ART ANNOTATION NOTES

FORM & INTERPRETATION

1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of & to deliver a determinate thing, & the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (This Art serves as defn for Sale)

Characteristics of a contract of sale: 1. Consensual perfected by mere consent 2. Bilateral parties are bound to fulfill correlative oblis toward each other 3. Onerous the thing sold is conveyed in consideration of the price & vice versa 4. Commutative thing sold is considered equivalent of the price paid & vice versa 5. Nominate given a special name & designation 6. Principal its existence & validity does not depend upon another contract

Essential requisites of sale: 1. Consent or meeting of the minds (1475) 2. Object or subject matter (1460) 3. Cause or consideration (1458)

Kinds of contract of sale:

1. Absolute not subject to condition. Ownership is transferred upon constructive or actual delivery.

2. Conditional subject to a contingency. Ownership is reserved until fulfillment of a suspensive condition or extinguished upon the happening of a resolutory condition.

Contract of Absolute Sale Contract to Sell

Title passes upon delivery Title shall not pass until buyer has paid the price despite delivery

Non-payment of the price may be seen as a negative resolutory condition (b/c ownership will revert to the seller if he chooses to rescind the contract)

Full payment of the price is a positive suspensive condition. (b/c ownership will be vested upon the buyer only when he pays the price)

Non-payment gives seller right to either demand specific performance or rescind the contract

Non-payment is not a breach but simply an event that prevents the obli of the vendor to convey title from acquiring binding force

Seller loses ownership of the thing sold & delivered unless the sale is rescinded

Seller retains ownership until buyers fulfillment of the condition

Remedy of rescission available (b/c rescission found in 1191 is not based upon the non-payment of the price but rather on the failure of the debtor to comply w/ an ALREADY EXISTING obli)

Remedy of rescission not available

Contract to Sell Conditional Sale

Similar to the nature of a conditional sale, since transfer of title is conditioned upon the full payment of the purchase price

Willingness of the vendee to sell is dependent upon a condition not necessarily the payment of the purchase price

Full payment of the purchase price does not automatically vest ownership or title to the prospective buyer as the prospective seller explicitly reserves its transfer. Seller still has to convey title.

Fulfillment of the suspensive condition makes the sale absolute. If there has been previous delivery to the buyer, ownership/title automatically transfers to the buyer.

If seller sells the object of sale to a 3rd person once condition is fulfilled, 3rd persons right is better than original buyer but seller incurs damages.

If seller sells the object of sale to a 3rd person once condition is fulfilled, 3rd persons right cannot defeat that of the orig buyer. (The orig buyer may even ask for reconveyance if the object has been delivered to such 3rd person.)

*Correlate w/: - 1459, 1460, re: determinate thing - 1469, 1472, re: price Contract to Sell a bilateral contract of conditional sale whereby the prospective seller, while expressly reserving the ownership of the subject prop despite delivery thereof to the prospective buyer, binds himself to sell the said prop exclusively to the prospective buyer upon fulfillment of the condition agreed upon. Dignos v CA: A deed of sale is absolute in nature although denominated as a Deed of Conditional Sale where nowhere in the contract in question is a proviso or stipulation to the effect that title to the prop sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay w/in a fixed period. (Hence, designation of the parties to the contract is not, in a word, controlling as to what the contract is) In Peoples Homesite & Housing Corp v CA, it would appear that in a conditional sale, there is no perfected contract of sale until the fulfillment of the suspensive condition. It is the willingness of the seller to sell the object w/c is dependent upon the condition. So if the condition is not fulfilled, there is NO MEETING OF THE MINDS hence there is no perfected contract of sale. *This gives us another difference b/w contract to sell & conditional sale. In a contract to sell, the sale is perfected but the transfer of ownership depends upon the fulfillment of the suspensive condition, the full payment of the purchase price.

1459. The thing must be licit & the vendor must have a right to transfer the ownership Requisites of Object: Read the cases of Artates v Urbi, Heirs of Zambales v CA for examples of sales involving

thereof at the time it is delivered. 1. It must be determinate 2. It must be licit 3. It must be w/in the commerce of men 4. As to rights, it must be transmissible or personal

2 kinds of illicit things: (relate w/ 1409)

1. Illicit per se 2. Illicit per accidens

Seller need not own the thing to be sold, all that is required of him is the right to transfer ownership thereof at the time it is delivered.

things illicit per accidens *When the thing is sold in violation of a right of 1st refusal of another person, the sale is valid but rescissible *Relate w/ Arts. 1347-48, 1460, CC

1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class. *Relate w/ Art. 1349, CC

1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void.

Things having a potential existence something that is reasonably certain to come into existence as the natural increment or usual incident of something in existence already belonging to the seller

- The moment the thing does come into existence, title is vested upon the buyer.

Emptio Rei Speratae Emptio Spei

Sale of a thing not yet in existence subject to the condition that the thing will exist & on failure of the condition, the contract becomes ineffective & hence, the buyer has no obli to pay the price

Sale of hope itself that the thing will come into existence even if the thing does not eventually exist

Future thing is certain as to itself but uncertain as to its quantity & quality It is not certain that the thing itself will exist, much less its quantity & quality

Deals w/ a future thing Deals w/ a present thing the hope or expectancy

Presumption is in favor of Emptio Rei Speratae

1462. The goods w/c form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called future goods.

Existing goods goods owned or possessed by the seller Future goods goods to be manufactured, raised, or acquired by the seller In the sale of future goods, the seller assumes the risk of acquiring the title (to the future goods) & making the conveyance, or responding in damages for the buyers loss of his bargain 1462 does not apply if the goods are to be manufactured ESPECIALLY for the buyer, b/c that case is a contract for a piece of work & not of sale.

1463. The sole owner of a thing may sell an undivided interest therein. Legal effect of the sale of an undivided interest in a thing is to make the buyer a co-owner in the thing sold

1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell & the buyer to buy a definite number, weight or measure of the goods in the mass, & though the number, weight or measure of the goods in the mass is undetermined. By such sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass & the seller is bound to make good the deficiency from goods of the same kind & quality, unless a contrary intent appears.

Fungible goods goods of w/c any unit is, from its nature or by mercantile usage, treated as the equivalent of any other unit Owner of mass may sell only an undivided share thereof, provided the mass is specific or capable of being made determinate. - By such sale, buyer becomes a co-owner of the seller of the whole mass in proportion in w/c the definite share bought bears to the

mass - Aliquot share of each owner can be determined only by the measurement of the entire mass. If it turns out that the whole mass is

actually LESS than the thing sold, the buyer becomes the owner of the whole mass & the seller must supply the deficiency.

1465. Things subject to a resolutory condition may be the object of the contract of sale. *Resolutory condition an uncertain event upon the happening of w/c the obli (or right) subject to it is extinguished.

1466. In construing a contract containing characteristics of both the contract of sale & of the contract of agency to sell, the essential clauses of the whole instrument shall be considered.

By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, w/ the consent or authority of the latter. (1868, CC)

Sale Agency

Buyer receives the goods as owner Agent receives the goods as the goods of the principal who retains ownership over them & has the right to fix the price & terms of the sale & receive the proceeds less the agents commission upon the sales made

Buyer has to pay the price Agent simply has to account for the proceeds of the sale he may make on the principals behalf

Buyer, generally, cannot return the object sold

Agent can return the object in case he is unable to sell the same to a 3rd person

Seller warrants the thing sold Agent makes no warranty for w/c he assumes personal liability as long as he

Read: Quiroga v Parsons Atty. Busmente: Is there a case wherein a contract is both a contract of sale & a contract of agency to sell at the same time? Transaction b/w car dealerships & manufacturers. The dealers will own the cars sold by the manufacturers but are still able to give the warranties of the manufacturers when they sell the cars in turn.

acts w/in his authority & in the name of the seller

Buyer can deal w/ the thing sold as he pleases

Agent in dealing w/ the thing received, must act & is bound according to the instructions of his principal.

1467. A contract for the delivery at a certain price of an art w/c the vendor in the ordinary course of his business manufactures or procures for the genl market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer & upon his special order, & not for the genl market, it is a contract for a piece of work.

By the contract of a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The distinction b/w a contract of sale & one for a piece of work is tested by the inquiry whether the thing transferred is one not in existence & w/c NEVER WOULD HAVE EXISTED IF NOT FOR THE ORDER of the party desiring to acquire it or a thing w/c WOULD HAVE EXISTED & been the subject of sale to some other person, even if the order had not been given.

Contract of Sale Contract for a Piece of Work

The object of the sale would have existed & been the subject of sale to some other person, even if the order had not been given

The object of the sale never would have existed if not for the order of the party desiring to acquire it

Risk of loss before delivery is borne by the buyer (at least according to 1480) Risk of loss before delivery is borne by the contractor

W/in the statute of frauds Not w/in the Statute of Frauds

Read: Concrete Aggregates v CTA

1468. If the consideration of the contract consists partly in money, & partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; o/w, it is a sale.

By the contract of barter/exchange, one of the parties binds himself to give one thing in consideration of the others promise to give another thing. Rule in determining the character of a contract the consideration of which is partly in money & partly in another thing:

1. Determine intention of the parties 2. If such intention does not appear:

a. Value of thing given > amount of money or its equivalent = BARTER b. Value of thing given < amount of money or its equivalent = SALE

In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain & for a period w/c may be definite or indefinite. *Difference b/w sales & lease is in lease, only TEMPORARY possession & enjoyment is transferred unto the lessee. Dacion en pago Alienation of prop to the creditor in satisfaction of a debt in money.

Sale Dacion En Pago

No preexisting credit or debt Pre-existing credit or debt

Oblis are created Oblis are extinguished

Cause is, as to the seller, the price paid & as to the buyer, the thing sold.

Cause is, as to the debtor, the extinguishment of debt & as to the creditor, he object acquired in lieu of the credit

More freedom in fixing the price Less freedom. Lols

Buyer still has to pay the price Debtor has already received payment before the contract (of dation) is perfected.

1469. In order that price may be considered certain, it shall be sufficient that it be so w/ reference to another thing certain, or that the determination thereof be left to the judgment of a specified person or persons. Should such person/s be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. If the 3rd person/s acted in BF or by mistake, the courts may fix the price. Where such 3rd person/s are prevented from fixing the price or terms by fault of the seller or the buyer, the party in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be.

The price is certain if: a. The parties have fixed or agreed upon a definite amount b. It be certain w/ reference to another thing certain (relate to 1472) c. The determination of the price is left to the judgment of a specified person/s *(b) & (c) apply only in absence of (a). Genl rule: Price fixed by a 3rd person is binding upon the parties Exceptions: 1. When the 3rd person acts in BF or by mistake (mistake error in judgment). In such a case, the courts may fix the price. 2. When the 3rd person disregards specific instructions or procedure or data given him (Walang sinabi si De Leon kung anong mangyayari but its analogous to the 1st exception, so I

think courts will fix the price din ang ending nito) 3. When the 3rd person refuses or cannot fix it. If this happens, the contract is void unless the parties subsequently agree upon the price. 4. When the 3rd person is prevented from fixing the price either by the seller or the buyer. In this case, innocent party may choose b/w rescission & fulfillment, w/ damages in either

case. (De Leon)

1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation, or some other act or contract.

Inadequacy of price however, may indicate a defect in the consent such as when fraud, mistake or undue influence is present. Read arts. 1355 & 1381, pars 1 & 2 Where the price is so low that a man in his senses & not under a delusion would not accept it, the sale may be set aside.

1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.

Simulation occurs when an apparent contract is a declaration of a fictitious will deliberately made by agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act w/c does not exist or is different from that w/c was really executed.

1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter when the parties conceal their true agreement. 1409. The ff contracts are inexistent & void from the beginning:

Requisites of simulation: 1. An outward declaration of will different from the will of the parties; 2. The false appearance must have been intended by mutual agreement; & 3. The purpose is to deceive 3rd persons.

2. Those w/c are absolutely simulated or fictitious. Hence, only those acts of absolute simulation where the parties do not intend to be bound at all are void.

1472. The price of securities, grain, liquid, & other things shall also be considered certain, when the price fixed is that w/c the thing sold would have on a definite day, or a particular exchange or market or when an amount fixed is above or below the price on such day, or in such exchange or market, provided said amount be certain.

1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected.

Acceptance by one of the parties of the price fixed by the other produces a meeting of the minds b/w the parties as to the price. Therefore, the fact that only one of the parties fixed the price does not automatically invalidate the sale.

Read the case of Serra v CA & RCBC, re the part of adhesion contracts w/c is similar to a price fixed by one of the parties

1474. Where the price cannot be determined in accordance w/ the preceding arts, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to & appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

Applies only where the means contemplated by the parties for fixing the price have, for any reason, proved ineffectual. Reasonable price = generally (but not necessarily) market price at the time & place fixed by the contract or by law for the delivery of goods.

1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing w/c is the object of the contract & upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

Perfection Consummation Validity of contract Enforceability of the contract Reluctance Absence of consent Absence of Price v Non-Payment of Price Absence of price will render the contract void while non-payment of price is a resolutory condition for w/c the seller may choose b/w rescission or specific performance. At the moment of perfection, the reciprocal oblis imposed upon the parties by the contract of sale arise & are, hence, demandable reciprocally in the absence of contrary stipulation. (remember 1169, par 3, delay in reciprocal oblis) Genl rule: a contract of sale is binding regardless of its form. Exception: when the law requires a certain form for its validity or enforceability such as those falling under the Statute of Frauds. (Read 1356-58 & 1403) De Leon: Sale, by itself, does not transfer or affect ownership, what it does is it CREATES THE OBLI TO TRANSFER the ownership of the thing sold. Ownership is transferred not by contract but by tradition or delivery Sampaguita v Jalwindor, Ten Forty Realty v Cruz

Toyota Shaw v CA: A definite agreement on the MANNER of payment of the price is an essential element in the formation of a binding & enforceable contract of sale. This is so b/c the agreement as to the manner of payment goes into the price such that a DISAGREEMENT ON THE MANNER OF PAYMENT IS TANTAMOUNT TO A FAILURE TO AGREE ON THE PRICE. Definiteness as to the price is an essential element of a binding agreement to sell personal prop. Read & understand 1403, 2(d). Atty. Busmente hinted na lalabas yan sa midterms. He asked this question in class: What are the 2 exceptions to the UNENFORCEABILITY of an UNWRITTEN contract of sale of goods, chattels or things in action at a price not less than P500? Answer: 1. When the buyer has either: a) accepted or received part of such goods & chattels or the evidences or some of them; or b) paid at the time some part of the purchase money. 2. Sale is made by auction & entry is made by the auctioneer in his sales book.

1476. In the case of a sale by auction: 1. Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale. 2. A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; & the auctioneer may w/draw the goods from the sale unless the

auction has been announced w/o reserve. 3. A right to bid may be reserved expressly by or on behalf of the seller, unless o/w provided by law or by stipulation. 4. Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any

person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer.

1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

Sale is consummated by delivery of both the thing sold & the purchase money. This article applies in the absence of stipulation to the contrary, reserving ownership in the thing sold despite its delivery. If the vendee/buyer fails to pay, & the thing has already been delivered, ownership of the thing DOES NOT automatically revert back to the vendor. In this case, the vendor has 2 options: 1, to demand payment of the price; & 2, rescission. *Correlate w/: - 1496 - 1497, re: actual delivery - 1498-1501, re: constructive delivery

Addison v Felix: The thing is considered to be delivered when it is placed in the hands & possession of the vendee. In order that symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership & the right of possession. THE THING SOLD MUST BE PLACED IN HIS CONTROL. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic tradition thru the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment & material tenancy of the thing & make use of it himself or thru another in his name, b/c such tenancy & enjoyment are opposed by the interposition of another will, then fiction yields to reality the delivery has not been effected. Sampaguita v Jalwindor: Ownership is not transferred by perfection of the contract but by delivery, either actual or constructive. This is true even if the purchase has been made on credit. Payment of the purchase price is not essential to the transfer of ownership as long as the prop sold has been delivered.

Norkis Distributors v CA: In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled w/ the intention of delivering the thing. The act, w/o the intention, is insufficient.

1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.

*Genl rule is 1477. 1478 works only if there is a stipulation to that effect. (Read: EDCA Publishing v. Santos)

1479. A promise to buy & sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

A unilateral promise of offer to sell or to buy a thing w/c is not accepted creates no juridical effect or legal bond. AKA Policitacion. Option a contractual privilege existing in one person for w/c he has paid a consideration w/c gives him the right to buy/sell from/to another person, if he chooses, at any time w/in the agreed period at a fixed price, or under, or in compliance w/ certain terms & conditions. Nature of Option Contract: 1. Preparatory contract separate & distinct from the main/principal contract. 2. Gives one party to the right to decide whether or not to enter into principal contract,

while it binds the other: a) not to enter into the principal contract w/ any other person during the agreed time; & b) to enter into the principal contract w/ the party to whom the option was granted if the latter should decide to use the option w/in the agreed period.

3. It imposes no binding obli on the person holding the option aside from the consideration for the offer.

4. Must be supported by a consideration distinct from the price (in order to bind the promissor the oblis stated in No.2), else it is void. (read: Atkins v Cua Hian Tek, Sanchez v Rigos, Sps. Trinidad v IAC)

5. Consideration need not be money or actual cash. It must be something of value though. (read: Serra v CA & RCBC)

Option Contract Right of 1st Refusal

Promissor cannot sell the prop to a 3rd person UNLESS the period agreed upon the option contract expires

Promissor cannot sell the prop to a 3rd person UNLESS he allows the promisee to exercise his right of 1st refusal, i.e. giving the promisee a similar offer, allowing the latter to choose whether or not to accept such offer

Promisee may compel promissor to enter into principal contract if he decides to exercise the option w/in the agreed period

Promisee cannot compel promissor to enter into principal contract since right of 1st refusal arises only when promissor decides to sell

If promisee elects to buy, the price of the object of sale is FIXED

If promisee elects to buy, the price is subject to negotiations

The consideration is DISTINCT from the purchase price

Usually found in contracts of lease, the consideration is INTEGRAL in the contract

Sale to a 3rd person in violation of Option: a. is Valid IF 3rd person is in GF. Buyer

may only hold seller liable for damages;

b. is Rescissible (by original buyer) if 3rd person is in BF

Sale to a 3rd person in violation of Right of 1st Refusal is RESCISSIBLE

Read: Equatorial v Mayfair

Art 1324, CC. When the offeror has allowed the offeree a certain period to accept, the offer may be w/drawn at any time before acceptance by communicating such w/drawal except when the option is founded upon a consideration, as something paid or promised. Atkins v Cua Hian Tek: If the option is given w/o consideration, it is a mere offer of a contract of sale, w/c is not binding until accepted. If, however, acceptance is made before a w/drawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. Sanchez v Rigos: 1354 (presumption of cause) applies to contracts in genl, whereas the 2nd par of 1479 refers to sales in particular, &, more specifically, to an accepted unilateral promise to buy or to sell. In order that said promise may be made binding upon the promissor, 1479 requires the concurrence of a condition, namely, that the promise be supported by a consideration distinct from the price. Accordingly, the promisee cannot compel the promissor to comply w/ the promise, UNLESS the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. Equatorial v Mayfair: Where a period is given to the offeree w/in w/c to accept the offer, the ff rules genlly govern: 1. If the period is NOT ITSELF FOUNDED UPON OR SUPPORTED BY A CONSIDERATION,

the offeror is still free & has the right to w/draw the offer before its acceptance, or if an acceptance has been made, before the offerors coming to know of such fact, by communicating that w/drawal to the offeree.

2. If the period HAS A SEPARATE CONSIDERATION, a contract of option is deemed perfected, & it would be a breach of that contract to w/draw the offer during the agreed period. The option, however, is an independent contract by itself; & is to be distinguished from the projected main agreement w/c obviously yet to be concluded. If, in fact, the optioner-offeror w/draws the offer before its acceptance by the optionee-offeree, the latter may not sue for specific performance on the proposed contract since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option.

Right of 1st Refusal - 1. A potential buyer's contractual right to meet the terms of a 3rd party's higher offer. -For example, A has a right of 1st refusal on the purchase of Bs house, C then offers to buy the house for P1M, then A can match this offer & prevent C from buying it. (Blacks Law Dictionary 9th Ed.)

1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by Arts 1163 to 1165, & 1262. This rule shall apply to the sale of fungible things, made independently & for a single price, or w/o consideration of their weight, number, or measure. Should fungible things be sold for a price fixed accdg to weight, number or measure, the

Who bears the loss: 1. Before perfection seller (in accordance w/ res perit domino) 2. At the time of perfection contract is void & inexistent, therefore seller (1493) 3. After perfection, before delivery if basis is 1480, buyer, regardless w/n ownership has been transferred (note the exception in the 3rd par of this Art, there has to be delivery

before the buyer can be made liable if things sold are fungible things for a price according to weight, number or measure). But if 1504, seller, if ownership is yet to be transferred. If ownership has been transferred, buyer.

risk shall not be imputed to the vendee until they have been weighed, counted, or measured, & delivered, unless the latter has incurred in delay.

4. After delivery buyer Atty. Busmente: 1480 v 1504. I dont know w/c should prevail over the other. If your client is the seller, use 1480. If its the buyer, 1504. *Read De Leons discussion of 1480 v 1504. Lumabas siya sa 2009 Sales Midterms ni Sir.

1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond w/ the description or the sample, & if the contract be by sample as well as by description, it is not sufficient that the bulk of goods correspond w/ the sample if they do not also correspond w/ the description. The buyer shall have a reasonable opportunity of comparing the bulk w/ the description or the sample.

Sale by description occurs where a seller sells things as being of a particular kind, the buyer not knowing whether the sellers representations are true or false, but relying on them as true Sale by sample to constitute a sale by sample, it must appear that the parties contracted solely w/ reference to the sample, w/ the understanding that the bulk was like it. Bulk of goods in this art = goods to be actually sold

1482. Whenever earnest money is given in a contract of sale it shall be considered as part of the price & as proof of the perfection of the contract.

Earnest money something of value given by the buyer to the seller to show that the buyer is really in earnest, & to bind the bargain. Earnest money forms part of the consideration ONLY IF the sale is PERFECTED & the sale is CONSUMMATED upon full payment of the purchase price. Earnest money constitutes an advance or down payment & must therefore be deducted from the total price.

Earnest Money Option Money

Part of the purchase price Distinct & separate consideration

Given only where there is already a perfected sale Applies to a sale not yet perfected

When given, buyer is bound to pay balance When given, would-be buyer not bound to pay the balance (& may even forfeit the option money if given such right in the terms of the option contract)

*Option money may become earnest money if the parties so agree. Or it may actually be in the nature of earnest money when considered w/ the rest of the contract.

1483. Subject to the provisions of the Statute of Frauds & of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing & partly by word of mouth, or may be inferred from the conduct of the parties.

Genl rule: a contract of sale is binding regardless of its form. Exception: when the law requires a certain form for its validity or enforceability such as those falling under the Statute of Frauds. (Read 1356-58 & 1403) In case the contract of sale is covered by the SoF, it should be in writing o/w they shall be unenforceable. (Remember, unenforceable void) Registration of a public instrument in the registry of deeds is not indispensible as regards the contracting parties. However, doing so would bind 3rd parties to the contract & protect the buyer against claims of 3rd persons arising from subsequent alienations by the vendor.

1484. In a contract of sale of personal prop the price of w/c is payable in installments, the vendor may exercise any of the ff remedies:

1. Exact fulfillment of the obli, should the vendee fail to pay; 2. Cancel the sale, should the vendees failure to pay cover 2 or more installments. 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to pay cover 2 or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

(AKA RECTO Law) 1485. The preceding art shall be applied to contracts purporting to be leases of personal prop w/ option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. 1486. In the cases referred to in the 2 preceding arts, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.

Remedies are alternative; election of one is a waiver of the right to resort to the others. Only the exercise of one of these remedies will serve as a bar to the others. If seller chooses option 2, the buyer may demand the return of the installments unless there is a stipulation effecting forfeiture (read 1486). The RULES APPLY to: 1. The SALE of PERSONAL PROP, w/c is PAYABLE IN INSTALLMENTS 2. The LEASE of PERSONAL PROP, w/ OPTION TO BUY, & the LESSOR has DEPRIVED THE

LESSEE of the POSSESSION/ENJOYMENT of the thing. RA 6552 governs sales of REAL ESTATE on installments. Where the buyer has paid at least 2 years of installments, the buyer is entitled to the ff rights in case he defaults in the payment of succeeding installments: 1. Grace Period to pay, w/o additional interest, the unpaid installments due w/in the

total grace period earned by him w/c is hereby fixed at the rate of one month grace period for every year of installment payments made; Provided, that this right shall be exercised by the buyer only once in every 5 years of the life of the contract & its extensions, if any;

2. Refund of Cash Surrender Value if the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the prop equivalent to 50% of the total payments made, &, after 5 years of installments, an additional 5% every year but not to exceed 90% of the total payments made; Provided, that the actual cancellation of the contract shall take 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act & upon full payment of the cash surrender value to the buyer.

Read: Layug v IAC

Southern Motors v Moscoso:

Foreclosure incident to 1st remedy Foreclosure of chattel mortgage (3rd remedy)

Procedure is those prescribed for ordinary civil actions, under the RoC

Procedure is outlined in 14 of Chattel Mortgage Law

Pascual v Universal Motors Corp: Sellers cannot go after guarantors if they have already chosen 3rd remedy. B/c if they did, guarantors would have a right to go after the original debtors, w/c would result in the situation the law seeks to prevent (double recovery). Ridad v Filinvest: Should the vendor choose to foreclose the mortgage (3rd remedy), he has to content himself w/ the proceeds of the sale at the public auction of the chattels w/c were sold on installment & mortgaged to him. Why is it that in Southern Motors v Moscoso, they were able to exact the fulfillment of the deficiency of the purchase price even after foreclosing the chattel mortgage while in Ridad v Filinvest, the court ruled that the vendor has to content himself w/ the proceeds of the foreclosure? B/c in the Moscoso case, what the vendors filed was a complaint to recover of the unpaid balance of the promissory note covering the chattel mortgage. In effect, what they chose was the 1st remedy. The foreclosure in this case was not an exercise of the 3rd remedy but was merely incident of their choice to exact the fulfillment of the obli. In Ridad, they chose to foreclose the chattel mortgage extrajudicially, w/c is the 3rd remedy, barring them to recover the deficiency from the vendees.

1487. The expenses for the execution & registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary.

1488. The expropriation of prop for public use is governed by special laws.

CAPACITY TO BUY OR SELL

1489. All persons who are authorized in this Code to obligate themselves may enter into a contract of sale, saving the modifications contained in the ff arts. Where necessaries are sold & delivered to a minor or other person w/o capacity to act, he must pay a reasonable price therefor. Necessaries are those referred in Art 290. *Art. 290, CC = Art. 94, FC

Genl rule: All persons, whether natural/juridical, who can bind themselves have also legal capacity to buy & sell. Exceptions: When law determines that a party suffers from either absolute or relative incapacity. Absolute incapacity exists in case of persons who cannot bind themselves (e.g. minors, insane or demented persons) Ralative incapacity exists only w/ reference to certain persons or a certain class of prop (e.g. 1490, 1491) Necessaries those things w/c are needed for sustenance, dwelling, clothing, medical attendance, education & transportation according to the financial capacity of the family of the incapacitated person (Art. 94, FC)

Contracts of sale entered into by incapacitated persons are: 1. VOIDABLE, if only ONE of the parties is incapable of giving consent to a contract

(1390[1]) 2. UNENFORCEABLE, if BOTH parties are incapable of giving consent to a contract

(1403[3]) Who are incapable of giving consent to a contract? 1327. The ff cannot give consent to a contract: 1. Unemancipated minors; 2. Insane or demented persons, & deaf-mutes who do not know how to write. 1329. The incapacity declared in art 1327 is subject to the modifications determined by law, & is understood to be w/o prejudice to special dqs established in the laws.

1490. The husband & the wife cannot sell props to each other, except: 1. When a separation of prop was agreed upon in the marriage settlements; or 2. When there has been a judicial separation of prop under Art. 191.

Prohibition also applies to common-law relationships. Persons allowed to question such sale: 1. Those who bear such relation to the parties making the transfer or to the prop itself

that such transfer interferes w/ their rights or interests. 2. The government.

A sale b/w husband & wife is VOID. (1409[7]) If you want: Read Art. 87, FC, re donations b/w husband & wife/common-law partners 134-142, FC, re judicial separation of prop 143-146, FC, re separation of prop

1491. The ff persons cannot acquire by purchase, even at public or judicial auction, either in person or thru the mediation of another:

1. The guardian, the prop of the person/s who may be under his guardianship; 2. Agents, the prop whose administration or sale may have been intrusted to them, unless the consent of the principal have been given; 3. Executors & administrators, the prop of the estate under administration; 4. Public officers & employees, the prop of the State or of any subdivision thereof, or of any gocc, or institution, the admin of w/c has been intrusted to them; this provision shall apply to judges & govt experts who, in any manner whatsoever take part in the sale; 5. Justices, judges, prosecuting attorneys, clerks of superior & inferior courts, & other officers & employees connected w/ the administration of justice, the prop & rights in litigation or levied upon an execution before the court w/in whose jurisdiction or territory they exercise their respective fxns; this prohibition includes the act of acquiring by assignment & shall apply to lawyers, w/ respect to the prop & rights w/c may be the object of any litigation in w/c they may take part by virtue of their profession; 6. Any others especially dqd by law.

Pars. 1-3 = unenforceable, capable of ratification (b/c it involves private interests) Pars. 4-6 = void (b/c it involves public interests) No. 2 not absolute, agent may buy the prop intrusted unto him if: 1. The agency has been terminated 2. His principal gives consent 3. The sale was made under a special power pursuant to a special law (read: Fiestan v CA) No.3 refers only to props under the administration of the executor or administrator at the time of the acquisition. Executor may purchase the hereditary rights of any heir, since they do not administer such rights. No.4 refers only to props: 1. Belonging to the Sate, or of any subdivision thereof, or of any gocc or institution 2. The admin of w/c has been entrusted to PO/Es.

For no. 5 to operate, sale or assignment must take place during the pendency of the litigation involving the prop. A prop is in litigation from the moment it becomes subject to judicial action.

Fiestan v CA: The prohibition mandated by par 2 of Art 1491 does not apply where the sale of the prop in dispute was made under a special power inserted in or attached to the real estate mortgage pursuant to Act No. 3135, as amended. Under Act No. 3135, as amended, a mortgagee-creditor is allowed to participate in the bidding & purchase under the same conditions as any other bidder. Act No. 3135 An Act to Regulate the Sale of Prop under Special Powers inserted in or Annexed to Real Estate Mortgages. (applies in cases of extrajudicial foreclosure sales) *It seems that we can consider pars. 1-3 of this article to be covered by 1403 [1] & pars. 4-5 to be under 1409 [1]

1492. The prohibitions in the 2 preceding arts are applicable to sales in legal redemption, compromises & renunciations. Compromise amicable settlement of a (legal) controversy Renunciation condonation (remember obli, read 1270-1274 kung trip mo)

EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST

1493. If at the time the contract of sale is perfected, the thing w/c is the object of the contract has been entirely lost, the contract shall be w/o any effect. But if the thing should have been lost in part only, the vendee may choose b/w w/drawing from the contract & demanding the remaining part, paying its price in proportion to the total sum agreed upon. 1494. Where the parties purport a sale of specific goods, & the goods w/o the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option, treat the sale:

1. As avoided; or 2. As valid in all of the existing goods or in so much thereof as have not deteriorated, & as binding the buyer to pay the agreed price for the goods in w/c the ownership will pass, if the sale was divisible.

1493 applies to a sale of a specific thing. 1494 applies to a sale the object of w/c consists of a mass of specific goods Loss or injury referred to in these articles is one w/c takes place BEFORE or AT THE TIME OF PERFECTION. The thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered. (1189, [3]) Perish material deteriorations, complete change in the nature of the thing in such a manner that it loses the utility it had during the time of the perfection of the contract Rule in 1493 & 1494 similar: If lost/deteriorated in whole = void If lost/deteriorated in part = rescind contract or pay for whats left (if divisible)

OBLIS OF THE VENDOR

Section 1. Genl Provisions

1495. The vendor is bound to transfer the ownership of & deliver, as well as warrant the thing w/c is the object of the sale.

Principal oblis of a vendor: (1) To transfer the ownership of the determinate thing sold (1948, 1495);

(2) To deliver the thing, w/ its accessions & accessories, if any, in the condition in w/c they were upon the perfection of the contract; (1537) (3) To warrant against eviction & against hidden defects; (1495, 1547) (4) To take care of the thing, pending delivery, w/ proper diligence; (1163) (5) To pay for the expenses of the deed of sale, unless there is a stipulation to the contrary. (1487) *Seller need not be the owner of the thing at the time of perfection of the contract; 1459 provides that it is sufficient that he has a right to transfer the ownership thereof at the time it is delivered.

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 arts 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: (1) Actual or real delivery (1497); (2) Constructive or legal delivery (1498-1501); or (3) Any other manner signifying an agreement that the possession is transferred to the vendee. (1496-1499) Delivery must be made to vendor or his authorized representative, if any. Constructive delivery a genl term comprehending all those acts w/c, although not conferring physl possession of the thing, have been held by construction of law equivalent to acts of real delivery. Ways of effecting constructive delivery:

Execution of a public instrument (1498, par. 1);

Symbolic tradition or tradition symbolica (1498, par. 2);

Traditio Longa Manu (1499, par. 1);

Traditio Brevi Manu (1499, par. 2);

Traditio Constitutum Possessorium (1500);

Quasi-traditio or quasi-delivery (1501). In all forms of delivery, it is necessary that the act be coupled w/ the intention of delivering the thing. For the same reason, any act, although not provided for in the preceding arts, but accompanied by the evident intention of the vendor to deliver or of the vendee to receive the thing sold, will be considered as constituting tradition. It is the intention w/c is essential.

Section 2. Delivery of the Thing Sold

1497. The thing sold shall be understood as delivered, when it is placed in the control & possession of the vendee. (Actual delivery)

Tradition is a derivative mode of acquiring ownership by virtue of w/c one who has the right & intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same. Ownership is not transferred by contract merely but by delivery, actual or constructive. Contracts only constitute title or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same. Note however, that the parties to the contract may agree when & on what conditions the ownership in the subject of the contract shall pass to the buyer. Delivery of thing sold + payment of purchase price = consummation of contract of sale. Since perfection consummation, delivery is not essential to the perfection of the contract of sale. Remedies of buyer if seller fails to deliver:

Specific performance

Rescission, w/ damages

1498. When the sale is made thru a public instrument, the execution thereof shall be equivalent to the delivery of the thing w/c is the object to the contract, if from the deed the contrary does not appear or cannot clearly be inferred. W/ regard to movable prop, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept.

1st par applies both to movable & immovable prop. Delivery here is only PRESUMPTIVE & can be rebutted by evidence to the contrary. A seller cannot deliver constructively if he cannot actually deliver even if he wants to. In order to bind 3rd parties to the sale, the public instrument needs to be recorded in the Register of Deeds & a certificate of title must be issued in the name of the buyer over the prop. But, as b/w the buyer & seller, the execution of the public instrument is enough to bind the 2 of them. Symbolic tradition when parties, to effect delivery, make use of a token symbol to represent the thing delivered. (e.g. Delivery of car keys)

Addison v Felix: In order that symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership & the right of possession. THE THING SOLD MUST BE PLACED IN HIS CONTROL. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic tradition thru the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment & material tenancy of the thing & make use of it himself or thru another in his name, b/c such tenancy & enjoyment are opposed by the interposition of another will, then fiction yields to reality the delivery has not been effected. Ten Forty Realty v Cruz: Execution of a public instrument gives rise only to a prima facie presumption of delivery. Such presumption is destroyed when the delivery is not effected b/c of a legal impediment. A constructive or symbolic delivery, being merely presumptive, is deemed negated by the failure of the vendee to take actual possession

of the land sold. Note the cases of Roman v Grimalt, Norkis Distributors v CA

1499. The delivery of movable prop 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 takes place by 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 Traditio Brevi Manu happens when the vendee has already the possession of the thing sold by virtue of another title (e.g. Lessor sells thing leased to lessee)

Atty. Busmentes example of Traditio Longa Manu: e.g. A buys Bs car, however, such car is in Baguio. Or such car is the subject of a lease contract b/w B & C at the time B sold it to A.

1500. There may also be tradition constitutum possessorium. Traditio Constitutum Possessorium takes place when the vendor continues in possession of the prop sold not as owner but in some other capacity. (e.g. A sells his land to B. Instead of delivering the land to B, A continues to occupy the land as Bs tenant.)

1501. W/ respect to incorporeal prop, the provisions of the 1st par of art 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, w/ the vendors consent, shall be understood as a delivery.

Quasi-traditio delivery of incorporeal things thru: - Execution of a public instrument; - If (1) is inapplicable, the placing of titles of ownership in the possession of the vendee; or - Allowing vendee to use his rights as new owner w/ the consent of the vendor.

*Incorporeal having a conceptual existence but no physl existence; intangible (BLD 9th Ed.)

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 w/in the time fixed in the contract, or, if no time has been fixed, w/in 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 or does any other act adopting the transaction;

2. If he does not signify his approval or acceptance to the seller, but retains the goods w/o giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, &, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.

Sale or Return a contract by w/c prop is sold but the buyer, who becomes the owner of the prop on delivery, has the option to return the same to the seller instead of paying the price. If buyer does not return w/in the time fixed in the contract, or if no time has been fixed, w/in reasonable time, sale is absolute & he is liable to pay the seller. Sale on Trial or Approval a contract in the nature of an option to purchase if the goods prove satisfactory, the approval of the buyer being a condition precedent. *Buyer cannot accept part & reject the rest of the goods. In both cases, if the goods are injured or damaged substantially thru the negligence or misuse of the buyer, his right to return is lost & the sale becomes absolute.

Sale or Return Sale on Trial/Approval

Subject to resolutory condition (ownership is extinguished if buyer decides to return) Subject to suspensive condition (ownership transfers if goods are satisfactory)

Depends entirely on the will of the buyer Depends on the character or quality of the goods

Ownership of the goods passes to the buyer on delivery & subsequent return of the goods reverts ownership in the seller.

Ownership remains in the seller until the buyer signifies his approval or acceptance to the seller

Risk of loss/injury rests upon buyer Risk still remains w/ the seller except when buyer is at fault or there is a contrary agreement.

1503. When 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 notw/standing 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, & 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 goods, the sellers prop in the goods shall be deemed only for the purpose of securing performance by the buyer of his oblis under the contract. Where goods are shipped, & by the bill of lading the goods are deliverable to 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 price & transmits the bill of exchange & 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, & 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, one who purchases in GF, for value, the bill of 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

GENL RULE: ownership in the goods sold passes to the buyer upon their delivery to the carrier. This is so b/c the carrier is presumed to be a bailee for the buyer. EXCEPTIONS: 1st, 2nd, & 3rd pars of 1503 Bakit di kasama yung 4th paragraph? B/c it talks about transmission of the Bill of Lading (BoL) w/ a Bill of Exchange (BoE) & not delivery of goods to a carrier or bailee *Bill of Lading - A docu acknowledging the receipt of goods by a carrier or by the shipper's agent & the contract for the transportation of those goods; a docu that indicates the receipt of goods for shipment & that is issued by a person engaged in the business of transporting or forwarding goods. (BLD 9th Ed.) Scenarios wherein SELLER reserves the right of possession or ownership despite delivery of the goods to the buyer, a carrier or other bailee: 1st Scenario (1st par): Seller reserves the right of possession or ownership in the goods BY THE TERMS OF THE CONTRACT until certain conditions have been fulfilled *Think of a contract to sell, where the seller still owns the thing despite delivery 2nd Scenario (2nd par): By the BoL the goods are DELIVERABLE TO THE SELLER OR HIS ORDER for the purpose of retaining ownership Effects:

1. The carrier is deemed as a bailee of the SELLER, not the buyer 2. The seller may retain the goods until the buyer performs his obli 3. The seller may dispose of the goods to a 3rd person (but he will be liable for damages; the 2nd buyer though obtains a better right against the original buyer.)

*The BoL may be deliverable to the seller or his order but his purpose is not to retain ownership but to secure the performance of the buyers obli. In such cases, the buyer will bear the risk of loss & he will also have an action based on ownership against anyone except an innocent purchaser for value of the BoL from the consignee. 3rd Scenario (3rd par): BoL is DELIVERABLE TO THE ORDER OF THE BUYER, but the SELLER RETAINS POSSESSION OF THE BoL. Effect: Buyer, even if the BoL is deliverable to him, cannot recover the goods until he presents the BoL (w/c he cannot do KASI NGA na kay Seller ang putang inang BoL) De Leon: A 3rd person may be named as consignee in the BoL. In this case, the buyer can only obtain the goods when the consignee surrenders the BoL to the carrier/buyer or he indorses the bill in blank or especially to the buyer. The consignee will only do so upon payment of the price (b/c if he would do so nonetheless, then USELESS! Seller might as well save himself the trouble by naming the buyer the consignee in the BoL) 4th Scenario (4th par): Seller transmits the BoL, together w/ a bill of exchange. (In the BoE, drawer & payee is seller, drawee is buyer) Effects:

consignee named therein, or of the goods, w/o notice of the facts making the transfer wrongful.

1. Title is retained by the seller until the BoE is paid. 2. Delivery of goods is conditioned upon the payment/acceptance of the BoE 3. If BoE is not paid, buyer is BOUND to return the BoL. 4. If the buyer wrongfully retains the BoL, he acquires no additional right thereby. 5. If the BoL names the buyer as consignee or is indorsed in blank or specially to the buyer, a purchaser in GF for value of the BoL from the buyer will obtain ownership in the

goods even if BoE is not honored. (De Leon: safe move for the seller is to send the BoL & BoE to a 3rd person b/c if sent to the buyer, he may obtain the goods & forget about honoring the BoE w/c would compel the seller to enter upon litigation) It seems that in these scenarios, the risk of loss is borne by the seller, as he reserves ownership in the things sold + res perit domino. The exception is when his only purpose is to secure the performance of the buyers obli.

1504. Unless o/w 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 & the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his oblis under the contract, the goods are at the buyers risk from the time of such delivery; 2. Where actual delivery has been delayed thru the fault of either the buyer or seller the goods are at the risk of the party in fault.

This provision states 2 exceptions to the principle of Res Perit Domino. In the 1st par, the owner is the seller but merely to secure the performance of the buyer of his oblis. In this par, the buyer is the one who bears the risk. In the 2nd par, the risk of loss is borne by the party at fault.

1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, & who does not sell them under authority or w/ 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. Nothing in this Title, however, shall effect:

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, markets, in accordance w/ the Code of Commerce & special laws.

Genl rule: Buyer cannot acquire more rights than the seller had Exceptions: (in these cases, the buyers right to the prop is better than the owner, provided he is in GF) 1. Owner is estopped from denying sellers authority to sell 2. Where the law enables the apparent owner to dispose of the goods as if he were the

true owner thereof 3. Where the sale is sanctioned by statutory or judicial authority 4. Where the sale is made at merchants stores, fairs or markets 5. When the seller has a voidable title w/c has not been avoided at the time of the sale 6. Where seller subsequently acquires title Read: Dizon v Suntay, EDCA Publishing v Sps. Santos

559. The possession of movable prop acquired in GF is equivalent to a tile. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same If the possessor of a movable lost or of w/c the owner has been unlawfully deprived, has acquired in GF at a public sale, the owner cannot obtain its return w/o reimbursing the price paid therefor. Dizon v Suntay: The right of the owner cannot be defeated even by proof that there was GF in acquisition by the possessor. Suffice it to say in this regard that the right of the owner to recover personal prop acquired in GF by another, is based on his being dispossessed w/o his consent. The common law principle that where 1 of 2 innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enable the fraud to be committed, cannot be applied in a case w/c is covered by an express provision of the new CC, specifically 559 of the CC. B/w a common law principle & a statutory provision, the latter must prevail in this jurisdiction. Why is it that in Dizon v Suntay, the owner (Suntay) was allowed to recover his prop but in EDCA v Sps Santos, EDCA was not? >In the latter case, the court held that EDCA WAS NOT UNLAWFULLY DEPRIVED OF THEIR PROP. They delivered the prop in question (books) to Cruz (who talked them into selling said books) & as we all know, ownership is transferred upon delivery, actual or constructive. By the time Cruz sold the books to the Santoses, he was already the owner of such books, allowing him to make a valid transfer of them.

1506. 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, & w/o notice of the seller's defect of title.

Requisites for acquisition of good title by buyer: 1) The sellers voidable title is yet to be avoided; 2) Buyer buys in good faith & for value; 3) Buyer has no notice of the sellers defect of title. If the seller has NO title, then a buyer, even if he purchases in GF & for value, cannot acquire a good title. Read the notes for the preceding article, specifically 559 & the Dizon v Suntay doctrine.

1385. (par 2) Neither shall rescission take place when the things w/c are the object of the contract are legally in the possession of 3rd persons who did not act in BF. (owner cannot rescind contract b/w seller & buyer if buyer fulfills requisites) 1388. Whoever acquires in BF the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on acct. of the alienation, whenever, due to any cause, it should be impossible for him to return them. (If the buyer does not fulfill the requisites, this is the remedy of the owner if ever the buyer cannot return the thing)

1507. A docu of title in w/c 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 docu is a NDT.

CLASSES OF DOCUMENTS OF TITLE: 1) Negotiable Documents of Title (NDT) deliverable to bearer or to the order of a specified person. 2) Non-negotiable Documents of Title (Non-NDT) deliverable to a specified person. (straight bill) *A document deliverable to bearer or to the order of a specified person w/c is subsequently indorsed to a specified person DOES NOT lose its negotiable character, read 1509. DEFINITION OF TERMS: 1) Document of Title of Goods any document used in the ordinary course of business in the sale or transfer of goods, or authorizing a person to do so in his behalf.

a. Bill of Lading a receipt for the transport of goods & their delivery to the person named therein. Three Persons Involved: Shipper Carrier Consignee. b. Dock Warrant instrument given by dock owners to an importer of goods warehoused on the dock. c. Warehouse Receipt a receipt of goods deposited w/ a warehouseman to hold & deliver the goods to the person named therein or bearer

d. Quedan warehouse receipt usually for sugar. 2) Order Relating to documents of title means an order by indorsement on the documents.

1508. A NDT may be negod by delivery: 1) Where by the terms of the docu 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 docu the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to

the order of a specified person, & such person or a subsequent indorsee of the docu has indorsed it in blank or to the bearer. Where by the terms of a NDT the goods are deliverable to bearer or where a NDT has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any specified person, & in such case the docu shall thereafter be negod only by the indorsement of such indorsee. 1509. A NDT may be negod by the indorsement of the person to whose order the goods are by the terms of the docu deliverable. Such indorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negod by the indorsement of such person in blank, to bearer or to another specified person. Subsequent negotiations may be made in like manner. 1510. If a docu of title w/c 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 w/c contains words of like import, has placed upon it the words "not nego," "non-nego" or the like, such docu may nevertheless be negod by the holder & is a NDT w/in 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 docu of title or placing thereon the words "not nego," "non-nego," or the like. 1511. A docu of title w/c is not in such form that it can be negod by delivery may be transferred by the holder by delivery to a purchaser or donee. A non-nego docu cannot be negod & the indorsement of such a docu gives the transferee no additional right. 1512. A NDT may be negod: 1) By the owner thereof; or 2) By any person to whom the possession or custody of the docu has been entrusted by the owner, if, by the terms of the docu the

bailee issuing the docu undertakes to deliver the goods to the order of the person to whom the possession or custody of the docu has been entrusted, or if at the time of such entrusting the docu is in such form that it may be negod by delivery.

1513. A person to whom a NDT has been duly negod acquires thereby: 1) Such title to the goods as the person negotiating the docu to him had or had ability to convey to a purchaser in good faith for

value & also such title to the goods as the person to whose order the goods were to be delivered by the terms of the docu had or had ability to convey to a purchaser in good faith for value; &

2) The direct obligation of the bailee issuing the docu to hold possession of the goods for him according to the terms of the docu as fully as if such bailee had contracted directly w/ him.

1514. A person to whom a docu of title has been transferred, but not negod, acquires thereby, as against the transferor, the title to the goods, subject to the terms of any agreement w/ the transferor. If the docu is non-nego, such person also acquires the right to notify the bailee who issued the docu of the transfer thereof, & thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the docu. Prior to the notification to such bailee by the transferor or transferee of a non-NDT, the title of the transferee to the goods & 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. 1515. Where a NDT is transferred for value by delivery, & the indorsement of the transferor is essential for negon, the transferee acquires a right against the transferor to compel him to indorse the docu unless a contrary intention appears. The negon shall take effect as of the time when the indorsement is actually made. 1516. A person who for value negotiates or transfers a docu of title by indorsement or delivery, including one who assigns for value a claim secured by a docu of title unless a contrary intention appears, warrants: 1. That the docu is genuine; 2. That he has a legal right to negotiate or transfer it; 3. That he has knowledge of no fact w/c would impair the validity or worth of the docu; & 4. That he has a right to transfer the title to the goods & 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 w/o a docu of title the goods represented thereby.

1517. The indorsement of a docu of title shall not make the indorser liable for any failure on the part of the bailee who issued the docu or previous indorsers thereof to fulfill their respective oblis.

(Abbreviations: nego = negotiable, negon = negotiation, negod = negotiated, negoing = negotiating, negos = negotiates) When NDT is negod by delivery: (1508)

1. When it is a bearer NDT 2. When it is an order NDT indorsed in blank or to bearer

When indorsement is essential for the negon of NDT:

1. When it is an order document (1509) 2. When it is a bearer NDT indorsed to a specified person (1508, 3rd par)

*In dealing w/ such NDTs, delivery alone is not sufficient to produce the effects of negon. *1511: If an NDT requires an indorsement to be negod BUT is TRANSFERRED BY DELIVERY ONLY, then the transferee acquires no additional right than that of the transferor (transferor is a mere assignee). Meanwhile, a person transferring a non-NDT, even if he indorses it, can transfer only such rights that he had to the transferor, non-negotiable nga e diba. In both cases, the transferor only acquires the rights in 1514. *If indorsement is made merely for identification, the party indorsing the document is liable only as guarantor (subsidiarily liable), not as an indorser (primarily liable). *The words non-nego or other words of similar import does not affect the nego character of NDT (1510) How indorsement is made: (1509)

1. Blank or to bearer effect: NDT can be subsequently negod by mere delivery 2. Special indorsement effect: NDT, to be subsequently negod, must be negod by indorsement + delivery

Blank Indorsement does not name a specific person w/c makes the goods deliverable to whoever possesses the NDT Special Indorsement names a specific person w/c makes the goods deliverable only to such named person Who may indorse: (1512)

1. Owner of an order NDT 2. Any holder of a bearer NDT

Rights acquired from a NDT duly negod: (1513) 1) Title of the person negoing the document, over the goods covered by the docu 2) Title of the person (depositor or owner) to whose order by the terms of the docu the goods were to be delivered, over such goods 3) The direct obli of the bailee to hold possession of the goods for him, as if the bailee contracted directly w/ him Rights acquired from a non-NDT or a NDT not duly negod: (1514) 1) The title of the goods as against the transferor; 2) The right to notify the bailee of the transfer thereof; & 3) The right, thereafter, to acquire the obli of the bailee to hold the goods for him. - These are not absolute. These rights are subject to the terms of the transferor. - If what is transferred is a NDT, the goods cannot be attached or levied unless the NDT is 1st surrendered to the bailee or its negon is enjoined. If Non-NDT, transferees right may be defeated by a levy of an attachment or execution by a creditor of the transferor - If the transferor of a NDT is a PURCHASER FOR VALUE, he may compel the transferee to indorse the NDT so that he may acquire the rights in 1513. The negotiation shall take effect as of the time the indorsement is actually made, not at the time the document is delivered. (1515) This does not apply however, when the intention of the parties is to affect a mere transfer only. Warranties & liabilities of a person negotiating or transferring a document: (1516) - Liability is limited only to a violation of these four warranties (G LR K RT) - It is the duty of every indorsee to know that all previous indorsements are genuine, o/w, he will NOT ACQUIRE a valid title to the

instrument. Similarly, under the NIL, the last indorser warrants that all previous indorsements are genuine. *Indorsers are subsidiarily liable if the person primarily liable fails honor the document. *Indorser however, is not liable if the goods are lost or becomes defective due to the fault of the bailee as he is a mere conveyor of the docu & not a guarantor. (1517)

1518. The validity of the negon of a NDT is not impaired by the fact that the negon was a breach of duty on the part of the person making the negon, or by the fact that the owner of the docu was deprived of the possession of the same by loss, theft, fraud, accident, mistake, duress, or conversion, if the person to whom the docu was negod or a person to whom the docu was subsequently negod paid value therefor in good faith w/o notice of the breach of duty, or loss, theft, fraud, accident, mistake, duress or conversion.

THIS ARTICLE PERTAINS ONLY TO THE DOCUMENT, NOT THE GOODS - Under 1512, only the owner of the docu or the person to whom he entrusted the docu to may negotiate said document. But under 1518,

if a person, not having such authority, negos the docu to an INNOCENT PURCHASER FOR VALUE, such purchasers right to the docu is indefeasible. (similar to a Holder in Due Course in nego)

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 & a NDT is issued for them they cannot thereafter, while in possession of such bailee, be attached by garnishment or o/w or be levied under an execution unless the docu be first surrendered to the bailee or its negon enjoined. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the docu is surrendered to him or impounded by the court.

GENL RULE: The goods cannot be attached or levied under execution EXCEPTIONS: 1) The Document of Title is surrendered to the bailee; or 2) The negotiation is prohibited or the goods are impounded by the court *If the depositor of the goods however is neither the owner nor someone authorized to convey title to the goods, 1519 does not apply.

1520. A creditor whose debtor is the owner of a NDT shall be entitled to such aid from courts of appropriate jurisdiction by injunction & o/w in attaching such docu or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property w/c cannot readily be attached or levied upon by ordinary legal process.

In case a debtor refuses to surrender a NDT to a creditor, the latter may, w/ aid from the Courts, afford of the ff remedies: 1. Injunction 2. Attaching the NDT 3. Satisfy his claim on the NDT

(Only IF the prop cannot be readily attached /levied upon ordinary legal process) However, if the NDT is negotiated to an innocent person, the transfer is nevertheless effectual.

1521. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, express or implied, b/w 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, & if not his residence; but in case of a contract of sale of specific goods, w/c 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 w/in 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 & 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 o/w agreed, the expenses of & incidental to putting the goods into a deliverable state must be borne by the seller.

RULES IN DELIVERY OF GOODS (PLACE): 1) According to that Agreed upon; 2) In the absence of an agreement Usage of Trade; 3) Sellers Place of business; 4) Sellers Residence; 5) For specific goods, where the said goods are Found (Paras Civil Code Book V, 2008) PRESUMPTION: The buyer must take the goods from the sellers place of business or residence rather than the seller to deliver them to the buyer. When the delivery was made not as stipulated & the buyer accepted the goods w/o complaint, it is deemed that the buyer WAIVED his right against the sellers failure to deliver. RULES IN DELIVERY OF GOODS (TIME): 1) The time stipulated or agreed upon - Time is of the essence: w/in the period stipulated - Time is NOT of the essence: w/in a reasonable time (Deleon p.236) 2) The time is not stipulated - Time is of the essence: buyer cannot invoke time is of the essence unless he gives the seller sufficient notice of his intention to cancel delivery is not made on or before a fixed time. - Time is NOT of the essence: w/in a reasonable time (a question of fact; case to case basis) HOUR OF DELIVERY: (speaks of the hour of the day) - A question of fact; depends on kind of obli

DUTY OF SELLER: To prepare the good in a deliverable state at his expense. In such state, the buyer is bound to accept delivery. (unless o/w agreed)

Usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade to justify an expectation that it will be observed w/ respect to the transaction in question. Ex. Appliance or machinery: delivered to the residence or place of business of buyer; car tires delivered at the place of business of seller (good luck ikaw magpalit ng goma ng gulong mo); mambabalot, magtataho, street vendors kung saan mo sila matitiempuhan. Course of dealing is a sequence of previous conduct b/w the parties to a particular transaction w/c is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions & other conduct. Explanation: there has been previous transactions b/w the seller & buyer. There has been an established understanding how delivery is to be conducted. That established understanding is the course of dealing. Note: above examples & explanation need to be confirmed if correct

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 & 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 w/ goods of a different description not included in the contract, the buyer may accept the goods w/c are in accordance w/ the contract & 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 art are subject to any usage of trade, special agreement, or course of

DELIVERY OF GOODS LESS THAN THE QUANTITY CONTRACTED: - The buyer may reject delivery - The buyer may accept delivery

- Know that seller would not complete delivery: Pay contract price - Does not know that seller will not complete delivery: Fair value of the goods

DELIVERY OF GOODS MORE THAN THE QUANTITY CONTRACTED: - Buyer may accept quantity contracted & reject the excess - Buyer may accept including the excess provided, he pays for their value - If indivisible, buyer may reject the whole or accept it entirely DELIVERY OF GOODS MIXED W/ OTHERS: - Buyer may accept those w/c are in accordance w/ the contract & reject the rest - Buyer may accept including that w/c are not in accordance w/ the contract provided, he

pays for their value - If indivisible, buyer may reject the whole or accept it entirely DELIVERY OF INDIVISIBLE GOODS WHETHER IN EXCESS OR MIXED GOODS

FAIR VALUE: not necessarily the market value; the benefit w/c the buyer may receive from the goods. Since the seller did not delivery the correct quantity as agreed upon, the buyer is not required to pay the contract price if such price is more than fair value to him 1233. A debt shall not be understood to have been paid unless the thing or service in w/c the obli consists has been completely delivered or rendered, as the case may be. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, & w/o expressing any protest or objection, the obli is deemed fully complied w/.

dealing b/w the parties. Buyer may reject the whole or accept it entirel

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 art 1503, first, second & third paragraphs, or unless a contrary intent appears. Unless o/w authorized by the buyer, the seller must make such contract w/ the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods & the other circumstances of the case. If the seller omits so to do, & 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 o/w agreed, where goods are sent by the seller to the buyer under circumstances in w/c the seller knows or ought to know that it is usual to insure, the seller must give such notice to the buy