Week 3 - Covenants - Obligations of Seller

Question 1

What are the principal obligations of the Vendor?

Answer 1

The principal obligations of a vendor are:

1. To transfer the ownership of the determinate thing sold (Art. 1458);
2. To deliver the thing, with its accessions and accessories, if any, in the condition in which they were upon the perfection of the contract (Art. 1537);
3. To warrant against eviction nd against hidden defects (Arts. 1495, 1547);
4. To take care of the thing, pending delivery, with proper diligence (see Art. 1163); and
5. To pay for the expenses of the deed of sale, unless there is a stipulation to the contrary. (Art. 1487).

Question 2

What is the standard of care required of the obligor under the law?

Answer 2

According to Art. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a famiy, unless the law or the stipulation of the parties requires anoother standard of care.

Question 3

When will the rights of the creditor to the fruits of the thing begin?

Answer 3

According to Art. 1164. The creditor has a right to the fruits of a thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him.

Question 4

When will the debtor lose the right to make use of the period?

Answer 4

Art. 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; and
(5) When the debtor attempts to abscond.

Question 5

Art. 1458 NCC. By the contract of sale …

Answer 5

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

Question 6

What is the requirement as to the vendor vis-a-vis the thing sold?

Answer 6

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

Question 7

When will the ownership of the thing sold transfer to the vendee?

Answer 7

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

Question 8

May the vendor reserve the ownership of the thing despite delivery?

Answer 8

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

Question 9

As a general rule, who shall bear the expenses of the execution and registration of the sale?

Answer 9

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

Question 10

Art. 1495. The vendor is bound to […], as well as […] the thing which is the object of the sale.

Answer 10

Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.

Question 11

Art. 1496. The ownership of the thing sold is acquired by the vendee from […] in any of the ways specified in Articles […], or in any other manner […].

Answer 11

Art. 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 in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.

Question 12

What are the requisites for delivery?

Answer 12

Requisites:

a. Identity – between what must be delivered and what is actually delivered
b. Integrity – in a condition suitable for enjoyment
c. Intentional

Question 13

When is a thing sold understood as delivered?

Answer 13

A thing sold is understood as delivered when:

(1) it is placed in the control and possession of the vendee [Art. 1497];
(2) execution of public instrument if sale is made through a public instrument if the contrary does not appear [Art. 1498];
(3) delivery of the keys of the place or depositary, with regard to movable property [Art. 1498];
(4) mere consent or agreement of the contracting parties, if it cannot be delivered at the time of sale or if property is already with the vendee [Art. 1499];
(5) constitutum possessorium [Art. 1500];
(6) with respect to incorporeal property, execution of public instrument or if not possible, placing the titles of ownership in the possession of the vendee, or use by the vendee of his rights with the vendor’s consent [Art. 1501].

Question 14

Is ownership of the thing sold transferred by payment?

Answer 14

No. Ownership of the things is transferred by delivery, and not by mere payment. (Art. 1477). However, the parties may stipulate that despite the deliverym the ownership of the thing shall remain with the seller until the purchaser has fully paid the price. (Art. 1503).

Question 15

What are the two kinds of delivery?

Answer 15

Actual and constructive delivery (Art. 1477)

Question 16

What is constructive delivery?

Answer 16

Constructive delivery is the general term comprehending all those acts which , although not conferring physical possession of the thing, have been held by construction of law equivalent to acts of delivery.

Question 17

Is payment of purchase price essential to the transfer of ownership?

Answer 17

No. Payment of purchase price is not essential to the transfer of ownership, as long as the property sold has been delivered. Nonpayment only creates a right to demand payment or to rescind the contract or to criminal prosecution in case of bouncing checks

Question 18

Who shall bear the expenses for the execution and registration of the sale?

Answer 18

The vendor, unless there is a stipulation to the contrary (Art. 1487NCC)

Question 19

Is ownership by the vendor necessary at the time of the perfection of the contract?

Answer 19

No. What is necessary is only that the vendor has the right to transfer the ownership of the contract. Art. 1459 states “The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.”

Question 20

Art. 1497. The thing sold shall be understood as delivered, when […].

Answer 20

Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.

Question 21

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be […] which is the object of the contract, if from the deed […].

With regard to movable property, its delivery may also be made by the […] where it is stored or kept.

Answer 21

Art. 1498. When the sale is made through 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 of the place or depository where it is stored or kept.

Question 22

Art. 1499. The delivery of movable property may likewise be made by […], if the thing sold […] to the possession of the vendee at the time of the sale, or if the latter already […] for any reason.

Answer 22

Art. 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any reason.

Question 23

Art. 1500. There may also be tradition […].

Answer 23

Art. 1500. There may also be tradition constitutum possessorium.

Question 24

What is constitutum possessorium?

Answer 24

Constitutum possessorium is the opposite of traditio brevi manu.

It takes place when the vendor continues in possession of the property sold not as owner but in some other capacity as for example, when the vendor stays as a tenant of the vendee or as a depositary of the vendee.

Question 25

What is the difference between traditio longa manu and traditio brevi manu?

Answer 25

• Traditio longa manu* - takes place when the delivery of the thing is made by the mere consent or agreement of the contracting parties; long hand delivery (Art. 1499);
• Traditio brevi manu* - takes place when the vendee already has the possession of the thing sold by virtue of another title as when the lessor sells the thing leased to the lessee; short hand delivery (Art. 1499).

Question 26

Art. 1501. With respect to incorporeal property, the provisions of the first paragraph of […] shall govern. In any other case wherein said provisions are not applicable, the […] or the […], with the […], shall be understood as a delivery.

Answer 26

Art. 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.

Question 27

Art. 1502. par. 1. When goods are delivered to the buyer “[…]” to give the buyer an […], the ownership […], but he may revest the ownership in the seller by […], or, if no time has been fixed, […].

Answer 27

Art. 1502. When goods are delivered to the buyer “on sale or return” to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time.

Question 28

Art. 1502. par. 2. When goods are delivered to the buyer on […], or […], the ownership therein passes to the buyer:

(1) When […] or does any […];
(2) If he does not signify his approval or acceptance to the seller, but […], then if a time has been fixed for the return of the goods, […], and, if no time has been fixed, […]. What is a […] is a question of fact.

Answer 28

Art. 1502. par. 2. When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer:

(1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the seller, but retains the goods 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. What is a reasonable time is a question of fact.

Question 29

Art. 1503. par. 1. Where there is a contract of sale of […], the seller may, by […], reserve […] in the goods until […]. The […] may be thus reserved notwithstanding the delivery of the goods to the […] or to a […] or other […] for the purpose of […].

Answer 29

Art. 1503. par. 1. Where 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.

Question 30

Art. 1503. par. 3. 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 […], and if he wrongfully retains the bill of lading […]. 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 bank, 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 […], although the bill of exchange has not been honored, provided that […] indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.

Answer 30

Art. 1503. par. 3. 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 bank, 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.

Question 31

What are the consequences of delivery?

Answer 31

1. Transfer of ownership – There is no transfer of ownership by mere consent.
2. Enjoyment of the thing sold – Delivery not only determines the transmission of ownership, but also the acquisition of real right . It is also necessary to enable the vendee to enjoy and make use of the property.
3. Liability in case of loss – When the thing subject of the sale is placed in the control and possession of the vendee (Art. 1497) or his agent, the delivery is complete, and the vendee cannot avoid liability in case the thing is subsequently lost without the fault of the vendor .
4. Right of vendor to claim payment – When the thing subject of the sale is placed in the control and possession of the vendee (Art. 1497) or his agent, the delivery is complete.
5. Consummation of contract

Question 32

What should be delivered by the seller to the buyer?

Answer 32

1. Thing sold – object of the sale
2. Accessions and accessories – in the condition in which they were upon the perfection of the contract; those which are incorporated or attached to the object.
3. Fruits – shall pertain to the vendee from the day on which the contract was perfected ; those which a produced by the principal object of sale.

Question 33

What is the effect of non-payment of price?

Answer 33

In case of non-payment of price:

1. General rule : Ownership of the thing shall pass from the vendor upon actual or constructive delivery of the thing sold even if the purchase price has not yet been fully paid .
2. Exception : Unless there is a stipulation otherwise.
3. Right to rescind or demand fulfillment – When the seller fails to deliver and transfer ownership to the buyer, the latter has the right to rescind or demand fulfillment and ask damages in either case. A sale is a reciprocal obligation in which the right to rescind is implied. (Seller may also rescind if the buyer fails to pay)

Question 34

Art. 1503. par. 2. 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 […]. But, if except for the form of the bill of lading, the ownership […], the seller’s property in the good shall be deemed to be […].

Answer 34

Art. 1503. par. 2. 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 good shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract.

Question 35

In the absence of a contractual agreement, or usage of trade, where is the place of delivery?

Answer 35

Art. 1521. Whether it is for the buyer to take possession of the goods or for 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.

Question 36

What is the period between perfection of contract and delivery of goods to the buyer?

Answer 36

Art. 1521. par. 2. 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.

Question 37

When are the goods deemed delivered to the buyer in case the goods are in possession of a third person at the time of sale?

Answer 37

Art. 1521. par. 3. 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.

Question 38

When will demand or tender of delivery be treated as ineffectual?

Answer 38

Art. 1521. par. 4. 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.

Question 39

What is the effect of delivery of goods to the carrier?

Answer 39

Art. 1523. par. 1. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears.

Question 40

When is the vendor not bound to deliver the thing sold?

Answer 40

No. Art. 1524. 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.

Question 41

In sum, when is the seller not bound to deliver?

Answer 41

The seller is not bound to deliver:

1. Vendee has not paid him the price [NCC 1524]; or
2. No period for the payment has been fixed in the contract. [NCC 1524];
3. The vendee loses the right to make use of the terms provided in Art. 1198 [NCC 1536]:
   
   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 which he has promised;
   4. When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
   5. When the debtor attempts to abscond.

Question 42

In sum, what are the rules regarding the place of delivery of a thing?

Answer 42

1. Hierarchy is followed:
   
   1. As stipulated in the contract (express or implied);
   2. Usage of trade;
   3. Seller’s place of business;
   4. Seller’s residence
2. In case of specific goods, which the parties knew to be at some other place when the contract was perfected, that place is the place of delivery;
3. If goods at the time of sale are possessed by a third person, then there is no delivery until he acknowledges to the buyer that the holds the goods for the buyer.

Question 43

As a general rule, who bears the expenses for the delivery of the goods?

Answer 43

Art. 1521. par. 5. Unless otherwise agreed, the expenses of an incidental to putting the goods into a deliverable state must be borne by the seller.

Question 44

Art. 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the term as provided in[…].

Answer 44

Art. 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the term as provided in Article 1198.

Question 45

Is the seller bound to inform the buyer then need to insure the thing sold?

Answer 45

Yes. Art. 1523. par. 2. 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.

Question 46

Art. 1537. The vendor is bound to deliver the thing sold and […] in the condition in […].

All the fruits shall pertain to […].

Answer 46

Art. 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract.

All the fruits shall pertain to the vendee from the day on which the contract was perfected.

Question 47

What are the principal obligations of the vendor?

Answer 47

The principal obligations of a vendor are:

(1) Transfer ownership of the determinate thing sold;
(2) Deliver the thing with its accessions and accessories, if any, in the condition in which they were upon the perfection of the contract;
(3) Warrant against eviction and against hidden defects;
(4) Take care of the thing, pending delivery, with proper diligence; and
(5) Pay for the expenses of the deed of sale, unless there is a stipulation to the contrary. [De Leon 217, 2021 ed.]

Question 48

What are the ways to effect the delivery of the thing sold?

Answer 48

Ways of effecting delivery:

(1) Actual or real delivery (Art. 1497);
(2) Constructive or legal delivery (Art. 1498-1501);
(3) Delivery in any other manner signifying an agreement that the possesison is transferred to the vendee. (Arts. 1496-1499).

Question 49

Define constructive delivery.

Answer 49

Constructive delivery is a general term comprehending all those acts which, although not conferring physical possession of the thing, have been held by construction of law equivalent to acts of real deliver. [De Leon 222, 2021 ed.]

(ie. no physical delivery but held by law as equivalent to delivery)

Question 50

What are the ways of effecting constructive delivery?

Answer 50

1. execution of public instrument (art. 1489 par. 1);
2. symbolical tradition or traditio symbolica (art. 1498 par. 2);
3. traditio longa manu (art. 1499);
4. traditio brevi manu (art. 1499);
5. traditio constitutm possessorium (art. 1500); or
6. quasi-delivery of quasi-traidio (art. 1501).

Question 51

What is the difference between “Sale or Return” and “Sale on Approval”?

Answer 51

SALE OR RETURN

SALE ON APPROVAL

Ownership immediately passes to the buyer upon deliver;

Ownership reverts to the seller only

Ownership is retained by the seller upon delivery to the buyer;

Ownership only passes to the buyer when acceptance is communicated to the seller or does not give notice of rejection upon expiration of time or within reasonable time

Depends on the will of the buyerDepends on the character or quality of goodsSubject to a resolutory conditionSubject to a suspensive conditionRisk of loss remains with the buyerRisk of loss remains with the seller

Question 52

What are the rules regarding the delivery to carrier?

Answer 52

Delivery to Carrier:

1. General rule: When seller is authorized or required to send the goods to the buyer, delivery to a common carrier is deemed to be delivery to the buyer regardless if the carrier is named by the buyer or not.
2. Exception: (a) When the seller reserves ownership or possession until certain conditions are met [Art. 1503] or (b) when a contrary intent appears.
3. Seller has the obligation to make contract with the carrier: (a) on behalf of the buyer as may be reasonable; (b) unless otherwise authorized by the buyer; (c) if seller omits do so and goods are lost or damaged in transit, buyer may decline to treat the delivery to carrier as delivery to himself and seller may be held responsible for damages.
4. Seller has the obligation to give notice of need for insurance when goods are sent to the buyer: (a) when the seller knows or ought to know that the goods are usual to insure; (b) to give notice to the buyer to enable him to insure the goods; and (c) if seller fails to do so, the goods shall be deemed to be at his risk during transit.

Question 53

What is a bill of lading?

Answer 53

1. A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried.
2. A bill of lading is (1) a document of title, (2) a receipt for shipped goods, and (3) a contract between a carrier and shipper. This document must accompany the shipped goods and must be signed by an authorized representative from the carrier, shipper, and receiver.
3. If managed and reviewed properly, a bill of lading can help prevent asset theft.