FATHER SATURNINO URIOS UNIVERSITY

COLLEGE OF LAW
LAW 207 - SALES
MARK JOSEPH T. DELIMA
BELLARDO L. VELASQUEZ
Chapter Two
CAPACITY TO BUY AND SELL
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ARTICLE 1489. All persons who are authorized in this Code to obligate themselves may enter into a contract of
sale, saving the modifications contained in the following articles.
Where necessaries are 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.
1. Incapacity to buy may be absolute or relative
Absolute incapacity when party cannot bind himself in any case.
Relative incapacity when certain persons, under certain circumstances, cannot buy certain property
2. Purchase by minors
When minors buy, the contract is generally voidable (one that is valid until annulled), but in case of
necessaries, where necessaries are sold and delivered to a minor or other person without capacity to act, he
must pay a reasonable price therefor.
Article 290, Civil Code
Necessaries include everything that is indispensable for sustenance, dwelling, clothing, and
medical attendance, according to the social position of the family. Support also includes the
education of the person entitled to be supported until he completes his education or training for
some profession, trade, or vocation, even beyond the age of majority.
ARTICLE 1490. The husband and wife cannot sell property to each other, except:
(1) When separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under Article 191.
1. Reason why generally a husband and wife cannot sell to each other
To avoid prejudice to third persons; to prevent one spouse from unduly influencing the other; to avoid by
indirection the violation of the prohibition against donations.
2. Effect of sale
Generally, a sale by one spouse to another is void.
ARTICLE 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in
person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale has been entrusted to them, unless the consent of the
principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any
government-owned or controlled corporation or institution, the administration of which has been
entrusted to them; this provision shall apply to judges and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers, and
other officers and employees connected with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within whose jurisdiction or territory they
exercise their respective functions; this prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and rights which may be the object of any litigation
in which they may take part by virtue of their profession;
(6) Any others specially disqualified by law.
(7)
1. Persons relatively incapacitated to buy
The guardian
Agents
Executors and administrators
Public officers and employees
Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers, and other
officers and employees connected with the administration of justice
Any others specially disqualified by law

2. Reason for the law

Public policy prohibits the transactions in view of the fiduciary relationship involved.
3. Purchase by another
Thru the mediation of another this must be proved, that is, that there was really an agreement between
the intermediary and the person disqualified; otherwise, the sale cannot be set aside.
4. Purchase by agent for himself
An agent is not allowed, without his principals permission, to sell to himself what he has been ordered to
buy; or to buy for himself what he has been ordered to sell
The fiduciary relations between them between them estop the agent from asserting a title adverse to that of
the principal.
5. Purchase by attorney
A lawyer is not allowed to purchase the property of his client which is in litigation.
Doing so would be a breach of professional conduct and would constitute malpractice.
6. Any others specially disqualified by law
This refers to those prohibited by reason of the fiduciary relationship involved.
This is so by the principle of ejusdem generis which postulate that in a series of enumerations, general
words like and others placed at the end thereof are understood to embrace only those situated under the
same class or group of those listed in the enumeration.
Hence, while aliens cannot buy land because of the Constitution, they do not fall under the phrase any
others specially disqualified by law.
Thus, while those disqualified under Articles 1490 and 1491 may not become lessees, still aliens may
become lessees even if they cannot buy lands.
7. Status of the sale
Generally, sales entered into in disregard of the prohibition under this article are not void. They are merely
voidable.
ARTICLE 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption,
compromise and renunciations.
1. Applicability of relative incapacity to legal redemption, compromises, and renunciation
If a wards property is sold, the guardian, even if he be an adjacent owner, and even if all the other
requisites for legal redemption are present, cannot exercise the of legal redemption.
Chapter Three
EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST
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ARTICLE 1493. If at the time of the contract of sale is perfected, the thing which is the object of the contract
has been entirely lost, the contract shall be without any effect.
But if the thing should have been lost in part only the vendee may choose between withdrawing from
the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon.
1. Loss of object before sale
This refers to a case of loss of the object even before the perfection of the contract.
It is evident here that there would be no cause or consideration; hence contract is void.
In here, the seller naturally will have to bear the loss.
2. Complete loss distinguished from partial loss
When the object has been completely lost contract shall be without effect
When the object has been partly or partially lost
o Remedies of the vendee
Withdrawal (or rescission)
Specific performance as to remainder by payment of proportional price
ARTICLE 1494. Where the parties purport a sale of specific goods, and the goods without the knowledge of
the seller have perished in part or have wholly or in material part so deteriorated in quality as to
substantially changed in character, the buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the
buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible.
1. Loss of specific goods
The provision of this article practically reiterates the principles involved in the preceding article.
Again the remedies are:

 Cancellation (avoidance)
Specific performance as to the remaining existing goods (if sale was divisible)
Chapter Four
OBLIGATIONS OF THE VENDOR
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Section 1
GENERAL PROVISIONS
ARTICLE 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.
1. Obligations of vendor
To transfer ownership (cannot be waived)
To deliver (cannot be waived)
To warrant the object sold (this can be waived or modified since warranty is not an essential element of the
contract of sale)
To preserve the thing from perfection to delivery, otherwise he can be held liable for damages
2. Failure to deliver on time
If the seller promised to deliver at a stipulated period, and such period is of the essence of the contract, but
did not comply with his obligation on time, he has no right to demand payment of the price. In fact, the
vendee-buyer may ask for the rescission or resolution of the sale.
If failure by seller to deliver on time is not due to his fault, as when it was the buyer who failed to supply
the necessary credit for the transportation of the goods, delay on the part of the seller may be said to be
sufficiently excused.
3. Effect of non-delivery
If the seller fails to deliver, and the buyer has no fault, the buyer may ask for the resolution or rescission of
the contract.
4. Duty to deliver at execution of sales
When the property is sold at an execution sale, the judgment debtor is not required to deliver the property
sold right away.
The reason is he has a period of one year within which to redeem the property.
In the meantime, the buyer should not take actual possession of the property for if he does so, an action of
forcible entry may be brought against him.
ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to
him in any 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.
1. Ownership is transferred generally only by delivery
As a rule, in the absence of agreement, ownership is not transferred, even if sold, unless there has been a
delivery.
2. Effect of delivery to buyer who used anothers money
In general, delivery of the property to a person who has purchased the property in his own name using the
money of another will give title to said purchaser for it is he who appears in the deed of sale to have made
the purchase in his own name and not the owner of the money used.
Section 2
DELIVERY OF THE THING SOLD
ARTICLE 1497. The things sold shall be understood as delivered, when it is placed in the control and
possession of the vendee.
1. Real of actual delivery (actual tradition)
2. When ownership is not transferred despite delivery
If it was intended that no such transfer of ownership will take place until full payment of the price.
3. Meaning of tradition
Tradition, or delivery, is a mode of acquiring ownership, as a consequence of certain contracts such as sale,
by virtue of which, actually or constructively, the object is placed under the control and possession of the
vendee.
4. Kinds of delivery or tradition
Actual or real
Legal or constructive

Legal formalities
Symbolical tradition or traditio simbolica
Traditio longa manu (mere consent or agreement)
Traditio brevi manu
Traditio constitutum possessorium (opposite of traditio brevi manu)
Quasi-tradition
o Delivery of rights, credits, or incorporeal property, made by:
Placing titles of ownership in the hands of a lawyer;
Or allowing the buyer to make use of the rights.

ARTICLE 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 of the keys of the place or depository where it is stored or kept.
1. Kinds of constructive delivery
By legal formalities
Applies to real and personal property since the law does not distinguish
Traditio simbolica
Symbolic delivery effects the transfer of ownership thru the execution of a public document.
The keyword here is control, not possession of the land.
2. Constructive delivery requires three things before ownership may be transmitted
(1) The seller must have control over the thing
(2) The buyer must be put under control
(3) There must be intention to deliver the thing for purposes of ownership
3. Rules on constructive delivery
(1) If a seller has no actual possession, he cannot transfer ownership by constructive delivery.
(2) There can be no constructive delivery by means of a public instrument if there is a stipulation to that effect.
(3) The Civil Code does not provide that the execution of the deed is a conclusive presumption of the delivery
of possession.
4. Effect of non-payment of price
Execution of the deed of sale, in the absence of any defect, transfers delivery, even if the selling price, in
whole or in part has not yet been paid, for it is not payment that transfer ownership.
ARTICLE 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 same
time of the sale, or if the latter already had it in his possession for any other reason.
Traditio longa manu mere consent or agreement
Traditio brevi manu buyer already had the possession of the even before the purchase.
[Note: The provision speaks of movable property.]
ARTICLE 1500. There may also be tradition constitutum possessorium.

Possession as owner changed, for example, to possession as a lessee

The basis is consent
Where a seller continues to occupy the land as tenant, the possession, by fiction of law, is deemed to
be constituted in the buyer.

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 vendors consent,
shall be understood as a delivery.
1. Delivery of incorporeal property
Incorporeal properties may be delivered:
By constructive tradition execution of public instrument
By quasi-tradition placing of titles of ownership in the possession of the buyer, or the use by the
buyer of his rights, with sellers consent.
[Note: The delivery of land title deeds is equivalent to a delivery of the property itself.]
ARTICLE 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.
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.
1. Transaction On Sale or Return
This is a sale that depends on the discretion of the buyer; it is a sale with a resolutory condition.
2. Transactions On Approval or On Trial or Satisfaction
The buyer may in time become the owner under the conditions specified in the law; otherwise the seller is
still the owner.
This is a sale really dependent on the quality of the goods; it is a sale with a suspensive condition.
3. Rules On Sale or Return
Buyer has no right to return if he has materially abused the condition of the thing. Sale in this case becomes
absolute.
If the objects deteriorate without fault of the buyer, the buyer can still return, provided that the reasonable
period of returning has not yet lapsed.
Difference between a contract on sale or return and a delivery of property with option to purchase:
In the first, ownership is transferred at once; in the second, there is no transfer of ownership till
the owner agrees to buy.
4. Rules on sale On approval or Trial or Satisfaction
The risk of loss remains with seller, although there has been delivery, until the sale becomes absolute.
Risk of loss remains with seller although there has been delivery, if the sale has not yet become absolute.
Exceptions:
If buyer is at fault;
If buyer had expressly agreed to bear the loss.
Buyer must give goods a trial except when it is evident that it cannot perform the work intended.
Period within which the buyer must signify his acceptance commences to run only when all the parts
essential for the operation of the object have been delivered.
If it is stipulated that a third person must satisfy approval or satisfaction, the provision is valid, but the third
person must be in good faith. If refusal to accept is not justified, seller may still sue.
Generally, the sale and delivery to a buyer who is an expert on the object purchased is not obviously a sale
on approval, trial, or satisfaction.
ARTICLE 1503. 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 thus be reserved notwithstanding the delivery of the
goods to the buyer or to 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 sellers 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.
1. Reservation of ownership despite delivery
Provisions of Article 1503 apply only to the sale of specific goods

Although delivery has been made, seller may reserve ownership till certain conditions are fulfilled. In here,
the most important controlling element is intention
As a general rule, the seller, as the owner, bears the risk of loss in line with the principle of res perit
domino (owner bears the loss)
2. Instances when seller is still the owner despite delivery
Express stipulation
If under the bill of lading the goods are deliverable to seller or agent or their order.
If bill of lading, although stating that the goods are to be delivered to buyer or his agent, is kept by the
seller or his agent.
When the buyer although the goods are deliverable to order of buyer, and although the bill of lading is
given to him, does not honor the bill of exchange sent along with it. But innocent third parties (innocent
holders and purchasers for value) should not be adversely affected.
ARTICLE 1504. Unless otherwise agreed, the goods remain at the sellers risk until ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the
buyers risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance
of the contract and 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 buyers risk from the time of such
delivery.
(2) Where the 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.
1. Risk of loss
As a general rule, the risk of loss of specific goods is borne by the seller until ownership is transferred.
Whoever has the beneficial interest should bear the risk.
ARTICLE 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the
owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct
precluded from denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any other provision of law enabling the
apparent owner of goods to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of
competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of
Commerce and special laws.
1. Generally, buyer acquires merely the sellers rights
The general rule is no one can give what he does not have nemo dat quod non habet.
Hence, even if a person be a bona fide purchaser, he succeeds only to the rights of the vendor.
If the seller is not the owner, the sale is null and void
If a vendee buys a parcel of land the certificate of title to which contains an inscription requiring his seller
to execute a deed of sale of a portion of the lot in favor of another person, he merely acquires all the rights
which his seller may have over the land subject to the right of such third person.
If an illegitimate mother sells her childrens land to another, the buyer does not become the owner because
the seller was not.
2. Exceptions
When owner of the goods by his conduct precluded from denying the sellers authority.
The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent
owner of goods to dispose of them as if he were the true owner thereof;
The validity of any contract of sale under statutory power of sale or under the order of a court of competent
jurisdiction;
Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce
and special laws.
3. Some recording acts
Sale of large cattle no transfer of large cattle shall be valid unless the same is registered, and a certificate
of transfer is obtained.
Land registration law
Sale of vessels record at each principal port if entry

ARTICLE 1506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at
the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for
value, and without notice of the seller's defect of title.
1. Effect if seller has only a voidable title
2. Reasons for the law
Before a voidable contract is annulled it is considered valid.
Where one of two innocent parties must suffer, he who placed the offender in a position to do wrong must
suffer.
3. Purchase from a thief
ARTICLE 1507. A document of title in which it is stated that the goods referred to therein will be delivered
to the bearer, or to the order of any person named in such document is a negotiable document of title.
1. What Document of Title includes
Any bill of lading
Dock warrant
Quedan
Warehouse receipt or order
Any other document used as proof of possession or as authority to transfer the goods represented by the
document.
2. Negotiable Document of Title
The document is negotiable if:
The goods are deliverable to bearer
The goods are deliverable to the order of a certain person
3. Effect of typographical or grammatical error
A mere typographical or grammatical error does not destroy the negotiability of a document of title, for
what should be considered is the intent.
ARTICLE 1508. A negotiable document of title may be negotiated by delivery:
(1) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same
undertakes to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same
undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee
of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a
negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the same to
himself or to any specified person, and in such case the document shall thereafter be negotiated only by the
indorsement of such indorsee.
1. How negotiable document of title is negotiated
There are two forms of negotiating a negotiable document of title:
Mere delivery
Indorsement plus delivery
2. When mere delivery is sufficient
Mere delivery (handing over) is sufficient:
If deliverable to bearer
If deliverable to the order of a certain person and that person has indorsed it in a blank merely or
indorsed it to bearer. The document can now be negotiated by mere delivery.
ARTICLE 1509. A negotiable document of title may be negotiated by the indorsement of the person to whose
order the goods are by the terms of the document deliverable. Such indorsement may be in blank, to bearer
or to a specified person. If indorsed to a specified person, it may be again negotiated by the indorsement of
such person in blank, to bearer or to another specified person. Subsequent negotiations may be made in like
manner.
1. Negotiation by indorsement and delivery
This refers to negotiation by indorsement and delivery
If the document says deliver to the order of Mr. X to negotiate it, Mr. X must sign his name at the back
and then deliver. Mere delivery without signing is not sufficient. When he signs he may:
just sign his name (blank indorsement)
or say deliver to Mr. Y
or say deliver to bearer
The provision of this article follows mercantile practice.

2. Effect of undated indorsement

It is not necessary to date an indorsement because no additional protection is given thereby to businessmen.
In fact, to require dating would be to impede business transactions.
3. Effect of indorsement and delivery
Indorsement and delivery of a negotiable quedan ipso facto transfer possession and ownership of the
property referred to therein.
ARTICLE 1510. If a document of title which contains an undertaking by a carrier, warehouseman or other
bailee to deliver the goods to bearer, to a specified person or order of a specified person or which contains
words of like import, has placed upon it the words "not negotiable," "non-negotiable" or the like, such
document may nevertheless be negotiated by the holder and is a negotiable document of title within the
meaning of this Title. But nothing in this Title contained shall be construed as limiting or defining the effect
upon the obligations of the carrier, warehouseman, or other bailee issuing a document of title or placing
thereon the words "not negotiable," "non-negotiable," or the like.
1. Effect of placing the word non-negotiable
ARTICLE 1511. A document of title which is not in such form that it can be negotiated by delivery may be
transferred by the holder by delivery to a purchaser or donee. A non-negotiable document cannot be
negotiated and the indorsement of such a document gives the transferee no additional right.
1. Effect of delivery when document cannot be negotiated by mere delivery
2. Effect of negotiation and indorsement of non-negotiable instrument
ARTICLE 1512. A negotiable document of title may be negotiated:
(1) By the owner thereof; or
(2) By any person to whom the possession or custody of the document has been entrusted by the
owner, if, 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 if at the
time of such entrusting the document is in such form that it may be negotiated by delivery.
1. Who may negotiate negotiable document of title
The owner thereof
Any person to whom the possession or custody of the document has been entrusted by the owner
2. Who bears the loss in case of unauthorized negotiation
If the owner of a negotiable document of title entrusts the document to a friend for deposit, but the friend
betrays the trust and negotiates the document by delivering it to another who is in good faith, the said
owner cannot impugn the validity of the negotiation.
As between two innocent persons, he who made the loss possible should bear the loss, without prejudice to
his right to recover from the wrongdoer.
ARTICLE 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document to him had or had ability to convey
to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods
were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith
for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him
according to the terms of the document as fully as if such bailee had contracted directly with him.
1. Rights of person to whom negotiable document is negotiated
This article provides of some rights of a person to whom a negotiable document of title has been
negotiated.
The bailee or carrier or depositary directly holds the property in behalf of the person to whom the
negotiable document was negotiated. It is as if such person had dealt directly with the bailee.
2. Purpose of the provision
The document should be made to really represent the depositors right to the goods.
ARTICLE 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 transferor of a subsequent
sale of the goods by the transferor.
1. Rights of mere transferee
The article provides with the rights of a transferee, not the rights of a person to whom the document was
negotiated.
The transferee does not acquire directly the obligation of the bailee to hold him. To acquire the direct
obligation of the bailee, the transferee or transferor must notify the bailee.
2. Who can defeat the rights of transferee
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 transferor of a subsequent sale of the
goods by the transferor.
ARTICLE 1515. Where a negotiable document of title is transferred for value by delivery, and the
indorsement of the transferor is essential for negotiation, the transferee acquires a right against the
transferor to compel him to indorse the document unless a contrary intention appears. The negotiation shall
take effect as of the time when the indorsement is actually made.
1. Rights of a person to whom an order document of title, which may not properly be negotiated by mere
delivery, has been delivered, without indorsement. They are:
The right to the goods as against the transferor
The right to compel the transferor to indorse the indorsement
If the intention of the parties is that the document should be merely transferred, the transferee has no right
to require the transferor to indorse the document.
ARTICLE 1516. A person who for value negotiates or transfers a document of title by indorsement or
delivery, including one who assigns for value a claim secured by a document of title unless a contrary
intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the validity or worth of the document; and
(4) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for
a particular purpose, whenever such warranties would have been implied if the contract of the parties had
been to transfer without a document of title the goods represented thereby.
1. Warranties in negotiation or transfer
This refers to warranties
by a person who negotiates
by a person who assigns or transfers for value
Warranties may be
about the document
about the right to document
about the goods represented by the document
2. Effect of indorsees knowledge of forged indorsement
If the indorsee knows that any of the former indorsements is a forgery, he does not acquire a valid title to
the document.
ARTICLE 1517. The indorsement of a document of title shall not make the indorser liable for any failure on
the part of the bailee who issued the document or previous indorsers thereof to fulfill their respective
obligations.
1. Non-liability of indorser for failure of bailee to comply
Failure of the bailee or the previous indorsers to comply with their obligations does not make the present
indorsers liable.
2. Reason
The indorser warrants only the things mentioned in Article 1516 of the Civil Code

ARTICLE 1518. 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
the owner of the document was deprived of the 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.