BUSLAW1: Sales Topic 5


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BUSLAW1: Sales Topic 5

  1. 1. Article 1525 Who is considered an unpaid seller? - Whole price has not been tendered by buyer - Whole price has not been paid by the buyer - The condition for the negotiable instrument used as a conditional payment was broken Note: 1. Tender of payment of buyer (ex: payment of checks)  Not the same as performance  DOES destroys the seller’s lien 2. Payment of part of price  DOES NOT destroys the seller’s lien 3. Payment of negotiable instrument (ex: promissory notes)  Will only be considered as paid IF:  the buyers has cashed it  They have been impaired through the creditors fault Article 1526 What are the remedies to an unpaid seller? Goods are still in the possession of the seller - Right of lien or right to retain the goods Right of resale Right to rescind the sale Right to withhold delivery Goods are not in the possession of the seller (ex: goods are in the process of delivery) - Right to stop the goods in transitu Article 1527 Right of lien - unpaid seller of the good who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely: 1. Where the goods have been sold without any stipulation as to credit; 2. Where the goods have been sold on credit but the term of credit has expired; and 3. Where the buyer becomes insolvent When unpaid seller’s possessory lien may be exercised 1) Sales without stipulation as to credit
  2. 2. - seller is entitled to the payment of the price at the same time that he transfers the possession of the goods - seller has always a lien upon the goods which he sells until payment of the price 2) Expiration of term of credit - by nature of a credit sale, the buyer is entitled to the possession of the goods even without paying the price - if he fails to pay until the term credit has expired and the price becomes due, he loses the right 3. Insolvency of the buyer - another situation where the lien of the seller in possession is revived even though the time of the payment has not yet arrived -application of a general principle that when one party to a bilateral contract is incapacitated from performing his part, the other party is also excused from performing his part Article 1530 Right of Stoppage of Transit Once the buyer becomes insolvent, the unpaid seller can reclaim the goods in transit and have the same rights to the goods as if he or she has never parted with the possession. - giving notice of the claim to the carrier or other bailee in possession - insolvency need not be judicially declared. (Art. 1636) Requisites for the exercise of right of stoppage in transit 1. unpaid seller 2. insolvent buyer 3. goods must be in transit 4. seller must either actually take possession of goods sold or give notice of his claim to the carrier or other person in possession 5. seller must surrender the negotiable document of title, if any, issued by the carrier or bailee 6. seller must bear the expenses of delivery of the goods after the exercise of the right Basis of right of stoppage in transit injustice of allowing the buyer to acquire ownership and possession of the goodswithout even paying and owing to his insolvency, cannot pay the price in exchange for the goods far-reaching principle allowing rescission and restitution where there is actual or prospective failure of consideration
  3. 3. Article 1533 Right of Resale - Unpaid seller has the right to resale when he/she has the right of lien or right of stoppage of goods in transitu. -Seller may resale a product that is perishable in nature in case buyers defaults on payment. -Seller does not need to inform the old buyer if he/she will resell something unless it is not perishable and/or it is expressedly stated in the contract. - Seller is not liable for any profit made by resale, but if he sells for less the price, he has the right to sue the original buyer for the balance Article 1534 When seller may rescind • Has right of lien • Has right to stay the good in transitu • It was expressed in the sales contract in case the buyer should default • The buyer delays the payment for an unreasonable time Effect of Rescission • Seller resumes ownership of the goods • Seller is not liable to the original buyer • Seller recover damages from the original buyer for the loss occassioned by the breach in contract of sale How the seller may rescind By choice of the seller to rescind  Manifested through:  notice of the buyer  through act of intention to rescind Communication of choice to rescind is not necessary BUT IN RESELL: the giving or failure to give a notice is relevant to in determining whether the buyer had been in default for an unreasonable time
  4. 4. Article 1544 Rules as to Preference of Ownership in Double Sales IN CASE OF MOVABLES/CHATTEL/GOODS Between the two buyers, one has preference if : a.) takes possession first b.) in good faith IN CASE OF IMMOVABLES/REAL PROPERTIES 1.) Ownership belongs to the buyer who registers first in good faith in the Registry of Deeds. Registry of Deeds. The designation, in certain jurisdictions, of the public officers who record documents that establish ownership of property, mortgages, and other instruments that relate to real property in official record books provided and maintained for such purpose. Registers of deeds are also known as recorders of deeds. 2.) In the absence of registration, ownership pertains to the buyer who takes possession first and in good faith. 3.) In the absence of registration and possession, ownership shall belong to the buyer who presents the oldest title and in good faith. Article 1598 Buyer’s remedies where seller breaks the contract for sale of goods Remedies a. Fulfillment of specific performance with damages b. Rescission with damages
  5. 5. Article 1599 Breach of Warranty Remedies: a. Accept and recoup b. Accept and maintain an action c. Refuse and maintain an action d. Rescind and recover payment When rescission by the buyer not allowed a. when he accepted the goods knowing of the breach of warranty b. if he fails to notify the seller within a reasonable time of his election to rescind c. if he fails to return or offer to return the goods in substantially as good condition as they were transferred Rights and obligation of buyer in case of rescission 1. Return the goods 2. Recover payment 3. Hold the goods as bailee for the seller if the seller refuse the return of goods 4. Right of lien on the goods