Obligations of the

vendor
Unpaid Seller
 Objectives
At the end of the lecture, the student should be able to:
1. Understand instances when the vendor is not bound to
deliver the thing.
2. Discuss the rights of the buyer when quantity or quality
of goods delivered is different from that which the
seller contracted to sell.
3. Define an unpaid seller.
4. Enumerate the rights of an unpaid seller.
5. Discuss the rules on the sale of real estate on lump sum
and that based on a rate of a certain unit of measure.

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WHEN VENDOR IS NOT BOUND
TO DELIVER
Grounds: THE
Sale is a bilateral THING
contract SOLD
– with reciprocal
obligations

1. If the vendee has not paid him the price.

2. If no period for the payment of the price has been
fixed in the contract.

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WHEN VENDOR IS NOT BOUND
TO DELIVER THE THING SOLD
If a period has been fixed for the payment of the price, the vendor is bound to
deliver the thing sold. However, he is not bound to deliver if the vendee loses the
right to make use of the period as follows:
a. When the vendee becomes insolvent, unless he gives a guaranty or security for
the payment of the price.
b. When the vendee fails to furnish the guaranties or securities that he has
promised.
c. When the guaranties or securities have been impaired through his own acts or
when through a fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory.
d. When the vendee violates any undertaking in consideration of which the
vendor agreed to the period.
e. When the vendee attempts to abscond. 4
Rights of the buyer when
quantity or quality of
goods delivered is
different from that which
the seller contracted to 5
Art 1522
1. When the quantity delivered is LESS than that which
the parties had agreed upon, the buyer may:
a. Reject the goods – Rule: Creditor cannot be compelled to
accept partial payment
b. Accept the goods

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If the buyer accepts the goods (B)
● If he knows that the seller is not going to perform the contract
in full, he must pay for them at the contract rate.
● If he has disposed of the goods before knowing that the seller is
not going to perform the contract in full, the buyer will not be
liable for more than the fair value of the goods received.

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illustration
B ordered 500 cans of sardines from S at P8 per can. On due date,
however, S could deliver only 450 cans. B may:
a) Reject the 450 cans.
b) Accept the 450 cans.
*If B knew S could not deliver the remaining 50 cans, he should pay for the 450
cans received at P8, total of P3,600.

*If B believes that S will deliver the remaining 50 cans (which did not happen) and
B has already disposed of the 450 cans received, he only has to pay the FMV or contract
price whichever is lower.
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Art 1522
When the quantity delivered is more than that which the parties
agreed upon, the buyer may:

a. Accept the goods agreed upon and reject the rest.

b. Accept the whole of the goods delivered and pay for them
at the contract rate.

c. Reject the whole of the goods if they are indivisible.

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illustration
B ordered 500 cans of sardines from S at P8 per can. On due date:
a. If S delivered 520 cans B may accept only 500 and reject the
20.
b. Accept all the 520 cans and pay them at the contract rate,
P8/can.

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illustration
B ordered a container of orange concentrate weighing 20 gallons from S.
S delivered a sealed container weighing 25 gallons.

B may reject the whole 25 gallons because although 5 gallons can be

removed from the container being delivered, still the whole container is
indivisible because punching a hole on it to extract the extra 5 gallons
will destroy the integrity of the product.

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Art 1522
When the seller delivers the goods agreed upon but are mixed
with goods of different description, the buyer may:

a. Accept the goods agreed upon and reject the rest, if the
sale is divisible.

b. Reject the whole of the goods if they are indivisible.

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illustration
a. B ordered 10 sacks of rice from S. S delivered 8 sacks of rice and 2
sacks of corn. B may reject all because the quantity of rice being
delivered is incomplete, while the 2 sacks of corn are of a different
description.
b. If S delivered 10 sacks of rice and 2 sacks of corn, B may accept the
10 sacks of rice and reject the 2 sacks of corn.
c. If S delivered 12 sacks with each sack containing a mixture of rice
and corn, B may reject the whole delivery even if the ratio of rice to
corn is 10:2 in each sack.
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UNPAID
SELLER
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VERY IMPORTANT PROVISION
Art. 1525. The seller of goods is deemed to be an unpaid seller within the meaning of this Title:

(1) When the whole of the price has not been paid or tendered;

(2) When a bill of exchange or other negotiable instrument has been received as conditional payment, and
the condition on which it was received has been broken by reason of the dishonor of the instrument, the
insolvency of the buyer, or otherwise.

In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has been
indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price, or any other
person who is in the position of a seller. (n)

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UNPAID SELLER
One who has not been paid or tendered the whole of the price or
who has received a bill of exchange or other negotiable instrument
as conditional payment and the condition under which it was
received has been broken by reason of the dishonor of the
instrument, the insolvency of the buyer, or otherwise.

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RIGHTS OF AN UNPAID SELLER
(ART 1526)
a. Possessory lien, or a lien on the foods or right to retain them
while he is in possession of them.

This right is available to the seller if he is in possession of the goods (as

agent or bailee) where:

 the goods have been sold without stipulation as to credit;

 if the goods have been sold on credit but the credit term has
expired.

 The buyer is insolvent.

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RIGHTS OF AN UNPAID SELLER
(ART 1526)
b. Lien where there is partial delivery

He may exercise his right of lien in the remainder, unless the partial
delivery is a symbolical delivery of the whole, in which case, the lien
is lost.

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When lien is lost
1. When he delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer WITHOUT RESERVING THE
OWNERSHIP in the goods or the right to the possession thereof.
2. When the buyer or his agent lawfully obtains possession of the
goods.
3. By waiver thereof.

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Right of stoppage in transitu
The right of the unpaid seller to resume possession of the goods
at any time while they are in transit, and he will then become
entitled to the goods as he would have had if he had never parted
with the possession.
Basis is the injustice of allowing the buyer to acquire ownership
and possession of the goods when he has not paid, and owing to
his insolvency, he cannot pay the price in return for the goods.
RESCISSION AND RESTITUTION WHERE THERE IS FAILURE OF CONSIDERATION

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Requisites for the exercise of the Right of
stoppage in transitu
1. The seller must be unpaid.
2. The buyer must be insolvent
3. The goods must be in transit
4. The seller must either actually take possession of the goods
sold or give notice of his claim to the carrier or other person in
possession.
5. The seller must surrender the negotiable document of title if
any, issued by the carrier or bailee.
6. The seller must bear the expenses of delivery of the goods
after the exercise of the right.
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When goods are in transit
1. From the time they are delivered to the carrier or other bailee
for the purpose of transmission to the buyer, until the buyer or
his agent, takes delivery of them from such carrier or other
bailee.
2. If the goods are rejected by the buyer, and the carrier or other
bailee continues in possession of them, even if the seller has
refused to receive them back.

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When goods are no longer in transit
1. If the buyer obtains delivery of the goods before arrival at the
appointed destination.
2. If the carrier or other bailee acknowledges to the buyer or his
agent, that he is holding the goods in his behalf, after arrival of
the goods at their appointed destination.
3. If the carrier or other bailee wrongfully refuses to deliver the
goods to buyer or his agent.

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EFFECTS OF the exercise of the Right of
stoppage in transitu
1. Goods are no longer in transit.
2. The contract of carriage ceases; the carrier shall be liable as
depositary.
3. The carrier must deliver the goods to the seller or his
instructions.
4. If a negotiable document of title issued has not been
surrendered for cancelation, the carrier will bot be bound to
deliver the goods to the seller.

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Right of resale
The unpaid seller may exercise his right of resale when:

1. The buyer has defaulted in the payment of the price.

2. The seller has the right of lien or has stopped the goods in transit.
3. Title to the goods has passed on to the buyer.
4. The grounds must be:

a. The goods are of perishable nature.

b. The seller has expressly reserved the right to resell the goods in case the buyer
should make default.

c. The buyer has been in default for an unreasonable time.

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Right of resale
The seller may resell the goods in a public or private sale. He is bound to
exercise reasonable care and judgment in making the resale. He cannot
directly or indirectly buy the goods.

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Effects of resale
1. The seller shall not be liable to the original buyer upon the contract of
sale or for any profit made by such resale.
2. He may recover damages from the buyer for any loss occasioned by
the breach of contract of sale.
3. The new buyer acquires a good title against the original buyer.

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Importance of notice to the original
buyer
It is not essential to the validity of resale that notice of an intention to
resell the goods be given by the seller to the original buyer. But where the
right to resell is not based on the perishable nature of the goods or upon
an express provision of the contract of sale, the giving or failure to give
such notice shall be relevant in any issue involving the question whether
the buyer had been in default for an unreasonable time before the resale
was made.

It is not essential to the validity of a resale that notice of the time and
place of such resale should be given by the seller to the original buyer.

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Right to rescind the sale
The unpaid seller may rescind the sale if:

1. The buyer has defaulted in the payment of the price.

2. The seller has the right of lien or has stopped the goods in transit.
3. Title to the goods has passed on to the buyer.
4. The grounds must be:

a. The seller has expressly reserved the right to rescind the sale in
case the buyer should make default.

b. The buyer has been in default for an unreasonable time.

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How rescission is made
1. By giving notice to the buyer of the intention to rescind.
2. By doing an overt act manifesting the intention to rescind. (may not be
communicated to the buyer)

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Effects of rescission
1. The seller shall not be liable to the buyer upon the contract of sale.
2. He may recover from the buyer damages for any loss occasioned by
the breach of the contract of sale.
3. The seller resumes ownership of the goods.

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Effect on possessory lien or right of
stoppage in transit if buyer has sold
or disposed
Possessory of the
lien is not affected except:goods
1. When the seller assented to the sale by the buyer.
2. When a negotiable document of title representing the goods has been
negotiated to a purchaser for value in good faith.

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Sale of real estate with a statement
of its area at the rate of a certain
price
If perdiscrepancies
there are unit of measure
between the actual area and
the area measured in the contract, or if a part of the
immovable is not of the quality specified therein, the
following rules shall be observed:

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Art 1539
If the actual area is less than that stated in the contract, the buyer may:
a. Ask for a proportionate reduction in the price if the lack in area is less
than 1/10 of that stated in the contract, unless the vendee would have
not bought the thing had he known of its smaller area, in which case, he
may opt to rescind the sale.
b. rescind the sale if the lack in area is not less than 1/10 of that stated.

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Art 1540
If the actual area is more than that stated in the contract, the buyer may:
a. Accept the are stated in the contract and reject the rest.
b. Accept the whole area and pay for them at the contract rate.

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Art 1539
If the area is the same but a part of it is not the quality specified in the
contract, the buyer may:

a. Ask for a proportionate reduction in the price if the inferior value of

the thing does not exceed 1/10 of the price agreed upon, unless the
vendee would have not bought the thing had he known of its inferior
quality, in which case, he may opt to rescind the sale.
b. rescind the sale if the inferior value of the thing exceeds 1/10 of the
price agreed upon. 36
illustration
S sold to B a lot consisting of 1,500 sqm at the rate of P1,000 per sqm.
1. Suppose the actual area is only 1,400 sqm, what are the rights of B?

a. B may ask for a proportionate reduction in the price since the lack
in the area is less than 1/10 of that stated in the contract (150 vs 100).
Thus B has to pay only 1,400 sqm at P1,000 per sqm, P1.4million.

b. B may ask for rescission of he would not have bought the lot had
he known of its smaller area.

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illustration
S sold to B a lot consisting of 1,500 sqm at the rate of P1,000 per sqm.

2. Suppose the actual area is only 1,300 sqm, what are the rights of B?

a. B may ask for the rescission of the contract because the area
lacking (200sqm) is not less than 1/10 of the area agreed upon.

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illustration
S sold to B a lot consisting of 1,500 sqm at the rate of P1,000 per sqm.

3. Suppose the actual area is 1,600 sqm, what are the rights of B?

a. B may accept the area 1,600 sqm and pay for it at the contract rate.

b. B may accept only 1,500 sqm and reject the rest.

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illustration
S sold to B a lot consisting of 1,500 sqm at the rate of P1,000 per sqm.
Assume the actual area is 1,500 sqm.

4. Suppose 200 sqm should be priced only at P950/sqm because of

inferior quality, what are the rights of B?

ANS: Since the inferior value of P50 does not exceed 1/10 of the price
agreed upon (P1,000 * 1/10 = 100):
a. B may ask for a proportionate reduction in the price by paying only
P1,490,000 (1,300sqm*P1,000 + 200sqm*950)
b. B may rescind the sale if he would have not bought the lot had he
known that a part thereof is of inferior value.

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illustration
S sold to B a lot consisting of 1,500 sqm at the rate of P1,000 per sqm.
Assume the actual area is 1,500 sqm.

4. Suppose 200 sqm should be priced only at P800 per sqm because of
inferior quality, what are the rights of B?

ANS: In this case, the inferior value (P200 exceeds) 1/10 of the value agreed
upon, B may ask for the rescission of the contract.

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Sale of real estate for a lump sum
and not at the rate of a certain sum
fortoabeunit
Area deliveredof measure

– the vendor is bound to deliver all that is included within the boundaries
stated in the contract although there be grater or less area than that
stated in the contract

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Sale of real estate for a lump sum
and not at the rate of a certain sum
fortoabeunit
Price ofvendee
paid by the measure
– vendee should pay the lump sum stipulated with no increase or decrease
in the price although there be greater or less area than that stated in the
contract.

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Sale of real estate for a lump sum
and not at the rate of a certain sum
for
Buyer’s a unit
remedies of
if the measure
vendor does not deliver the area within the
boundaries stated in the contract:

a. Buyer may ask for a proportionate reduction in the price

b. Rescind the contract

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Rules of preference in case of double
sale
● Movable property – first possessor in good faith
(actual or constructive)
● Immovable property – based on the following order
1. Registrant in good faith
2. Possessor in good faith
3. Oldest title in good faith

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Accessories and accessions of the
object of the contract of sale
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.

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