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

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

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.