SALES REVIEWER

1|INTRODUCTION
 SALES REVIEWER

INTRODUCTION
I. Definition. [1458] Comment [vsf1]: By the contract of sale one
of the contracting parties obligates himself to
a. one of the contracting parties obligates himself to transfer the ownership transfer the ownership and to deliver a
of and to deliver a determinate thing; and determinate thing, and the other to pay therefor
a price certain in money or its equivalent.
b. the other to pay therefor a price certain in money or its equivalent

II. Elements
a. Essential elements— those without which, there can be no valid sale
(consent, object, price)
b. Natural elements— inherent and are deemed to exist even in the absence
of contrary provision, save those in the contrary (warranties against
eviction and hidden defects)
c. Accidental elements —dependent on the parties’ stipulation (e.g.
conditions, interest, penalty, time or place of payment)

III. Stages
a. Negotiation—covers the period from the time the prospective parties
indicate interest in the contract until it is perfected
b. Perfection—meeting of the minds as to the object of contract and upon
the price
c. Consummation—object is delivered and the price is paid

IV. Characteristics [CBOC NP]

a. Consensual—it is perfected at the moment there is a meeting of the minds
upon the thing, which is the object of the contract and the upon the price.
xxx [1475]
b. Bilateral —
i. one of the contracting parties obligates himself to transfer the
Comment [vsf2]: The contract of sale is
perfected at the moment there is a meeting of
minds upon the thing which is the object of the
contract and upon the price.

ownership of and to deliver a determinate thing and the other to From that moment, the parties may reciprocally
pay therefor a price certain in money or its equivalent [1458]. demand performance, subject to the provisions
of the law governing the form of contracts.
ii. as a consequence:
1. power rescind is implied in case one of the obligors should
not comply with what is incumbent upon him [1191]
2. neither party incurs in delay if the other does not comply
or is not ready to comply in proper manner what is
incumbent upon him [1169]
c. Onerous—valuable consideration is necessary for the contract to be valid
(price)

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d. Commutative—what is done, given, or promised by one party is

considered as equivalent to or in consideration of what is done, given or
promised by the other
e. Nominate—the civil code refers to it by special designation or name
f. Principal—for the contract of sale to exist, there is no necessity for it to
depend upon the existence of another valid contract

V. Distinguished from other contracts

a. Sale v Donation
i. the contract of sale is an onerous contract; a donation is a
gratuitous contract, the consideration being liberality [725]. Comment [vsf3]: Donation is an act of
liberality whereby a person disposes
ii. Hence, a sale where the price is simulated is void. But it may be gratuitously of a thing or right in favor of
shown to have been a donation [1471] another, who accepts it.

b. Sale v Barter Comment [vsf4]: If the price is simulated, the

sale is void, but the act may be shown to have
i. in a sale, one of the contracting parties obligates himself to been in reality a donation, or some other act or
transfer the ownership of and to deliver a determinate thing and contract.

the other to pay therefor a price certain in money or its equivalent

[1458].
ii. in a barter, one of the parties binds himself to give one thing in
consideration of the other’s promise to give another things

NOTE: If the consideration is partly in money and partly in another

thing, the nature of the contract will depend on [1468]:
1. the manifest intention of the parties
2. if the intent is not clear, apply the ff rules:
a. if the thing is more valuable than money— barter
b. if the money and the thing are of equal value—sale
c. if the thing is less valuable than money—sale
Comment [vsf5]: If the consideration of the
contract consists partly in money, and 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; otherwise, it is a sale

c. Sale v Piece of Work [1467]
i. vendor, in the ordinary course of his business, manufactures or
procures the thing sold for the general market, whether the same
is on hand at the time or not —sale
ii. goods are to be manufactured specially for the customer and upon
his special order and not for the general market—piece of work
iii. Tests under jurisprudence
1. Habituality test: WON the job requires the use of
extraordinary or additional equipment, or involves
services not generally performed [Celestino v. CIR]
1. WON the thing is one which would have never existed but
for the order of the party desiring to acquire it, or one
Comment [vsf6]: A contract for the delivery
at a certain price of an article which the vendor
in the ordinary course of his business
manufactures or procures for the general
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
and upon his special order, and not for the
general market, it is a contract for a piece of
work.

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 SALES REVIEWER
which would have existed and have been the subject of
sale to some other person even f the order had not been
given [CIR v. Eng.&Supply]
d. Sale v Agency to Sell [Quiroga v Parsons]
Sale
1. Buyer receives the goods as
owner
2. Buyer pays the price
3. Buyer, as a general rule,
cannot return the object sold
4. Seller warrants the thing sold
5. Buyer can deal with the thing
sold as he pleases
e. Sale v Dacion en Pago
Sale
1. No pre-existing credit
2. Obligations are created
3. Consideration on the part of
the seller is the price; on the
part of the buyer is the
acquisition of the object
4. Greater freedom in
determining the price
5. Buyer still has to pay the price
NOTE:
i. CivCode Definition. property is alienated to the creditor in
satisfaction of a debt in money [1245]
ii. is governed by the law on sales [1245]
4|INTRODUCTION
Agency to sell
1. Agent receives the goods as
goods of the principal who
retains ownership over them
2. Agent delivers the price which
in turn he got from his buyer
3. Agent can return the goods in
case he is unable to sell the
same to a third person
4. Agent makes no warranty, for
which he assumes personal
liability as long as he acts
within his authority and in the
name of the seller
5. Agent in dealing with the
thing received, must act
according to the instructions
of the principal
Dacion en Pago
1. Pre-existing credit
2. Agent delivers the price which
in turn he got from his buyer
3. The debtor’s consideration is
the extinguishment of the
debt; the creditor’s
consideration is the
acquisition of the object
offered in lieu of the original
credit
4. Less freedom in determining
the price
5. The payment is received by
the debtor before the contract
is perfected
Comment [vsf7]: Dation in payment,
whereby property is alienated to the creditor in
satisfaction of a debt in money, shall be
governed by the law of sales.
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iii. there is a novation of the contract of one of loan into one of sale
[Baviera]

f. Sale v Contract to Sell

Sale Contract to Sell

1. Title passes to the buyer upon
delivery of the thing
2. Non-payment of the price is a
negative resolutory condition.
The remedies of the seller are
specific performance and
rescission
3. Vendor loses and cannot
recover ownership of the
thing sold once delivered
1. Ownership is reserved in the
seller and will pass only to the
buyer upon full payment of
the price
2. Full payment is a positive
suspensive condition, the
failure of which is not a
breach but prevents the
obligation of the vendor to
convey title from having
binding force
3. Title remains in the vendor if
the vendee does not comply
with the condition precedent
of making payment at the
time specified in the contract

NOTE:
i. Absent a proviso in the contract that the title to the property is
reserved in the vendor until full payment of the purchase price or
a stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within the fixed
period, the transaction is an absolute contract of sale not a contract
to sell. [Dignos v CA]
ii. Other cases of contract to sell
1. where subject matter is indeterminate
2. sale of future goods
3. stipulation that deed of sale and corresponding certificate
of sale would be issued only after full payment

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OBJECTS OF SALE
1. Requisites [licit; not impossible; determinate or determinable; existing, future,
contingent]
a. Licit [1459] Comment [vsf8]: The thing must be licit and
the vendor must have a right to transfer the
i. it is licit if not ownership thereof at the time it is delivered.
1. contrary to law, morals, good customs, public order, or
public policy
2. outside of the commerce of man
ii. sale is inexistent and void if the object is illicit [1409 (1,4)]

NOTE: The following are inexistent and void from the beginning:
1. those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy
4. those whose object is outside the commerce of man

b. Not impossible [1348]

NOTE: Impossible things or services cannot be the objects of contracts

c. Determinate or determinable
i. a thing is determinate when it is: [1460]
1. particularly designated or
2. physically segregated from the all others of the same class
ii. it is determinable if at the time the contract is entered into
1. the thing is capable of being made determinate
2. without the necessity of a new or further agreement
between the parties
iii. contracts where the intention of the parties relative to the
principal object cannot be ascertained are void [1409 (6)]
d. Existing, future, or contingent
i. existing goods—goods owned or possessed by the seller at the
time of perfection
ii. future
1. things having a potential existence. goods, which though not
yet actually in existence, are certain to come into existence
as the natural increment or usual incident of something
already in existence (may be the object of a sale) [1461]
2. future goods. goods to be manufactured, raised or acquired
by the seller after the perfection of the contract (may be the
object of a sale) [1462]

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NOTE:

1. Future inheritance, except in cases expressly authorized

provided by law, cannot be the object of a sale [1347] Comment [vsf9]: All things which are not
outside the commerce of men, including future
2. Sale of a vain hope is void [1461] things, may be the object of a contract. All rights
3. Emptio rei speratae v Emptio spei: if the the expected thing which are not intransmissible may also be the
object of contracts.
in the first does not materialize, the sale is not effective. In
the second, it does not matter whether the thing No contract may be entered into upon future
inheritance except in cases expressly authorized
materialized or not; what is important is that the hope by law.
validly existed. All services which are not contrary to law,
morals, good customs, public order or public
policy may likewise be the object of a contract.
iii. contingent —existence of the thing is dependent on the happening
of condition
2. Particular kinds
a. Generic things
i. so long as intent of parties clear, it is valid. (it is sufficient that it is
particularly designated)
ii. rule under the civil code that it has to be physically segregated is
no longer followed. (Hence, Yu Tek v Gonzalez no longer sound
doctrine)
b. Undivided interest
i. The sole owner of a thing may sell an undivided interest therein
[1463]
ii. The sale of an undivided share in specific mass of fungible goods
results in making the buyer co-owner of the entire mass in
proportion to the amount bought by him, and if the mass contains
less than the amount bought, the seller is bound to make good the
deficiency from goods of the same kind and quality, unless a
contrary intent appears. [1464]
c. Things in litigation
i. Contracts which refer to thins under litigation, if they have been
entered into by the defendant without the knowledge and
approval of the litigants OR of competent judicial authority, are
rescissible [1381(4)]
ii. The property is said to be in litigation after the defendant has
received the service of summons
d. Things subject to a resolutory condition may be the object of a sale [1465]

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PRICE
I. Definition. The sum stipulated as the equivalent of the thing sold and also every
incident taken into consideration for the fixing of the price, put to the debit of the
vendee and agreed to by him.

II. Requisites [certain at time of perfection; in money or its equivalent; real; true]
a. Certain The price is certain when it is
i. fixed by the agreement of the parties

NOTE: The fixing of price cannot 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 [1473]

ii. certain with reference to another thing certain[1469] Comment [vsf10]: In order that the price may
be considered certain, it shall be sufficient that it
iii. to be fixed by a third person [1469] be so with reference to another thing certain, or
1. Effect when the price is fixed by the 3rd person designated that the determination thereof be left to the
judgment of a special person or persons.
a. General Rule: It is binding upon the parties
b. Exceptions: Should such person or persons be unable or
unwilling to fix it, the contract shall be
i. when the 3rd person acts in bad faith or by inefficacious, unless the parties subsequently
agree upon the price.
mistake; in which case the courts may fix
the price If the third person or persons acted in bad faith
or by mistake, the courts may fix the price.
ii. when the third person disregards the
specific instructions or the procedure Where such third person or persons are
prevented from fixing the price or terms by
marked out by the parties fault of the seller or the buyer, the party not in
2. Effect when the price is not fixed by the 3rd person fault may have such remedies against the party
in fault as are allowed the seller or the buyer, as
a. if the 3rd person refuses or cannot fix the price, the the case may be
contract shall become ineffective, unless the parties
subsequently agree upon the price
b. if the 3rd person is prevented from fixing the price
by the fault of the seller or buyer, the party not in
fault may obtain redress against the party in fault
(rescission or fulfillment of damages in either case)
iv. pegged at the price which the thing sold would have on definite
day, or a particular exchange or market, or a certain amount
above or below such price [1472]

NOTE: If the price cannot be determined, the sale is inefficacious; but if

the thing or part thereof has been delivered to and appropriated by the
buyer, he must pay a reasonable price therefore [1474]

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b. In money or its equivalent [1458]

NOTE:

i. The Government argues that “Price is always paid in terms of

money and the supposed payment being in kind, is no payment at
all,” citing article 1458 of the new Civil Code. However, the same
article provides that the purchaser may pay “a price certain in
money or its equivalent,” which means that payment of the price
need not be in money. [Republic v Phil Resources]
ii. According to Prof. Jardaleza, Republic v Phil Resources is a wrong
interpretation of 1458 NCC
.
c. Real and not simulated
i. The price is real when there is an intention on the part of the
buyer to pay and an expectation on the part of the seller to receive
it
ii. If the price is simulated, the sale is void; but it may be shown that
it was really a donation [1471]
d. True
i. The price is false when the real consideration is not the same as
that stated in the contract [Mapalo v Mapalo]
ii. If the price is false, the sale is void unless proved to be founded on
another true and lawful price [1353]

NOTE: Gross inadequacy of price does not affect a contract of sale, except that:
1. it may indicate a defect in the consent such as fraud,
mistake or undue influence [1470 & 1355]
2. it may indicate that the parties intended a donation [1470]
3. the sale is rescissible if:
Comment [vsf11]: 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

a. the sale is entered into by the guardian or by a
representative of an absentee
b. the ward of absentee represented suffers lesion by
more than ¼ of the value of the thing sold, and
c. the sale is not approved by the court [1381 (1&2) &
1386]
4. In an ordinary sale, a transaction may be invalidated on
the ground of inadequacy of price; BUT such does not
follow when the law gives the owner the right to redeem
as when a sale is made at public auction, upon the theory
that the lesser the price, the easier it is for the owner to
effect redemption. [Hulst v. PR Builders, Inc.]
Comment [vsf12]: Except in cases specified
by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence
Comment [vsf13]: The following contracts
are rescissible:
(1) Those which are entered into by guardians
whenever the wards whom they represent
suffer lesion by more than one-fourth of the
value of the things which are the object thereof;
(2) Those agreed upon in representation of
absentees, if the latter suffer the lesion stated in
the preceding number;
Comment [vsf14]: Rescission referred to in
Nos. 1 and 2 of Article 1381 shall not take place
with respect to contracts approved by the courts

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FORMATION OF CONTRACT OF SALE

I. Preparatory
a. Option to buy or sell [accepted unilateral promise to buy or sell]
i. It is a contract granting a privilege in one person, for which he has
paid a consideration , which gives him the right o buy certain
merchandise at anytime within the agreed period at a fixed price.
ii. Rules re: consideration of option contracts [Sanchez v Rigos; 1324 Comment [vsf15]: When the offerer has
allowed the offeree a certain period to accept,
& 1479(2)] the offer may be withdrawn at any time before
1. if the option is supported by consideration distinct from acceptance by communicating such withdrawal,
except when the option is founded upon a
the price, it is both a binding option contract and an offer consideration, as something paid or promised.
of a contract of sale Comment [vsf16]: An accepted unilateral
2. if the option is not supported by consideration distinct promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if
from the price, it is not binding , but is a mere offer of a the promise is supported by a consideration
distinct from the price.
contract of sale
NOTE: if, however, the offer is accepted [i.e. option is
exercised] before withdrawal, a contract of sale is perfected
iii. Remedies in case of breach

Withdrawal of offer Withdrawal of offer

before acceptance after acceptance
Option with Damages for breach Specific performance
distinct of option contract of contract of sale
consideration
Option without ONLY IF there is an Specific performance
distinct abuse of right under of contract of sale
consideration Art. 19, CC (no
damages for breach of
option contract)

b. Right of first refusal

i. It is a right of first priority all things and conditions being equal;
identity of the terms and conditions offered to the optionee and
other prospective buyers, with optionee to enjoy the right of first
refusal
ii. The basis of the right of first refusal must be the current offer to
sell of the seller or offer to purchase by the buyer. Only after the
optionee fails to exercise its right of first priority under the same
terms and within the period contemplated could the owner
validly offer to sell the property to a third person again, under the
same terms as offered to the optionee [Paranaque Kings v CA]

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iii. Remedies in case of breach

i. Prevailing doctrine—A sale made in violation of a right of first
refusal is valid but rescissible under Art 1381(3),CC, and may be
the subject of an action for specific performance. However, before
the sale to the 3rd person could be rescinded, the 3rd person must
be, actually or constructively aware at the time he bought it, of the
right of first refusal. Rosencor Devt Corp v Inquing]
ii. Ang Yu v CA—Specific performance cannot lie because it is not
yet a perfected contract under 1458 CC. Neither can the right of
first refusal, understood in its normal concept, per se be brought
within the purview of an option under 1479 (2) or possibly an
offer under 1319. An option would require, among other things, a
clear certainty on both the object and the cause or consideration of
the envisioned contract. In a right of first refusal, while the object
might be made determinate , the exercise of the right would be
dependent not only on the grantor’s eventual intention to enter
into a binding juridical relation with another but also on terms,
including the price, that obviously are yet to be firmed up.

c. Bilateral promise to buy and sell [1479 (1)]

i. one party accepts the other’s promise to buy and the latter, the
former’s promise to sell a determinate thing for a certain price.
ii. it is reciprocally demandable
i. the promise to buy is the consideration for the promise to sell and
vice versa
ii. no title of dominion is transferred as yet, the parties being given
only the right to demand fulfillment or damages.

II. Perfection
a. The contract of sale is a consensual contract
i. General Rule: it is perfected at the moment there is a meeting of the
minds upon the thing, which is the object of the contract and the
upon the price [1475]

NOTE: A definite agreement on the manner of payment of the

price is also an essential element in the perfection of the sale. 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 [Toyota Shaw v CA]

ii. Exception: When the sale is subject to a suspensive condition by

virtue of law or stipulation

b. Rule re: perfection

i. When parties are face to face [1319]—meeting of the offer and the
acceptance upon the thing and the cause; offer must be certain and
acceptance absolute

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NOTE: A qualified acceptance is a counter-offer

ii. When the contract is thru correspondence or thru telegram [1319]

—when the offeror receives or has knowledge of the acceptance
by the offerree

NOTE:
1. If the buyer has already accepted but the seller does not
know yet of such, the seller may still withdraw
2. If the sale is negotiated thru phone, it is as if it is
negotiated face to face
iii. Auction sales [1476]
1. Sales of separate lots by auction are separate contracts of
sale
2. Sale is perfected by the fall of the hammer
3. Seller has the right to bid in the auction, provided:
a. Such right was reserved
b. Notice was given that the sale was subject to a right
to bid on behalf of the seller
c. Right is not prohibited by law

iv. Advertisements
1. Unless it appears otherwise, business advertisements of
things for sale are not definite offers, but mere invitations
to make an offer [1325]
2. Advertisements for bidders are simply invitations to make
proposals, and the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary appears
[1326]

NOTE: Earnest Money

1. part of the purchase price
2. proof of perfection of the contract [1482]
3. Earnest Money v Option Money

Earnest Money Option Money

1. Title passes to the
buyer upon delivery of
the thing sold
2. Part of the purchase
price
3. When given, buyer
bound to pay balance
4. There is already a sale
1. Ownership is reserved to
the seller and is not to
pass until full payment
2. Money given as
consideration for option
3. The would-be buyer is
not required to buy
4. Applies to a sale not yet
perfected

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CAPACITY OF THE PARTIES
I. General Rule [1489]
a. only persons who can validly consent may enter into contracts of sale
b. hence, the ff cannot validly enter into contracts of sale: minors, demented,
imbeciles, deaf & dumb, prodigal,civil interdictees
NOTE:
a. where necessaries are sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price therefor
b. necessaries are those which are indispensable for his support, according
to the social position of the family
II. Exceptions
a. husband & wife
i. they cannot sell to each other [1490]
NOTE:
1. exceptions
a. when a separation of property was agreed upon in
the marriage settlement
b. when there has been a judicial separation of
property
2. rule also applies to common law spouses
3. prohibition can only be taken advantage by persons who
bear a relationship to the spouses or to the property that
such transfer interferes with their rights
4. the government is always an interested party to all matters
involving taxable transactions
ii. alienation or encumbrance of community or conjugal property [96,
124 FC]
1. authority of the court or written consent of the other
spouse is required; otherwise the sale is void
2. the transaction, however, shall be construed as a
continuing offer on the part of the consenting spouse and
the 3rd person, and may be perfected as a binding a
contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by
either or both offerors
b. 1491: the following persons cannot acquire by purchase, even at a public
or judicial auction, either in person or thru the mediation of another:
i. guardian with respect to the property of his ward
13 | C A P A C I T Y O F T H E P A R T I E S
Comment [vsf17]: All persons who are
authorized in this Code to obligate themselves,
may enter into a contract of sale, saving the
modifications contained in the following
articles.
Where necessaries are those sold and delivered
to a minor or other person without capacity to
act, he must pay a reasonable price therefor.
Necessaries are those referred to in Article 290
Comment [vsf18]: The administration and
enjoyment of the community property shall
belong to both spouses jointly. In case of
disagreement, the husband's decision shall
prevail, subject to recourse to the court by the
wife for proper remedy, which must be availed
of within five years from the date of the contract
implementing such decision.
In the event that one spouse is incapacitated or
otherwise unable to participate in the
administration of the common properties, the
other spouse may assume sole powers of
administration. These powers do not include
disposition or encumbrance without authority
of the court or the written consent of the other
spouse. In the absence of such authority or
consent, the disposition or encumbrance shall
be void. However, the transaction shall be
construed as a continuing offer on the part of
the consenting spouse and the third person, and
may be perfected as a binding contract upon the
acceptance by the other spouse or authorization
by the court before the offer is withdrawn by
either or both offerors.
 SALES REVIEWER

ii. executors or administrators, with respect to the property of the

estate under administration

NOTE: executors do not administer the hereditary rights of the

heirs of the estate under their administration

iii. agent, with respect to the property whose administration or sale

may have been entrusted to them, unless the consent of the
principal has been given

NOTE: a broker does not come within the prohibition because a

broker is a mere go-between

iv. public officers and employees with respect to the property of the
government, its political subdivisions, GOCCs, that are entrusted
to them
v. judges, justice, prosecuting attorneys, clerks of court, and other
officers connected with the administration of justice, with respect
to property or rights in litigation or execution before the court
within whose jurisdiction or territory they exercise their
respective functions

NOTE: this prohibition includes the act of acquiring by

assignment and shall apply to lawyers, with respect to property
and rights which may be the object of any litigation in which they
may take part by virtue of their profession

NOTE:
i. rule when property is purchased thru intermediary
1. actual collusion need not be proved when such can be
deduced from the very short time between the two sales
and the relationship between them [PhilTrust v Roldan]
2. however, where the interval between the 2 sales is
sufficiently long as to dispel a natural suspicion, it is
essential to prove actual collusion
ii. contracts of sale in violation of 1491 are void for being against
public policy
c. persons specially disqualified by law
i. aliens who are disqualified to purchase agricultural lands

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ii. an unpaid seller having a right of lien or having stopped the

goods in transit, who is prohibited from buying the goods directly
or indirectly

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FORMALITIES OF THE CONTRACT

I. General Rule
a. the contract of sale is a consensual contract; no form is required for its
validity
b. it can be [1483]:
i. in writing
ii. by word of mouth
iii. partly in writing and partly by word of mouth
iv. inferred from the conduct of the parties
II. Exceptions
a. statute of frauds—the ff must be in writing to be enforceable[1403(2)]
i. sale of real property or of an interest therein
ii. sale of personal property at a price not less than 500
iii. sale of property not to be performed within a year from the date
thereof

NOTE:
i. a sufficient memorandum containing all the essential terms of the
contract will take the contract out of the scope of the statute of
frauds
ii. the statute of frauds applies only to executor contracts, not to
contracts either totally or partially performed
iii. failure to object to the presentation of oral evidence to prove the
agreement or acceptance of benefits under the agreement shall
render the agreement enforceable
iv. the statute of frauds does not apply where the verbal contract of
sale is adduced not for the purpose of enforcing the performance
thereof [Almirol v Monserrat]

b. sale of real property or any interest therein

i. it must appear in a public instrument [1358]
ii. this requirement is only for convenience and not for validity or
enforceability; it is not a requirement for validity [Dalion v CA]
iii. while a sale of a piece of land appearing in a private document is
binding between the parties, it cannot be considered binding on
3rd persons, if it Is not embodied in a public instrument and
recorded in the Registry of Property [Secuya v Vda de Selma]
c. sale of realty by an agent—the authority of the agent must be in writing;
otherwise the sale shall be void [1874]
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d. sale under the E-Commerce Act

i. electronic documents shall have the legal effect, validity,
enforceability as any other document or legal writing
ii. provided the e-document:
1. maintains its integrity and reliability
2. capable of being displayed to the person whom it is
presented
3. contains the electronic signature of the person sending it

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TRANSFER OF OWNERSHIP
I. In general
a. ownership of the thing sold is transferred to the vendee upon actual or
constructive delivery thereof [1477], or in any manner signifying Comment [vsf19]: The ownership of the
thing sold shall be transferred to the vendee
agreement that possession is transferred from the vendor to the vendee upon the actual or constructive delivery thereof.
[1496] Comment [vsf20]: The ownership of the
b. a sale without delivery gives the purchaser no rights in said property, thing sold is acquired by the vendee from the
moment it is delivered to him in any of the
except those of the creditor ways specified in Articles 1497 to 1501, or in
any other manner signifying an agreement that
the possession is transferred from the vendor to
II. Exceptions to general rule that ownership is transferred upon delivery the vendee.
a. no valid sale
b. express reservation of ownership [1503(1), 1478]
i. The parties may stipulate that ownership in the thing shall not
pass to the purchaser until he has fully paid the price. [1478]
ii. 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. [1503(1)]
c. sale on approval, trial, or satisfaction [1502(2)]—ownership is transferred
only:
i. when he signifies his approval or acceptance to the seller or does
any other act adopting the transaction
ii. if he does not signify his approval or acceptance to the seller, but
retains the goods without giving notice of rejection, then if a time
has been fixed for the return of the goods, on the expiration of
such time, and, if no time has been fixed, on the expiration of a
reasonable time.
d. implied in the form of the bill of lading [1503]
i. under the bill of lading, goods are deliverable to the seller or his
agent or to the order of the seller or his agent
ii. under the bill of lading , goods are deliverable to the order of the
buyer or his agent, but the seller reserves possession of the bill
iii. buyer does not honor the bill of exchange
e. seller is not the owner —the buyer acquires no better title to the goods
than the seller had

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NOTE:
a. Exceptions to rule that buyer acquires no better title to the goods than the
seller had
i. the owner is precluded by his conduct from denying the seller’s
authority to sell
ii. apparent owner, even if not true owner, enabled by any factors’
act, recording laws, or any other provision of law
iii. contract of sale under statutory power of sale or under the order
of a competent court of competent jurisdiction

NOTE: It does not follow, however, that if the goods sold did not
belong to the judgment debtor or pledgor or mortgagor, as the
case may be, that the innocent purchaser at such sale acquired a
better title, foe he steps merely into the shows of the judgment
debtor, pledgor or mortgagor [Banzon v Cruz]

iv. purchases made in a merchant’s store, or in markets, in

accordance with the Code of Commerce and special laws

b. cf. vendor‘s title merely voidable

i. if title has not been avoided at the time of the sale, vendor can
transfer a valid title to an innocent purchaser for value [1506]
ii. nevertheless, one who has lost any movable or has been unlawfully
deprived thereof may recover it from the person in possession of
the same; provided he reimburse the purchaser of the price paid
thereof if the latter purchased it in good faith at a public sale. [559]

III. Kinds of delivery

a. actual or real delivery—the thing shall be understood as delivered when
it is placed in the control and possession of the vendee [1497]
b. legal or constructive delivery—delivery is represented by signs or acts
indicative thereof
i. delivery by public instrument— execution of the public
instrument is equivalent to the delivery of the thing, if from the
deed, the contrary does not appear or cannot be clearly inferred
[1498]

NOTE: gives only to a prima facie presumption of delivery

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1. presumption may be rebutted by clear and convincing
evidence
2. legal fiction yields to reality in case notwithstanding the
execution of the instrument the purchaser cannot have the
enjoyment and material possession of the thing
ii. delivery of keys—with regard to movable property, its delivery
may be made by the delivery of the keys of the place or depository
where it is stored or kept [1498]
iii. traditio longa manu
iv. tradition brevi manu—vendee already had the thing in possession
before the sale took place
v. tradition consitutum possessorium [1500]—vendor remains in
possession of the property sold
c. delivery to carrier
i. General Rule: when the seller is authorized or required to send the
goods to the buyer, delivery to the carrier is delivery of the buyer
[1523]
ii. Exceptions
1. contrary intent appears [1523]
2. seller expressly reserves ownership [1503]
3. under the bill of lading, goods are deliverable to the seller
or his agent or to the order of the seller or his agent[1503]
4. under the bill of lading , goods are deliverable to the order
of the buyer or his agent, but the seller reserves possession
of the bill [1503]
5. buyer does not honor the bill of exchange [1503]
NOTE:
i. Kinds of delivery to carrier
1. C.I.F— signifies that the price fixed covers not only the
cost of the goods, but the expense of the freight and the
insurance to be paid by the seller
2. F.O.B. — goods are to be delivered free of expense to the
buyer to the point where they are F.O.B. The point of
F.O.B. determines when the ownership passes
NOTE: The terms C.I.F. and F.O.B merely makes rule sof
presumption
20 |T R A N S F E R O F O W N E R S H I P
Comment [vsf21]: here, 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
case provided for in Article 1503, first, second
and third paragraphs, or unless a contrary
intent appears.
Unless otherwise authorized by the buyer, the
seller must make such contract with the carrier
on behalf of the buyer as may be reasonable,
having regard to the nature of the goods and
the other circumstances of the case. If the seller
omit so to do, and the goods are lost or
damaged in course of transit, the buyer may
decline to treat the delivery to the carrier as a
delivery to himself, or may hold the seller
responsible in damages.
Unless otherwise agreed, where goods are sent
by the seller to the buyer under circumstances
in which the seller knows or ought to know that
it is usual to insure, the seller must give such
notice to the buyer as may enable him to insure
them during their transit, and, if the seller fails
to do so, the goods shall be deemed to be at his
risk during such transit.
Comment [vsf22]: 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 notwithstanding the delivery of the
goods to the buyer or to a carrier or other bailee
for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of
lading the goods are deliverable to the seller or
his agent, or to the order of the seller or of his
agent, the seller thereby reserves the ownership
in the goods. But, if except for the form of the
bill of lading, the ownership would have passed
to the buyer on shipment of the goods, the
seller's property in the goods shall be deemed to
be only for the purpose of securing performance
by the buyer of his obligations under the
contract.
Where goods are shipped, and by the bill of
lading the goods are deliverable to 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 and transmits the bill of exchange
... [1]
 SALES REVIEWER

3. C.O.D. —the carrier acts for the seller in collecting the

purchase price, which the buyer must pay to obtain
possession of the goods

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DOUBLE SALE
I. Requisites [Cheng v Genato]
a. 2 or more sales in issue must pertain to exactly the same subject matter,
and must be valid sale transactions
b. 2 or more buyers at odds over the rightful ownership of the subject
matter must each represent conflicting interests
c. Buyers must each have bought from the same owner

II. Rules of Preference [1544]

a. Personal property —first possessor in good faith
b. Real property
i. first registrant in good faith
ii. first possessor in good faith
iii. person with the oldest title

NOTE:
a. 1544 is not applicable to execution sales because the purchaser of such
sales is substituted to or acquires only whatever rights, titles or interests
the judgment debtor may have over the property, as of the time of the
levy
b. Possession may either be actual or constructive
c. When the object of the sale is unregistered land, rule is that registration is
without prejudice to a third party with a better right.

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RISK OF LOSS
I. Loss occurs at the time of perfection of contract [1493]
a. if entire thing is lost—contract shall be without effect
b. if only lost in part—
i. vendee may withdraw from the contract
ii. vendee may demand the remaining part and pay its price in
proportion to the total sum agreed upon
II. Loss occurs after perfection [1504]
a. General Rule—
i. goods remain at the seller's risk until the ownership therein is
transferred to the buyer
ii. when the ownership therein is transferred to the buyer the goods
are at the buyer's risk whether actual delivery has been made or
not
b. Exceptions
i. when otherwise agreed upon
ii. where delivery of the goods has been made but the ownership in
the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract,
the goods are at the buyer's risk from the time of such delivery
iii. where actual delivery has been delayed through the fault of either
the buyer or seller the goods are at the risk of the party in fault.
c. Other rules to be followed [1189]
i. If the thing is lost without the fault of the seller, the obligation
shall be extinguished;
ii. If the thing is lost through the fault of the seller, he shall be
obliged to pay damages; it is understood that 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;
iii. When the thing deteriorates without the fault of the seller, the
impairment is to be borne by the creditor;
iv. If it deteriorates through the fault of the seller, the buyer may
choose between the rescission of the obligation and its fulfillment,
with indemnity for damages in either case;
v. If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the buyer;
vi. If it is improved at the expense of the seller, he shall have no other
right than that granted to the usufructuary.

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 SALES REVIEWER

DOCUMENTS OF TITLE
I. Negotiable documents of title
a. Definition. Document authorizing or purporting to authorize the
possessor of the document to transfer or receive goods represented by
such document [1636(1)]

b. Purpose. Through a document of title, seller is allowed by fiction of law to

deal with the goods described therein as though he had physically
delivered them to the buyer; and buyer may take the document of title as
though he had actually taken possession and control over the goods
described therein. The endorsement and delivery of a negotiable quedan
operates as the transfer of possession and ownership of the property
referred to therein, and had the effect of divorcing the property covered
therein from the estate of the insolvent prior to the filing of the petition
for insolvency [Philippine Trust Co. v. National Bank]

c. How negotiable document of title is negotiated

i. by mere delivery [1508]
1. if deliverable to the bearer [bearer bill]
2. if deliverable to the order of a certain person and that
person has indorsed it in blank or indorsed it to the bearer
ii. by indorsement and delivery (order bill) [1509]

d. Who may negotiate negotiable document of title [1512]

i. owner thereof
ii. any person to whom the possession or custody of the document
has been entrusted by the owner if:
1. by the terms of the document the bailee issuing the
document undertakes to deliver the goods to the order of
the person to whom the possession or custody of the
document has been entrusted; or
2. at the time of such entrusting the document is in such form
that it may be negotiated by delivery

e. Unauthorized negotiation
i. The validity of the negotiation of a negotiable document of title is
not impaired by the fact that the negotiation was a breach of duty
on the part of the person making the negotiation, or by the fact
that that the owner of the document was deprived of the
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 SALES REVIEWER

possession of the same by loss, theft, fraud, accident, mistake,

duress, or conversion, if the person to whom the document was
negotiated or a person to whom the document was subsequently
negotiated paid value therefor in good faith without notice of the
breach of duty, or loss, theft, fraud, accident, mistake, duress or
conversion [1518]
ii. If the owner of a negotiable document of title deliverable to the
bearer entrusts the document to a friend for deposit, but the
friends 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.
[Sy Cong Bien v HSBC]
II. Non-negotiable documents of title [1514]

1514: A person to whom a document of title has been transferred, but not
negotiated, acquires thereby, as against the transferor, the title to the goods,
subject to the terms of any agreement with the transferor.

If the document is non-negotiable, such person also acquires the right to notify
the bailee who issued the document of the transfer thereof, and thereby to
acquire the direct obligation of such bailee to hold possession of the goods for
him according to the terms of the document.

Prior to the notification to such bailee by the transferor or transferee of a non-

negotiable document of title, the title of the transferee to the goods and the right
to acquire the obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the transferor, or by a
notification to such bailee by the transferor or a subsequent purchaser from the
transfer of a subsequent sale of the goods by the transferor.

III. Implied warranties of indorser or transferor (unless a contrary intention appears)

[1516]
a. genuineness of document
b. legal right to negotiate or transfer
c. no knowledge of fact which would impair the validity or worth of the
document
d. right to transfer the title to the goods and merchantability or fitness for a
particular purpose, whenever such warranties would have been implied
had the contract been transfer the goods without a document
IV. Garnishment of goods
a. If the document is negotiable [1519]

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i. generally no attachment or levy, except

1. if the document is surrendered to the bailee
2. or the negotiation of the document is enjoined
ii. the bailee 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

b. If the document is non-negotiable, prior to the notification to the bailee by

the transferor or transferee of a non-negotiable document of title, the title
of the transferee to the goods and the right to acquire the obligation of
such bailee may be defeated by the levy of an attachment of execution
upon the goods by a creditor of the transferor, or by a notification to such
bailee by the transferor or a subsequent purchaser from the transfer of a
subsequent sale of the goods by the transferor. [1514]

c. A creditor whose debtor is the owner of a negotiable document of title

shall be entitled to such aid from courts of appropriate jurisdiction by
injunction and otherwise in attaching such document or in satisfying the
claim by means thereof as is allowed at law or in equity in regard to
property which cannot readily be attached or levied upon by ordinary
legal process [1520]

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REMEDIES OF UNPAID SELLER

I. Who is an unpaid seller
a. whole of the price of his goods has not been paid or tendered; or
b. bill of exchange or other negotiable instrument has been received as
conditional payment of his goods, and the condition on which it was
received has been broken by reason of
i. dishonor
ii. insolvency of the buyer
iii. or otherwise
c. he is either
i. the seller
ii. agent of the seller to whom the bill of lading has been
indorsed
iii. consignee or agent who has himself paid or is directly
responsible for the price
iv. any other person in the position of the seller

II. Possessory lien. an unpaid seller has a lien on the goods or right to retain them for
the price while he is in possession of them [1526 (1)]
a. When unpaid seller who is possession of the goods entitled to retain Comment [vsf23]: Seller may exercise his
right of lien notwithstanding that he is in
them until he has been paid [1527] possession of the goods or bailee of the buyer
i. goods have been sold without any stipulation as to credit [1527]

ii. goods have been sold on credit but the term of credit has
expired
iii. buyer becomes insolvent
b. Rule in case of partial delivery. When partial delivery has been made,
the unpaid seller may exercise his right of lien on the remainder,
unless such partial delivery has been made under circumstances as to
show intent to waive the lien or right of retention [1528]
c. Loss of right of lien [1529]
i. when he delivers to the goods to a carrier or other bailee for
the purpose of transmission to the buyer without reserving the
ownership in the goods or the right of possession thereof.
ii. when the buyer or his agent lawfully obtains possession f the
goods
iii. when he waives such right
iv. exception: when he has obtained judgment or decree for the
price of goods

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III. Stoppage of goods. an unpaid seller has the right to stop goods in transit after he
has parted with the possession of them, in case of the insolvency of the buyer
[1526 (1)]
a. When are goods in transit [1531]
i. When are goods in transit
1. from the time when they are delivered to a carrier by
land, water, or air, or other bailee for the purpose of
transmission to the buyer, until the buyer, or his agent
in that behalf, takes delivery of them from such carrier
or other bailee;
2. if the goods are rejected by the buyer, and the carrier or
other bailee continues in possession of them, even if
the seller has refused to receive them back
ii. When are goods no longer in transit
1. if the buyer, or his agent in that behalf, obtains delivery
of the goods before their arrival at the appointed
destination;
2. if, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledges to
the buyer or his agent that he holds the goods on his
behalf and continues in possession of them as bailee for
the buyer or his agent; and it is immaterial that further
destination for the goods may have been indicated by
the buyer;
3. if the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that
behalf.
iii. Delivery to ship, freight train, truck or plane chartered by the buyer.
is a question depending on the circumstances of the particular
case, whether they are in the possession of the carrier as such
or as agent of the buyer [1531]
iv. Rule in case of partial delivery. If part delivery of the goods has
been made to the buyer, or his agent in that behalf, the
remainder of the goods may be stopped in transitu, unless
such part delivery has been under such circumstances as to
show an agreement with the buyer to give up possession of
the whole of the goods.
b. Exercise of right of stoppage [1532]
i. How right is exercised
1. obtaining actual possession
2. giving notice of the claim
ii. To whom notice is given
1. to the person in actual possession if the goods
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2. or to his principal Comment [vsf24]: To be effectual, notice

must be given at such time and under such
iii. Effect of the exercise of the right circumstances that the principal, by the exercise
1. carrier must redeliver the goods to, or according to the of reasonable diligence, may prevent delivery.

directions of the seller

2. expenses of such deliver must be borne by the seller
3. exception: if a negotiable document of title has been
issued by the carrier or other bailee, he shall not be
obliged to deliver or justified in delivering the goods to
the seller unless such document is first surrendered for
cancellation
IV. Resale. an unpaid seller has the right of resale [1526 (3); 1533]
a. When the right of resale exists Comment [vsf25]: Unpaid seller should have
a right of lien; or he should have stopped the
i. perishable goods. goods are of perishable nature goods in transit for him to be able to resell the
ii. express stipulation. seller expressly reserves the right of resale goods.

in case the buyer should make default

iii. unreasonable default. buyer has been in default in the payment
of the price for an unreasonable time
b. Liability of seller/buyer in case of resale
i. seller shall not be liable to the original buyer upon the contract
of sale or for any profit made by such resale
ii. seller may recover from the buyer damages for ay loss
occasioned by the breach of the contract of sale
c. New buyer acquires a good title as against the original buyer
d. Notice requirement
i. it is not essential to the validity of the resale that notice of
intention to resell the goods be given by the seller to the
original buyer
ii. the giving or failure to give such notice shall be relevant in any
issue involving the question whether the buyer had been
default for an unreasonable time before the sale was made
e. How sale should be made
i. seller is bound to exercise reasonable care and judgment in
making the resale
ii. resale may either be by public or private sale
iii. seller cannot directly or indirectly buy the goods
V. Rescind. an unpaid seller has the right to rescind the transfer of title and to
resume the ownership in the goods. [1526(1); 1534]
a. When the right to rescind exists Comment [vsf26]: Unpaid seller should have
a right of lien; or he should have stopped the
i. express reservation. where the seller expressly reserved the right goods in transit for him to be able to able to
to do so in case the buyer should make default rescind the contract

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ii. unreasonable default. where the buyer has been in default in the
payment of the price for an unreasonable time
b. Liability of buyer/seller
i. seller shall not be liable to the buyer upon the contract of sale
ii. seller may recover from the buyer damages for any loss
occasioned by the breach of the contract
c. What should be done in order to rescind the transfer of title
i. notice to the buyer; or
ii. any overt act showing an intention to rescind. Comment [vsf27]: It is not necessary that the
overt act be communicated to the buyer; but the
VI. Effect if buyer has already sold the goods [1535] the giving or failure to give such notice shall be
a. Generally, the unpaid seller’s right of lien or stoppage in transitu relevant in any issue involving the question
whether the buyer had been default for an
remains even if the buyer has sold or otherwise disposed of the goods unreasonable time before the right of rescission
b. Exceptions was asserted

i. when the seller has given his consent thereto

ii. when the purchaser or the buyer is a purchaser for value in
good faith of a negotiable document of title

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DELIVERY OF THING SOLD
I. Place, time and manner of delivery [1521]
a. Place of delivery
i. Whether it is for the buyer to take possession of the goods or for
the seller to send them depends on the contract between the
parties.
ii. as a general rule, the buyer must get the goods at the seller’s
business place or residence, except in the ff cases
1. there is an agreement to the contrary (express or implied)
2. usage of the trade states dictates otherwise
3. sale of specific goods which parties knew to be in some
other place at the time of sale that place is the place of
delivery
b. Time of delivery
i. Where the seller is bound to send the goods but no time for
sending is fixed, he must send them w/in a reasonable time [1521]
ii. The vendor shall not be bound to deliver the thing sold, if the
vendee has not paid him the price, or if no period for the payment
has been fixed in the contract [1524]
c. Manner of delivery when goods are in the hands of a 3rd person.
i. Where the goods at the time of sale are in the possession of a third
person, the seller has not fulfilled his obligation to deliver to the
buyer unless and until such third person acknowledges to the
buyer that he holds the goods on the buyer's behalf. [1521]
ii. Expenses for the delivery are to be shouldered by the seller unless
otherwise agreed upon [1521]
iii. When demand of delivery must be made. In the absence of
agreement, demand must be made at a reasonable hour [1521]
iv. When parties incur in delay [1169]
1169: Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in
order that delay may exist:
1. When the obligation or the law expressly so declare; or
2. When from the nature and the circumstances of the
obligation it appears that the designation of the time when
the thing is to be delivered or the service is to be rendered
31 |D E L I V E R Y O F T H E T H I N G S O L D
Comment [vsf28]: 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,
between the parties. Apart from any such
contract, express or implied, or usage of trade to
the contrary, the place of delivery is the seller's
place of business if he has one, and if not his
residence; but in case of a contract of sale of
specific goods, which to the knowledge of the
parties when the contract or the sale was made
were in some other place, then that place is the
place of delivery.
Where by a contract of sale the seller is bound
to send the goods to the buyer, but no time for
sending them is fixed, the seller is bound to
send them within a reasonable time.
Where the goods at the time of sale are in the
possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyer
unless and until such third person
acknowledges to the buyer that he holds the
goods on the buyer's behalf.
Demand or tender of delivery may be treated as
ineffectual unless made at a reasonable hour.
What is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and
incidental to putting the goods into a
deliverable state must be borne by the seller
Comment [vsf29]: Smith Bell & Co.,
Ltd. V. Matti, 1922: What constitutes a
reasonable time is determined by the
circumstances of the particular transaction, such
as: the character of the goods,
- the purpose for which they are
intended,
- the ability of the seller to produce
the goods if they are manufactured,
- the facilities available for
transportation and the distance the
goods must be carried, and
- the usual course of business in the
particular trade
 SALES REVIEWER

was a controlling motive for the establishment of the

contract; or
3. When demand would be useless, as when the obligor has
rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other

does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.

II. Effects of delivery

a. ownership of the thing sold is transferred to the vendee upon actual or
constructive delivery thereof [1477], or in any manner signifying
agreement that possession is transferred from the vendor to the vendee
[1496]
b. in the ff instances, ownership is not transferred despite delivery
i. when the sale is not valid
ii. express reservation [1503(1),1478]
iii. sale on approval [1502]
iv. implied in the bill of lading[1503]
v. seller not the owner [1505]

c. when seller not bound to deliver

i. vendee has not paid him the price or if not period for payment has
been fixed in the contract [1524]
ii. in case the vendee shall lose to make use of the term as provided
in 1198 [1536]
iii. under 1198, the debtor shall lose every right to make use of the
period
1. When after the obligation has been contracted, he becomes
insolvent, unless he gives a guaranty or security for the
debt;
2. When he does not furnish to the creditor the guaranties or
securities which he has promised;
3. When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory;
4. When the debtor violates any undertaking, in
consideration of which the creditor agreed to the period;
III. Sale of movables [1522]
a. rules when the quantity delivered is less than that agreed upon
i. buyer may reject
ii. or buyer may accept what has been delivered, at the contract rate
b. rules when quantity is more than the agreement
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i. buyer may reject all; he must not be burdened with the duty of
segregation, if he does not so desire
ii. buyer may accept the goods agreed upon and reject the rest
iii. if he gets all, he must pay for them at the contract rate
c. delivery by installments [1583]
1583: Unless otherwise agreed, the buyer of goods is not bound to
accept delivery thereof by installments.

Where there is a contract of sale of goods to be delivered by stated

installments, which are to be separately paid for, and the seller
makes defective deliveries in respect of one or more installments,
or the buyer neglects or refuses without just cause to take delivery
of or pay for one more installments, it depends in each case on the
terms of the contract and the circumstances of the case, whether
the breach of contract is so material as to justify the injured party
in refusing to proceed further and suing for damages for breach of
the entire contract, or whether the breach is severable, giving rise
to a claim for compensation but not to a right to treat the whole
contract as broken.

IV. Sale of immovables

a. if sale is made with a statement of its area, at the rate of a certain price for
a unit
i. vendor shall be obliged to deliver to the vendee, if the latter
should demand it, all that may have been stated in the contract
[1539]
ii. should this not be possible or should any part of the immovable
be not of the quality specified in the contract, the vendee may Comment [vsf30]: in the case of lack in the
choose between [1539] area, rescission shall only take place if the lack
1. a proportional reduction of the price and is not less than one tenth of that stated; in case
of misrepresentation as to quality, rescission
2. the rescission of the contract shall only take place at the will of the vendee
iii. should there be a greater area or number in the immovable than and when the inferior value of the thing sold
that stated in the contract [1540] exceeds one tenth of the price agree d upon.

a. vendee may accept the area included in the
contract and reject the rest
b. he may accept the whole area, but he must pay for
the same at the contract rate
iv. 1539 and 1540 apply to judicial sales
b. If sale is made for a lump [1541]
i. there shall be no increase or decrease of the price, although there
greater or less area or number than that stated in the contract
ii. same rule applies when 2 or more immovable are sold for a
single price
33 |D E L I V E R Y O F T H E T H I N G S O L D
Nevertheless, if the vendee would not have
bought the immovable had he known of its
smaller area or inferior quality, he may rescind
the sale.
Comment [vsf31]: but if, besides mentioning
the boundaries, which is indispensable in every
conveyance of real estate, its area or number
should be designated in the contract, the vendor
shall be bound to deliver all that is included
within said boundaries, even when it exceeds
the area or number specified in the contract;
and, should he not be able to do so, he shall
suffer a reduction in the price, in proportion to
what is lacking in the area or number, unless
the contract is rescinded because the vendee
does not accede to the failure to deliver what
has been stipulated.
 SALES REVIEWER

V. Inspection and Acceptance

a. Right to inspect
i. unless otherwise agreed, the seller is bound, on request of the
buyer, to afford the buyer a reasonable opportunity of examining
the goods for the purpose of ascertaining whether they are in
conformity with the contract [1584(2)]
ii. no right to inspect when the sale is on COD in the absence of an
agreement or usage of trade to the contrary [1583(3)]
b. Manifestation of acceptance— the buyer is deemed to have accepted the
goods when [1585]:
i. he intimates to the seller that he has accepted them; or
ii. when the goods have been delivered to him and he does any act in
relation to them which is inconsistent with the ownership of the
seller; or
iii. when, after the lapse of time, he retains the goods without
intimating to the seller that he has rejected them
c. Refusal to accept—Unless otherwise agreed, where the goods are
delivered to the buyer and he has a right to refuse to accept them, he need
not return them. It is sufficient that he notifies the seller that he refuses to
accept them, and the buyer becomes the depository of the goods [1587]

d. Acceptance not condition to delivery— Since delivery of the subject

matter of the sale is an obligation on the part of the seller, the acceptance
thereof by the buyer is not a condition for the completeness of delivery
[La Fuerza v CA]

34 |D E L I V E R Y O F T H E T H I N G S O L D
 SALES REVIEWER

PAYMENT OF PRICE
I. when & where payment should be made [1582]
a. The vendee is bound to accept delivery and to pay the price of the thing
sold at the time and place stipulated in contract
b. If the time and place should not have been stipulated, payment must be
made at the time and place of delivery of the thing sold

II. liability for interest on the price [1589] —vendee is liable for interest if
a. there is a stipulation requiring interests
b. if there is none, but
i. the thing delivered produces fruits or income; or
ii. the buyer incurs in default from the time of judicial or
extrajudicial demand for payment

III. suspension of payment [1590] —vendee may suspend payment of

a. he is disturbed in the possession or ownership of the thing bought
b. he has a well-grounded fear that his possession or ownership would be
disturbed by a vindicatory action or foreclosure of mortgage

IV. when vendee cannot suspend payment [1590]

a. vendor gives security for the return of the price is a proper case
b. vendor has caused the disturbance or danger to cease
c. disturbance is a mere act of trespass
d. it has been stipulated that notwithstanding any such contingency, the
vendee must make payment

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WARRANTIES
I. Definition
a. It is a statement of representation made by the seller contemporaneously
and as part of the contract of sale, having reference to the character,
quality, or title of the goods, and by which he promises or undertakes to
insure that certain facts are or shall be as he then represents

b. May express or implied

i. Express— any affirmation of fact or any promise by the seller
relating to the thing which induces the buyer to purchase the
same
ii. Implied— that which the law derives from the nature of the
transaction or the relative situation or circumstances of the parties,
irrespective of any intention of the seller to create it

c. Distinguished from condition

i. a condition is an uncertain event or contingency fixed by the
parties, the existence or happening of which, is necessary to the
efficacy of the contract
ii. where a condition is not performed
1. the other party may either [1545]
a. refuse to proceed with the contract
b. proceed with the contract, waiving the
performance of the contract
2. if the condition is in the nature of a promise that it should
happen, the non-performance of such condition may be
treated by the other party as a breach of warranty
iii. warranty v condition

Warranty
Goes into the performance of
such obligation and in fact may
constitute an obligation in itself
May form part of the obligation
or contract by provision of the
law without the parties having
agreed thereto
Whether express or implied
relates to the subject matter
itself or to the obligations of the
seller as to the subject matter of
the sale
Condition
Goes into the root of the
existence of the obligation
Must be stipulated by the
parties in order to form part of
an obligation
May attach itself either to the
obligation of the seller to
deliver possession and transfer
ownership over the subject
matter of the sale

36 |W A R R A N T I E S
 SALES REVIEWER

d. Distinguished from opinion, dealer’s talk [1546]

i. An affirmation of the value of the thing or any statement of the
seller’s opinion not a warranty
ii. Exception—
1. seller made such affirmation as an expert; and
2. it was relied upon the buyer

II. Breach of warranty

a. Remedies of vendee [1599]
i. Recoupment —accept the goods and set up the seller’s breach to
reduce or extinguish the price
ii. Accept the goods and maintain an action for damages for breach
of warranty
iii. Refuse to accept the goods and maintain an action for damages
for breach of warranty
iv. Rescind the contract by returning or offering the return of the
goods, and recover the price or any part thereof

b. When rescission not allowed[1599]

i. If the buyer accepted the goods without protest, knowing the
breach of warranty
ii. If the buyer fails to notify the seller within a reasonable time of his
election to rescind
iii. If he fails to return or offer to return the goods in substantially as
good condition as they were in at the time of the transfer of
ownership to him; except if the deterioration is due to the breach
of warranty
c. Rights and obligations of buyer in case of rescission [1599]
i. Buyer shall cease to be liable for the price, his only obligation
being to return the goods
ii. If he has paid the price or any part thereof, he may recover it from
the seller
iii. He has the right to hold the goods as bailee for the seller should
the latter refuse the return of the goods; AND
iv. He has a right to have a lien on the goods for any portion of the
price already paid which lien he may enforce as if he were an
unpaid seller
III. Implied Warranties
a. Implied Warranty of Title
i. Unless a contrary intention appears, there is an implied warranty
on the part of seller [1547]
1. that he has a right to sell the thing; and
2. that the buyer shall, from that time, have and enjoy the
legal and peaceful possession of the thing
ii. There is a violation of this warranty when [1548]
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1. the vendee is deprived, in whole or in part, of the thing

purchased
2. the deprivation is by virtue of a final judgment [1557]
3. the judgment is based on a prior right to the sale or an act
imputable to the vendor
4. the vendor was summoned in the suit for eviction at the
instance of the vendee [1558]; AND
5. no waiver of the warranty by the vendee

NOTE:
1. the vendee need not appeal from the decision in order in
order that the vendor may be liable for eviction [1549]
2. there is likewise a violation of the warranty when the
property is sold for nonpayment of taxes due and not
made known to the vendee before the sale [1551]
3. The judgment debtor is also responsible for eviction in
judicial sales, unless it is otherwise decreed in the
judgment [1552]
4. When adverse possession had been commenced before the
sale but the prescriptive period is completed after the
transfer, the vendor shall not be liable for eviction. [1550]

ii. Liability of vendor

1. Total eviction [1555]—VICED
a. Value of the thing at the time of the eviction
b. Income or fruits if he has been ordered to deliver
them to the party who won the suit
c. Costs if the suit
d. Expenses of the contract; AND
e. Damages and interests if the sale was in bad faith
2. Partial eviction [1556]
a. VICED; OR
b. Rescission if vendee would not have bought the
thing without said part; but with the obligation to
return the thing without other encumbrances than
those which it had at the time he acquired it
iii. Warranty may be renounced, limited
1. The contracting parties may increase, diminish, or
suppress this legal obligation of the vendor [1548]
2. Any stipulation exempting the vendor from the obligation
to answer for eviction shall be void, if he acted in bad faith
[1553]
3. Consequence of waiver, renunciation [1554]
a. should take place, the vendor shall only pay the
value which the thing sold had at the time of the
eviction
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b. if the vendee made the waiver with knowledge of

the risks of eviction and assumed its consequences,
the vendor shall not be liable.

b. Implied Warranty Against Non-apparent Encumbrances

i. Unless a contrary intention appears, there is an implied warranty
that the thing shall be free from any charge or encumbrance not
declared or known to the buyer [1547]

ii. When there is a breach of this warranty, such that it may be

presumed that vendee would not have bought its, vendee may
[1560]
1. if within 1 year from the execution of the deed
a. ask for rescission of the contract within 1 year from
the execution of the deed; or
b. sue for damages within the same period
2. if period has elapsed, sue for damages within 1 year from
the discovery of the burden of servitude

iii. When there is no breach [1560]

1. if the non-apparent burden or servitude is registered in the
Registry of Deeds, unless there was an express warranty
2. if the vendee had knowledge of the encumbrance

c. Implied Warranty Against Hidden Defects

1. Unless a contrary intention appears, there is an implied warranty
that the thing shall be free from any hidden faults or defects[1547]
2. When there is a breach of this warranty [1561]
1. Hidden defect would render the thing unfit for the use
intended ; or
2. would diminish its fitness for such use to an extent that
had the vendee been aware thereof, he would not have
acquired it or would have given a lower price for it
NOTE:
1. Vendor shall be answerable even if he was unaware of
such defects [1566]
2. This implied warranty applies to judicial sales, except that
the judgment debtor shall not be liable for damages [1570]
3. When two or more things are sold together, the hidden
defect of one shall not affect the validity of the other things
sold, unless the vendee would not have bought them
without the defective one [1573]
4. This warranty may be validly waived, unless the vendor
acted in bad faith [1566]
3. There is no implied warranty for [1561]
1. patent defects; and
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2. those hidden, but would have been known to the vendee if

the latter is an expert who, by reason of his trade or
profession, should have known such defects
4. Remedies of vendee – vendee may either [1567]
1. Withdraw from the contract and ask for damages
2. Demand for a proportionate reduction of the price and ask
for damages
5. Effect when the thing is lost [1568, 1569]
1. Loss of thing on account of hidden defect
a. if the vendor was aware of hidden defects, he shall
bear the loss and the vendee shall have the right t
recover (PED)
i. price paid
ii. interest thereon
iii. damages
b. if the vendor was not aware, he shall be obliged to
return (PIE)
i. price paid
ii. interest thereon
iii. expenses of the contract if paid by the
vendee

2. Loss of the thing not due to hidden defect (but

nevertheless has hidden defect)
a. if due to fortuitous event or thru the fault of the
vendor, the vendee may demand from the vendor
the price which he paid less the value of the thing
at the time of the loss
b. if the vendor acted in bad faith, the vendor shall
pay damages to the vendee.

d. Implied Warranty of Merchantability

i. when the goods are brought by description from a seller who
deals in goods of that description, whether he is the grower,
manufacturer or not, there is an implied warranty that the goods
correspond with the description and that they shall be of
merchantable quality [1481,1561(2)] Comment [vsf32]: The goods are reasonably
fit for the general purpose for which they are
ii. There is no implied warranty of merchantability where the
sold.
goods are in the presence of the parties at the time of the sale,
and adequate examination was made.

e. Implied Warranty of Quality [1562 (1)]

i. When there is an implied warranty of quality
1. Where the buyer, expressly or impliedly, made known to
the seller the particular purpose for which the goods are
acquired,
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2. and the buyer relied on the seller’s skill or judgment,

whether the latter is a grower or manufacturer of the
goods or not, there is an implied warranty that the goods
shall be fit for such purpose

NOTE: Such warranty may be annexed by the usage of the

trade [1564]

ii. In a sale of a specified article under its patent or trade name,

there is no warranty as to its fitness for any particular purpose,
unless there is a stipulation to the contrary [1563]

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REMEDIES IN CASE OF BREACH

I. In General
a. Remedies of the seller
i. Action for payment of the price [1595]
ii. Action for damages for non-acceptance of the goods [1596]
iii. Action for rescission [1597]
b. Remedies of the buyer
i. Action for specific performance [1598]
ii. Action for rescission, or damages for breach of warranty

Art. 1595. Where, under a contract of sale, the ownership of the goods has passed to
the buyer and he wrongfully neglects or refuses to pay for the goods
according to the terms of the contract of sale, the seller may maintain an
action against him for the price of the goods.

Where, under a contract of sale, the price is payable on a certain day,

irrespective of delivery or of transfer of title and the buyer wrongfully
neglects or refuses to pay such price, the seller may maintain an action for the
price although the ownership in the goods has not passed. But it shall be a
defense to such an action that the seller at any time before the judgment in
such action has manifested an inability to perform the contract of sale on his
part or an intention not to perform it.

Although the ownership in the goods has not passed, if they cannot readily
be resold for a reasonable price, and if the provisions of article 1596, fourth
paragraph, are not applicable, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify the buyer that the
goods are thereafter held by the seller as bailee for the buyer. Thereafter the
seller may treat the goods as the buyer's and may maintain an action for the
price. (n)

Art. 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may maintain an action against him for damages for
nonacceptance.

The measure of damages is the estimated loss directly and naturally resulting
in the ordinary course of events from the buyer's breach of contract.

Where there is an available market for the goods in question, the measure of
damages is, in the absence of special circumstances showing proximate
damage of a different amount, the difference between the contract price and
the market or current price at the time or times when the goods ought to have

42 |R E M E D I E S I N C A S E O F B R E A C H
 SALES REVIEWER

been accepted, or, if no time was fixed for acceptance, then at the time of the
refusal to accept.

If, while labor or expense of material amount is necessary on the part of the
seller to enable him to fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to proceed no further
therewith, the buyer shall be liable to the seller for labor performed or
expenses made before receiving notice of the buyer's repudiation or
countermand. The profit the seller would have made if the contract or the
sale had been fully performed shall be considered in awarding the damages.
(n)

Art. 1597. Where the goods have not been delivered to the buyer, and the buyer has
repudiated the contract of sale, or has manifested his inability to perform his
obligations thereunder, or has committed a breach thereof, the seller may
totally rescind the contract of sale by giving notice of his election so to do to
the buyer. (n)

Art. 1598. Where the seller has broken a contract to deliver specific or ascertained
goods, a court may, on the application of the buyer, direct that the contract
shall be performed specifically, without giving the seller the option of
retaining the goods on payment of damages. The judgment or decree may be
unconditional, or upon such terms and conditions as to damages, payment of
the price and otherwise, as the court may deem just. (n)

Art. 1599. Where there is a breach of warranty by the seller, the buyer may, at his
election:

(1) Accept or keep the goods and set up against the seller, the breach of
warranty by way of recoupment in diminution or extinction of the price;

(2) Accept or keep the goods and maintain an action against the seller for
damages for the breach of warranty;

(3) Refuse to accept the goods, and maintain an action against the seller for
damages for the breach of warranty;

(4) Rescind the contract of sale and refuse to receive the goods or if the goods
have already been received, return them or offer to return them to the seller
and recover the price or any part thereof which has been paid.

When the buyer has claimed and been granted a remedy in anyone of these
ways, no other remedy can thereafter be granted, without prejudice to the
provisions of the second paragraph of Article 1191.

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Where the goods have been delivered to the buyer, he cannot rescind the sale
if he knew of the breach of warranty when he accepted the goods without
protest, or if he fails to notify the seller within a reasonable time of the
election to rescind, or if he fails to return or to offer to return the goods to the
seller in substantially as good condition as they were in at the time the
ownership was transferred to the buyer. But if deterioration or injury of the
goods is due to the breach or warranty, such deterioration or injury shall not
prevent the buyer from returning or offering to return the goods to the seller
and rescinding the sale.

Where the buyer is entitled to rescind the sale and elects to do so, he shall
cease to be liable for the price upon returning or offering to return the goods.
If the price or any part thereof has already been paid, the seller shall be liable
to repay so much thereof as has been paid, concurrently with the return of
the goods, or immediately after an offer to return the goods in exchange for
repayment of the price.

Where the buyer is entitled to rescind the sale and elects to do so, if the seller
refuses to accept an offer of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for the seller, but subject to a
lien to secure payment of any portion of the price which has been paid, and
with the remedies for the enforcement of such lien allowed to an unpaid
seller by Article 1526.

(5) In the case of breach of warranty of quality, such loss, in the absence of
special circumstances showing proximate damage of a greater amount, is the
difference between the value of the goods at the time of delivery to the buyer
and the value they would have had if they had answered to the warranty. (n)

II. Sale of Goods

a. Remedies of the seller
i. Action for the price [1595] — only when
1. Ownership of the goods has passed to the buyer
2. Price is payable before delivery of the goods; although in
this case the buyer could set up the defense that the seller
could not or did not intend to deliver the goods; OR
3. The seller was notified by the buyer of the latter’s
repudiation of the contract after the seller has completed
the manufacture of the goods or had procured the goods to
be delivered, and the goods could not readily be resold for
a reasonable price

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ii. Action for damages [1596]

1. Where the buyer wrongfully neglects or refuses to accept
and pay for the goods—the measure of damages is the
estimated loss directly and naturally resulting in the
ordinary course of events from the buyer’s breach of
contract
2. Where the goods have already been manufactured or
procured by the seller before he learns of the repudiation
of the contract by the buyer, and there is an available
market for the goods—the measure for damages, in the
absence of special circumstance showing proximate
damage of a different amount, is the difference between
the contract price and the market or current price at the
time when the goods ought to have been accepted or, if no
time was fixed for acceptance, then at the time of refusal to
accept

3. Where labor or expense of material amount is necessary in

the part of the seller to enable him to fulfill his obligation
under the contract, and the buyer notified the seller not to
proceed further therewith—the measure for damages shall
be the cost of labor and expenses incurred before receiving
the countermand or repudiation, and the profit the seller
would have made if the contract had been fully performed

iii. Action for rescission [1597]
1. When seller may rescind by giving notice of election
a. Where the good have not been delivered
b. The buyer either
i. Has repudiated the contract
ii. Has manifested his inability to perform his
obligation thereunder
iii. Has committed a breach thereof
Comment [vsf33]: An unpaid seller having
the right of lien or having stopped the goods in
transitu, may rescind the transfer of title and
resume the ownership in the goods, where he
expressly reserved the right to do so in case the
buyer should make default, or where the buyer
has been in default in the payment of the price
for an unreasonable time. The seller shall not
thereafter be liable to the buyer upon the
contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach
of the contract.

2. Different from 1534— rescission under this article would
bar an action on the contract because it means cancellation
of all contractual obligations; unlike in 1534 where the
unpaid seller may still recover damages after resuming
ownership over the goods
45 |R E M E D I E S I N C A S E O F B R E A C H
The transfer of title shall not be held to have
been rescinded by an unpaid seller until he has
manifested by notice to the buyer or by some
other overt act an intention to rescind. It is not
necessary that such overt act should be
communicated to the buyer, but the giving or
failure to give notice to the buyer of the
intention to rescind shall be relevant in any
issue involving the question whether the buyer
had been in default for an unreasonable time
before the right of rescission was asserted.
 SALES REVIEWER

b. Remedies of the buyer

i. Specific Performance
1. Where the seller has broken a contract to deliver specific or
ascertained goods, a court may, on the application of the
buyer, direct that the contract shall be performed
specifically, without giving the seller the option of
retaining the goods on payment of damages. The judgment
or decree may be unconditional, or upon such terms and
conditions as to damages, payment of the price and
otherwise, as the court may deem just. [1598]
2. courts will refuse to decree specific performance with
respect to chattels because damages is a sufficient remedy,
unless:
a. the buyer is entitled to the specific thing which to
him has some special value and which he cannot
readily obtain in the market; or
b. in cases where it is apparent that compensation in
damages would not furnish a complete and
adequate remedy
ii. Action for rescission, or damages for breach of warranty
1. Remedies of vendee [1599]
a. Recoupment —accept the goods and set up the
seller’s breach to reduce or extinguish the price
b. Accept the goods and maintain an action for
damages for breach of warranty
c. Refuse to accept the goods and maintain an action
for damages for breach of warranty
d. Rescind the contract by returning or offering the
return of the goods, and recover the price or any
part thereof
2. When rescission not allowed[1599]
a. If the buyer accepted the goods without protest,
knowing the breach of warranty
b. If the buyer fails to notify the seller within a
reasonable time of his election to rescind
c. If he fails to return or offer to return the goods in
substantially as good condition as they were in at
the time of the transfer of ownership to him; except
if the deterioration is due to the breach of warranty
3. Rights and obligations of buyer in case of rescission [1599]
a. Buyer shall cease to be liable for the price, his only
obligation being to return the goods

46 |R E M E D I E S I N C A S E O F B R E A C H
 SALES REVIEWER

b. If he has paid the price or any part thereof, he may

recover it from the seller
c. He has the right to hold the goods as bailee for the
seller should the latter refuse the return of the
goods; AND
d. He has a right to have a lien on the goods for any
portion of the price already paid which lien he may
enforce as if he were an unpaid seller

47 |R E M E D I E S I N C A S E O F B R E A C H
Page 20: [1] Comment [vsf22] victor samuel fontanill 10/12/2008 2:56:00 PM
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 notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee
for the purpose of transmission to the buyer.

Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order
of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if except for the form of the
bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller's property in the
goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the
contract.

Where goods are shipped, and by the bill of lading the goods are deliverable to 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 and transmits the bill of exchange and bill of lading
together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of
lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added
right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the
buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, 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 consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.