession of the buyer, or the use by the buyer of
his rights, with the seller’s consent.
NOTE: The delivery of land title deeds is equivalent to a delivery of the property itself. So is the use of the
vendor’s right with the vendor’s consent.

Article 1502
Transaction ‘On Sale or Return’
The first paragraph refers to a transaction “on sale or return.” (This is a sale that depends on the discretion of
the buyer; it is a sale with a resolutory condition.)

Transactions ‘On Approval or On Trial or Satisfaction’

The second paragraph is a sale “on approva1 or on trial or satisfaction.” (Here, the buyer may in time become
the owner under the conditions specified in the law; otherwise, the seller is still the owner.) (This is a sale really
dependent on the quality of the goods; it is a sale with suspensive condition.)

NOTE:
(a) In a case of “on sale or return,” the buyer has no right to return if he has materially abused the condition of
the thing. The sale in this case becomes absolute.
(b) In a case of “on sale or return,” if the objects deteriorate without fault of the buyer, the buyer can still return,
provided the reasonable period for returning has not yet lapsed.
(c) Give the difference between a contract “on sale or return” and a delivery of property with option to
purchase.
ANS.: In the first, ownership is transferred at once; in the second, there is no transfer of ownership till the
owner agrees to buy.

Article 1503
Reservation of Ownership Despite Delivery
(a) The article applies only to the sale of “specific goods.”
(b) Although delivery has been made, seller may reserve ownership till certain conditions are fulfilled. Of
course,
The most important controlling element is the INTENTION.

Article 1504
The risk of loss of specific goods is borne by the seller as a general rule, until ownership is transferred. This
apparently contradicts Art. 1480.

Article 1505
The general rule is no one can give what he does not have –– nemo dat quod non habet. Therefore, even if a
person be a bona fide purchaser, he succeeds only to the rights of the vendor.

If the seller is not the owner, the sale is null and void.

Exceptions
(a) When the owner of the goods by his conduct precluded from denying the seller’s authority.
Example: If A sells B’s property to C, and B consents, B is estopped from denying A’s authority to sell.
(b) Second paragraph (Nos. 1, 2, 3) of Art. 1505.

Some Recording Acts

(a) Sale of large cattle — no transfer of large cattle shall be valid unless the same is registered, and a certificate
of transfer obtained (Sec. 59, Rev. Adm. Code).
(b) Land registration law. (Act 496).
(c) Sale of vessels –– record at each principal port of entry. (Sec. 1171, Rev. Adm. Code).

Article 1506
Reasons for the Law
(a) Before a voidable contract is annulled it is considered valid.
(b) Where one of two innocent parties must suffer, he who placed the offender in a position to do wrong must
suffer.

Can a buyer acquire title from a thief (a person who stole and then sold the goods to him)?
What if the buyer had acquired the stolen automobile at a public auction?

Article 1507
‘Document of Title’ Includes
(a) any bill of lading
(b) dock warrant
(c) quedan
(d) warehouse receipt or order
(e) any other document used as proof of possession or as authority to transfer the goods represented by the
document.

Negotiable Document of Title

The document is negotiable if:
(a) the goods are deliverable to bearer (“deliver to bearer”);
(b) or if the goods are deliverable to the order of a certain person (“deliver to the order of X”; “deliver to Mr. X
or his order”).

Effect of Typographical or Grammatical Error

A mere typographical or grammatical error does not destroy the negotiability of a document of title, for what
should be considered is the intent. Thus, if the words “by order of X” are placed instead of “to the order of X”
the document can still be considered negotiable. Moreover, a mere incorrectness in the description of the goods
when there can be no doubt of the goods referred to will not destroy the negotiability of the document.

Article 1508
How Negotiable Document of Title is Negotiated
There are two forms of negotiating a negotiable document
of title:
(a) mere delivery;
(b) indorsement PLUS delivery.

When Mere Delivery is Sufficient

Mere delivery (handing over) is sufficient —
(a) If “deliverable to bearer.”
NOTE: The holder can just transfer it to a friend, and the friend will be entitled to the goods.

(b) If “deliverable to the order of a certain person” AND that person has indorsed it in blank merely (put his
name at the back) or indorsed it to bearer (at the back, he placed “deliver to bearer” and then he signed his
name). The document can now be negotiated by mere delivery.
Article 1509
Negotiation by Indorsement and Delivery
Example: The document says “deliver to the order of Mr. X” To negotiate it, Mr. X must sign his name at the
back and then deliver. Mere delivery without signing is not sufficient. When he signs he may:
1) just sign his name (blank indorsement);
2) or say “deliver to Mr. Y”;
3) or say “deliver to bearer.”
(NOTE: Mr. Y can in turn indorse it in blank, to bearer, or to another specified person.)

Effect of Undated Indorsement

It is not necessary to date an indorsement because no additional protection is given thereby to businessmen. As
a matter of fact, to require dating would be to impede business transactions.

Effect of Indorsement and Delivery

Indorsement and delivery of a negotiable quedan ipso facto transfer possession and ownership of the property
referred to therein.

Article 1510
Effect of Placing the Word ‘Non-Negotiable’
Example:
A negotiable document of title was marked “non-negotiable” by the warehouseman (or carrier or depositary). Is
it still negotiable?
ANS.: Yes, insofar as the various holders of the note are concerned, the note is still negotiable. Regarding the
intent or liability of the maker, this Article does not deal with the same.

Article 1511
Effect of Delivery When Document Cannot Be Negotiated By Mere Delivery
Example of 1st sentence of Article
A document of title was non-negotiable. May it still be given or assigned to another?
ANS.: Yes, but this does not have the effect of a negotiation. It is a mere transfer or assignment.

Effect of Negotiation and Indorsement of Non-Negotiable

Instrument
Example of 2nd sentence of Article
A document of title contained the words “deliver to Mr. X.” This is therefore non-negotiable.
(a) May it be negotiated?
ANS.: No, but it may be transferred.
(b) Suppose it is indorsed by Mr. X?
ANS.: The indorsement is useless and does not give the indorsee any additional right. There is in this case only a
transfer or assignment.

Article 1512
Who May Negotiate Negotiable Document of Title
(a) This Article speaks of the person who may negotiate a negotiable document of title.

Example: A document of title contained the following words: “Deliver to the order of X or to the order of the
person to whom this document has been entrusted by X.” Later, X entrusted the document to Y. May Y negotiate
the same by indorsement?
ANS.: Yes. (Art. 1512, No. 2, 1st part).

Who Bears Loss in Case of Unauthorized Negotiation

If the owner of a negotiable document of title (deliverable to bearer) entrusts the document to a friend for
deposit, but the friend betrays the trust and negotiates the document by delivering it to another who is in good
faith, the said owner cannot impugn the validity of the negotiation. As between two innocent persons, he who
made the loss possible should bear the loss, without prejudice to his right to recover from the wrongdoer.

Article 1513
Purpose: The document should be made to really represent the depositor’s right to the goods.

Rights of Person to Whom Negotiable Document Is Negotiated

The bailee (or carrier or depositary) directly holds the property in behalf of the person to whom the negotiable
document was negotiated. It is as if such person had dealt directly with the bailee.
Article 1514
Rights of Mere Transferee (not the rights of a person to whom the document was negotiated.)

The transferee does not acquire directly the obligation of the bailee to hold for him (unlike that referred to in
Art. 1513). To acquire the direct obligation of the bailee, the transferee (or transferor) must notify the bailee.

Who Can Defeat Rights of Transferee

The third paragraph refers to the persons who can defeat the right of the transferee PRIOR to the notification.

Article 1515
Rule if Indorsement is Needed for Negotiation
Example:
A document of title contained the words “deliver to X or his order.” X wanted to negotiate it to Y, but instead of
indorsing it, he merely delivered it to Y. Has there been a negotiation?
ANS.: No, because of the non-indorsement. But Y acquires a right to compel X to indorse it provided that:
(a) Y paid value for the document; and
(b) no contrary intention appears.

Article 1516
Warranties in Negotiation or Transfer
(a) This refers to warranties
1) by a person who negotiates;
2) by a person who assigns or transfers for value.
(b) Note that there are warranties
1) about the document;
2) about the right to the document;
3) about the goods represented by the document.

Effect of Indorsee’s Knowledge of Forged Indorsement

If the indorsee knows that any of the former indorsements is a forgery, he does not acquire a valid title to the
document.

Article 1517
Non-liability of Indorser for Failure of Bailee to Comply
Failure of the bailee or the previous indorsers to comply with their obligations does not make the present
indorsers liable.

Reason
The indorser warrants only the things mentioned in the preceding article.

Article 1518
Effect if Owner of Document Was Deprived of It
Example:
A document of title contained the words “deliver to bearer.” The document was stolen by T; T subsequently
indorsed it to S, a purchaser in good faith. Is the negotiation to S valid?
ANS.: Yes, notwithstanding the theft by T. Reason: S is a purchaser for value in good faith; that is, S did not
know that the document had been stolen by T.

Article 1519
This Article speaks of two important things (if the document is negotiable):
(a) Generally no attachment or levy, except:
1) if the document is surrendered to bailee;
2) or the negotiation of the document enjoined.
(b) The bailee (or depositary or carrier) cannot be compelled
to surrender the goods except:
1) if the document is surrendered to him;
2) or the document is impounded by the court. (Art.1519).
(NOTE: A creditor of the owner of the negotiabledocument is protected by the next article.)

Article 1520
Right of Creditor
Here, special aid is to be given to the creditor because the document concerned is negotiable. Attachment is not
easily made.

Article 1521
Specifications for the Delivery
This Article provides for the:
(a) place of delivery;
(b) time of delivery;
(c) manner of delivery.

Place of Delivery
(a) Should the seller send the goods or should the buyer get them?
ANS.: This depends on the:
1) agreement (express or implied);
2) if no agreement — get the USAGE of trade;
3) if no usage — the buyer must get them at the seller’s business place or residence.
Exception — In the place where the specific goods are found.

(b) There is sufficient delivery when a fortuitous event prevents delivery at the actual place agreed upon,
forcing a delivery at a place near the original one.
(c) There is sufficient delivery when the original place is changed, but the buyer accepted the goods at a
different place without complaint so long as the seller was in good faith.

Time of Delivery
(a) Delivery (if to be made by seller) must be within a reasonable time, in the absence of express agreement.
(Art. 1521, par. 2).

(b) What is a reasonable time is a question of fact, depending upon circumstances provable.

(c) Among the circumstances that may be considered are the following:
1) character of the goods;
2) purpose intended;
3) ability of seller to produce the goods;
4) transportation facilities;
5) distance thru which the goods must be carried;
6) usual course of business in that particular trade.

(d) If a delivery is to be made “at once,” “promptly,” or “as soon as possible,” a reasonable time must
necessarily be given.

(e) Premature delivery generally is not allowed because a term is for the benefit of both parties.

Manner of Delivery When Goods Are in the Hands of a Third Person

It is essential here that the third person acknowledges that he holds the goods on behalf of the buyer (otherwise,
the seller shall not yet be complied with his duty to deliver). (Art. 1521, par. 3).
(NOTE: This does not apply in case a negotiable document of title has been issued.)
[NOTE: The paragraph also does not apply when the goods are still to be manufactured.
It applies to the sale of goods already existing but in the hands of a third party.]

Expenses to Be Shouldered by Seller

Who pays expenses for putting the goods in a deliverable state?
ANS.: The seller, unless otherwise agreed. (Art. 1521, last paragraph). This is true even if the buyer has the
duty to take delivery.

When Demand or Tender of Delivery Must Be Made

When must demand or tender of delivery be made?
ANS.: In the absence of agreement, at a reasonable hour. (This is a question of fact.) (Art. 1521, par. 4).

Article 1522
Rules when the Quantity Is LESS than that Agreed Upon
(a) Buyer may REJECT;
(b) Or buyer may ACCEPT what have been delivered, at the contract rate.
Rules When the Quantity Is MORE than the Agreement
(a) Buyer may reject ALL. He must not be burdened with the duty of segregation, if he does not so desire.
(b) Buyer may accept the goods agreed upon and reject the rest.
(c) If he gets all, he must pay for them at the contract rate. (Art. 1622, par. 2).
[NOTE: For the rule to apply, the quantity must have been fixed by prior agreement.]

Implied Acceptance - when the buyer exercises acts of ownership over the excess goods.

Rule When Quality is Different

Where the seller delivers to the buyer the goods agreed upon MIXED with goods of a different description, the
buyer may:
(a) accept the goods which are in accordance with the contract, and
(b) reject the rest.
(NOTE: If the sale is indivisible, the buyer may reject the whole of the goods.)

Article 1523
When Delivery to Carrier is Delivery to Buyer
(a) This article deals with “delivery to a carrier on behalf of the buyer.”
(b) General rule: Delivery to carrier is delivery to buyer, if it is the duty of the seller to send the goods to the
buyer.

Kinds of Delivery to Carrier

Delivery to carrier may be:
(a) C.I.F. (cost, insurance, freight) — (Since the selling price includes insurance and freight, it is understood
that said insurance and freight should now be paid by the seller.)
[NOTE: So all charges up to the place of destination must be paid by the seller.]
[NOTE: If the goods will be transported from New York “C.I.F. Manila,” this means that delivery should be
made at Manila. If the goods then are not delivered at Manila, seller should be held liable. [NOTE: In a C.I.F.
contract the place of delivery is presumptively at the BUYER’S place.

(b) F.O.B. (free on board)

The sale may be:
1) f.o.b. at the place of shipment (here, the buyer must pay the freight).
2) f.o.b. alongside (the vessel) (here, also from the moment the goods are brought alongside the vessel, the
buyer must pay for the freight or expenses).
3) f.o.b. at the place of destination (here, the seller must pay the freight, since the contract states “free on board
till destination).

NOTE: The general rule in “f.o.b.” or “f.a.s.” (free alongside) sales that the property passes as soon as the
goods are delivered aboard the carrier or alongside the vessel, and that the buyer as the owner of the goods is to
bear all expenses after they are so delivered.

Article 1524
When Vendor is Not Bound to Deliver
The seller must deliver, and the buyer must pay. If the buyer does not pay, the seller is not required to deliver.
This is because a sale is a reciprocal contract giving rise to reciprocal obligations.

Effect if Period is Fixed for Payment

If a period has been fixed for the payment, the seller must deliver the thing sold even if said period has not yet
arrived. He will then have to wait for the end of the period before he can demand the price, except if the buyer
has lost the benefit of the term. (See Art. 1198, Civil Code)

Article 1525
When Seller is Deemed an “Unpaid Seller”
(a) If only part of the price has been paid or tendered, the seller is still an “unpaid seller.” Notice that the law
uses
“the whole of the price.” (Art. 1525, par. 1, Civil Code).
(b) Mere delivery of a negotiable instrument does not extinguish the obligation of the buyer to pay because it
may be dishonored. (See Art. 1249, par. 2, Civil Code). Therefore, the seller is still an unpaid seller, if say, a
dishonor indeed is made.