CHAPTER 4: OBLIGATION OF THE VENDOR
SECTION 1 – GENERAL PROVISIONS
OBLIGATION OF THE VENDOR….
DELIVERY
– used in the Law on Sales
– refers to the concurrent transfer of two things: (1) possession
(2) ownership
PURPOSE OF DELIVERY
Under the Civil Code, ownership does not pass by mere stipulation but only by delivery.
Delivery – signifies that the title has been passed from the seller to the buyer.
The purpose of delivery Is not only f r the enjoyment of the thing but also a mode of acquiring dominion and
determines the transmission of ownership, the birth of the real right.
WHAT IS DELIVERY?…
WHAT IS ACTUAL DELIVERY?
Actual delivery of a thing sold occurs when it is placed under the control and possession of the vendee.
ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in
any of the ways specified in Articles 1497 to 1501, or any other manner signifying an agreement that
the possession is transferred from the vendor to the vendee.
General Rule:
Ownership of the thing sold is acquired only upon its delivery, actual or constructive, to the buyer.
Exceptions:
1. When the seller and the buyer agree that the ownership shall remain with the seller until the full payment of
the purchase price;
2. Contract to sell;
3. Sale on approval, trial or satisfaction; and
4. Implied reservation of ownership.
Payment is NOT essential to transfer ownership
The Civil Code state that ownership of the thing sold is transferred to the vendee upon actual or constructive
delivery of the same. And the thing is understood as delivered when it is placed in the control and possession of
the vendee.
Payment of the purchase price is not essential to the transfer of ownership as long as the property sold has
been delivered; such delivery (traditio) operated to divest the vendor of title to the property which may not be
regained or recovered until and unless the contract is resolved or rescinded in accordance with law.
The delivery under any of the forms provided by Articles 1497 to 1505 of the Civil Code signifies that the transmission
of ownership from vendor to vendee has taken place. Here, emphasis is placed on Article 1497 of the Civil Code, which
contemplates what is known as real or actual delivery, when in the thing sold is placed in the control and possession
of the vendee.
SECTION 2: DELIVERY OF THE THING SOLD
ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the
vendee.
WHAT IS REAL OR ACTUAL DELIVERY?
Real or actual delivery, when the thing sold is placed in the control and possession of the vendee.
Article 1498 – refers to the symbolic delivery by the execution of public instrument.
– does not say that the execution of the deed provides a conclusive presumption of the delivery of
possession.
–it confines itself to providing that the execution thereof is equivalent to delivery, which means that
the presumption therein can be rebutted by means of clear and convincing evidence.
– thus, the presumptive delivery by the execution of a public instrument can be negated by the failure
of the vendee to take actual possession of the land sold.
KINDS OF DELIVERY…
KINDS OF LEGAL OR CONSTRUCTIVE DELIVERY
a. Legal Formalities
When the sale is made through a public document. The delivery by execution of public instrument gives rise to
prima facie presumption of delivery, which is destroyed when actual delivery is not affected due to legal
impediment.
b. Symbolic Tradition or Traditio Simbolica
The parties use a symbol to represent the thing delivered.
c. Traditio Longa Manu
The delivery is by mere consent or agreement of the contracting parties, where the seller points out to the
buyer the object of sale without the need of actually delivering it.
d. Tradition Brevi Manu
This occurs when the would be buyer had already the possession of the object even before the contract of sale
by virtue of another title which is not ownership (like a lessee in a Contract of Lease), and pursuant to a contract
of sale, he would now hold possession in the concept of an owner (like a buyer of a house where he was a
former lessee of the same house).
This is opposite of constitutum possessorium.
e. Traditio Constitutum Possessorium
The delivery consists in the owner’s continuous possession of the property he had already sold to another
person but his present possession is no longer that of an owner but under another capacity, like that of a lessee.
This is opposite of traditio brevi manu.
Example:
With regard to movable property, its delivery may also be made by the delivery of the keys of the place
or depository where it is stored or kept.
ARTICLE 1498. When the sale is made though a public instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary does not
appear or cannot clearly be inferred.
With regard to movable property, its delivery may also be made by the delivery of the keys place or
depository where it is stored or kept.
WHAT IS A PUBLIC INSTRUMENT?
A document prepared by a notary public in the presence of the parties who sign it before witnesses.
NOTARY PUBLIC
A person authorized by a State to administer oaths, certify documents, attest to the authenticity of signatures,
and perform official acts in commercial matters, such as protesting negotiable instruments.
ARTICLE 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the
contracting parties, of the thing sold cannot be transferred to the possession of the vendee at the
time of the sale, or if the latter already had it in his possession for any other reason.
ACTUAL DELIVERY vs. CONSTRUCTIVE DELIVERY
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Article 1497 to 1501.
The word “delivered” should not be taken restrictively to mean transfer of actual physical possession of the property.
The law recognizes two principal modes of delivery, to wit: (1) actual delivery, and (2) legal or constructive delivery.
The above-stated articles speaks about the two kinds of constructive delivery which are legal formalities and
tradition simbolica.
In Philippine Suburban Development Corporation v. The Auditor General , The Supreme Court held:
When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of
the thing object of the contract if from the deed the contrary does not appear or cannot clearly be inferred.
In other words, there is symbolic delivery of the property subject of the sale by the execution of the public
instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention
of the parties.
For instance, where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its
material delivery could not have been made.
Stated differently, as a general rule, the execution of a public instruments amounts to a constructive delivery of
the thing subject of a contract of sale. However, exceptions exist, among which is when mere presumptive and not
conclusive delivery is created in cases where the buyer fails to take possession of the subject of sale.
A person who does not have actual possession of the thing sold cannot transfer constructive possession by the
execution and delivery of a public instrument.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.
Legal or constructive delivery, may be had through any of the following ways:
-the execution of a public instrument evidencing the sale
-symbolical tradition such as the delivery of the keys of the place where the movable sold is being kept
–traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale
–traditio brevi manu if the buyer already had the possession of the object even before the sale
–traditio constitutum possessorium, where the seller remains in possession of the property in a diff. capacity.
ARTICLE 1500. There may also be tradition constitutum possessorium.
Under this kind of delivery, the law considers all these formalities to have taken place by agreement of the parties.
ARTICLE 1501. With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall govern.
In any other case wherein said provisions are not applicable, the placing of the titles of ownership in
the possession of the vendee or the use by the vendee of his rights, with the vendor’s consent, shall
be understood as a delivery.
DELIVERY OF INCORPOREAL PROPERTY
1. Execution of public instrument;
2. The placing of the titles of ownership in the possession of the vendee; or
3. The use by the vendee of his rights, with the vendor’s consent.
ARTICLE 1502. When the goods are delivered to the buyer “on sale or return” to give the buyer an option to return the
goods instead of paying the price, the ownership passes to the buyer on delivery, but he may revest
the ownership in the seller by returning or tendering the goods within the time fixed in the contract or,
if no time has been fixed, within a reasonable time.
When goods are delivered to the buyer on approval or on trial or on satisfaction, or in similar terms,
the ownership therein passes to the buyer:
(1) When he signifies his approval or acceptance to the seller or does any other act adopting the
transaction;
(2) If he does not signify his approval or acceptance to the seller , but retains the goods without giving
notice if rejection, then if a time has been fixed for the return of the goods, on the expiration of such
time, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a
question of fact.
SALE ON APPROVAL
Also called “sale on acceptance”, “sale on trial”, or “sale on satisfaction”. There is no transfer of ownership
notwithstanding delivery of the goods. Ownership passes to the buyer only of the following instances:
1. When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
2. If he does not signify his approval or acceptance to the seller , but retains the goods without giving notice if
rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, if no time has been
fixed, on the expiration of a reasonable time.
SALE OR RETURN
In a “sale or return”,the ownership passes to the buyer on delivery. The subsequent return of the goods
reverts ownership in the seller. Delivery or tradition as mode of acquiring ownership must be in consequence of a
contract, e.g. sale.
EXPRESS WRITTEN AGREEMENT IN SALE OR RETURN OR SALE ON APPROVAL
The provision in the Uniform Sales Act and the Uniform Commercial Code from which Article 1502 was taken,
Clearly requires an express written agreement to make sales contract either “sale or return” or a “sale on
approval”.
Parol or extrinsic testimony could not be admitted for the purpose of showing that an invoice or bill of sale that was
complete in every aspect and purporting to embody a sake without condition or restriction constituted a contract
of sale or return.
If the purchaser desired to incorporate a stipulation securing to him the right of return, he should have done so at
the time the contract was made.
On the other hand , the buyer cannot accept part and reject the rest of the goods since this falls outside the normal
intent of the parties in the “on approval” situation.
SALE OR RETURN vs. SALE ON TRIAL
SALE OR RETURN
SALE ON TRIAL
Ownership passes to the buyer on delivery and subsequent
return reverts ownership in the seller
Ownership remains in the seller until the buyer signifies his
approval or acceptance to the seller
Subject to a resolutory condition
Subject to a suspensive condition
Depends entirely on the will of the buyer
Depends on the quality of the goods
Risk of loss rests upon the buyer
Risk of loss remains with the seller
ARTICLE 1503. When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve
the right of possession or ownership in the goods until certain conditions have been fulfilled. The right
of possession or ownership may be, thus, reserved 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 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 if he wrongfully retains the bill of lading, he
requires 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 endorsed 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 is 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.
Note: This article applies to the sale of specific goods.
Article 1503 is an exception to the first paragraph of Article 1523.
Article 1503 is an exception to the general presumption provided in the fist paragraph of Article 1523, which reads:
Article 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer,
delivery of the good to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is
deemed to be a delivery of the goods to the buyer, except in the cases provided for in Article 1503. the 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 the 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 the such transit.
Article 1503, on the other hand, provides:
ARTICLE 1503. When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve
the right of possession or ownership 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 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 if he wrongfully retains the bill of lading, he requires 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
endorsed 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 is 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.
ARTICLE 1504. Unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred
to the buyer, but when the ownership therein is transferred to the buyer, the goods are at the buyer’s
risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has been retained by the seller merely to secure
performance by the buyer of his obligation under the contract, the goods are at the buyer’s risk from
the time of such delivery.
Article 1523 and 1503 do not apply to the contract of carriage.
Article 1523 and 1503, therefore, refer to a contract of sale between a seller and a buyer. In particular, they
refer to who between the seller and the buyer has the right of possession or ownership over the goods subject of the
sale. Article 1523 and 1503 do not apply to a contract of carriage between the shipper and the common carrier.
The third paragraph of Article 1503, does not oblige the common carrier to withhold delivery of the goods in the
event that the bill of lading is retained by the seller. Rather, it only gives the seller a better right to the possession of
the goods as against the mere inchoate right of the buyer.
A contract of sale is separate and distinct from a contract of carriage. They involve different parties, different rights,
different obligations and the liabilities.