An unpaid seller is one who has not received full payment for goods from the buyer. An unpaid seller has several remedies available, including: 1. Retaining possession of the goods (lien) until payment is made if the goods are still in the seller's possession. 2. Stopping goods in transit if the buyer becomes insolvent before delivery. 3. Reselling the goods to recover the unpaid price if the buyer defaults, as long as the seller provides proper notice. 4. Rescinding the sale if given the right of lien or stoppage in transit, if the buyer delays unreasonable payment, or if expressed in the contract. The document outlines the rights and remedies

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. - 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. 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. 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. 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