Topic Outline

I. Who is an unpaid seller?

II. Remedies of an Unpaid Seller
A. Ordinary
1. Action for Price
2. Action for ama!es
". Special
1. Possessory lien
2. Stoppa!e in transit
#. Ri!ht to resell
$. Ri!ht to rescind
I. WHO IS AN UNPAID SELLER?
The seller of !oods is deemed to %e an unpaid seller &ithin the
meanin! of this Title'
(1) When the &hole of the price has not %een paid or tendered*
(2) When a %ill of e+chan!e or other ne!otia%le instrument has %een recei,ed
as conditional payment- and the condition on &hich it &as recei,ed has
%een %ro.en %y reason of the dishonor of the instrument- the insol,ency of
the %uyer- or other&ise. (Art. 1/2/- 011)
The term "seller" includes an a!ent of the seller to &hom the %ill of
ladin! has %een indorsed- or a consi!nor or a!ent &ho has himself paid-
or is directly responsi%le for the price- or any other person &ho is in the
position of a seller. (Art. 1/2/- 011)
II. REMEDIES OF AN UNPAID SELLER
A. Ordinary
1. Action for Price
An action for price is e+ercised &hen'
a. O&nership has passed to the %uyer*
%. Price is paya%le on a day certain*
c. 2oods cannot readily %e resold for a reasona%le price
2. Action for Daa!e"
Where- under a contract of sale- the o&nership of the !oods has
passed to the %uyer and he &ron!fully ne!lects or refuses to pay for the
!oods accordin! to the terms of the contract of sale- the seller may
maintain an action a!ainst him for the price of the !oods. (Art. 1/3/- 011)
#. S$ecia%
1. Po""e""ory Lien
&: When is the right to retain the goods available to the unpaid seller?
The unpaid seller of !oods &ho is in possession of them is entitled
to retain possession of them until payment or tender of the price in the
follo&in! cases- namely'
(1) Where the !oods ha,e %een sold &ithout any stipulation as to credit*
(2) Where the !oods ha,e %een sold on credit- %ut the term of credit has
e+pired*
(#) Where the %uyer %ecomes insol,ent.
The seller may e+ercise his ri!ht of lien not&ithstandin! that he is in
possession of the !oods as a!ent or %ailee for the %uyer. (Art. 1/24- 011)
&' When part of the goods had already been delivered, may the seller
exercise his possessory lien on the remainder?
Where an unpaid seller has made part deli,ery of the !oods- he
may e+ercise his ri!ht of lien on the remainder- unless such part deli,ery
has %een made under such circumstances as to sho& an intent to &ai,e
the lien or ri!ht of retention. (Art. 1/25- 011)
&' When does the unpaid seller lose his lien on the goods?
The unpaid seller of !oods loses his lien thereon'
(1) When he deli,ers the !oods to a carrier or other %ailee for the purpose
of transmission to the %uyer &ithout reser,in! the o&nership in the !oods
or the ri!ht to the possession thereof*
(2) When the %uyer or his a!ent la&fully o%tains possession of the !oods*
(#) "y &ai,er thereof.
Problem: S sold " a specific diamond rin! to %e paid in si+ months. "y
mutual a!reement- " is already the o&ner- %ut S &ill act as the depositary
of the rin! in the meantime. If the term e+pires- and " has not yet paid-
may S still continue possessin! the rin! e,en if he is no lon!er the o&ner?
A' 6es- for he has 0OT %een paid. 7is no lon!er %ein! the o&ner is not
important- for the la& says' 8The seller may e+ercise his ri!ht of lien
not&ithstandin! that he is in possession of the !oods as a!ent or %ailee
for the %uyer.9 (Art. 1/24- 011)
Problem: An unpaid seller still in possession of the !oods sold %rou!ht an
action to !et the purchase price? oes he lose his lien?
A' 0o- for the %rin!in! of the action is not &ays of losin! possessory lien.
The unpaid seller of !oods- ha,in! a lien thereon- does not lose his lien %y
reason only that he has o%tained :ud!ment or decree for the price of the
!oods. (Art. 1/23- 011)
Problem: An unpaid seller- &ho possessed the !oods thru a
&arehouseman- deli,ered to the %uyer a ne!otia%le &arehouse receipt.
oes the unpaid seller still ha,e possessory lien?
A' 0o more- for the ne!otia%le &arehouse receipt automatically
transferred %oth title and ri!ht of possession to the !ood in the %uyer.
Under Art. 1/23 of the 011- the unpaid seller loses his lien &hen the
%uyer or his a!ent la&fully o%tains possession of the !oods.
2. Sto$$a!e in tran"it(
&' What is meant by the right of stoppage in transit?
A' The ri!ht of stoppa!e in transitu refers to the ri!ht of the unpaid seller to
resume possession of the !oods at any time &hile they are in transit- and
he &ill then %ecome entitled to the same ri!hts in re!ard to the !oods as
he &ould ha,e had if he had ne,er parted &ith the possession. (Art. 1/#;-
011)
&' When is the right of stoppage in transit available to the seller?
A' This ri!ht is a,aila%le to the unpaid seller &ho has parted &ith the
possession of the !oods and the %uyer of !oods is or %ecomes insol,ent.
(Art. 1/#;- 011)
&' How is the right of stoppage in transit exercised?
A' The unpaid seller may e+ercise his ri!ht of stoppa!e in transitu either
%y o%tainin! actual possession of the !oods or %y !i,in! notice of his
claim to the carrier or other %ailee in &hose possession the !oods are.
Such notice may %e !i,en either to the person in actual possession of the
!oods or to his principal. In the latter case the notice- to %e effectual- must
%e !i,en at such time and under such circumstances that the principal- %y
the e+ercise of reasona%le dili!ence- may pre,ent a deli,ery to the %uyer.
When notice of stoppa!e in transitu is !i,en %y the seller to the
carrier- or other %ailee in possession of the !oods- he must redeli,er the
!oods to- or accordin! to the directions of- the seller. The e+penses of
such deli,ery must %e %orne %y the seller. If- ho&e,er- a ne!otia%le
document of title representin! the !oods has %een issued %y the carrier or
other %ailee- he shall not o%li!ed to deli,er or :ustified in deli,erin! the
!oods to the seller unless such document is first surrendered for
cancellation. (Art. 1/#2- 011)
&' When are goods considered in transit?
2oods are in transit &ithin the meanin! of the precedin! article'
(1) <rom the time &hen they are deli,ered to a carrier %y land- &ater- or
air- or other %ailee for the purpose of transmission to the %uyer- until the
%uyer- or his a!ent in that %ehalf- ta.es deli,ery of them from such carrier
or other %ailee*
(2) If the !oods are re:ected %y the %uyer- and the carrier or other %ailee
continues in possession of them- e,en if the seller has refused to recei,e
them %ac.. (Art. 1/#1- 011)
&' When are goods considered not in transit?
2oods are no lon!er in transit &ithin the meanin! of the precedin!
article'
(1) If the %uyer- or his a!ent in that %ehalf- o%tains deli,ery of the !oods
%efore their arri,al at the appointed destination*
(2) If- after the arri,al of the !oods at the appointed destination- the carrier
or other %ailee ac.no&led!es to the %uyer or his a!ent that he holds the
!oods on his %ehalf and continues in possession of them as %ailee for the
%uyer or his a!ent* and it is immaterial that further destination for the
!oods may ha,e %een indicated %y the %uyer*
(#) If the carrier or other %ailee &ron!fully refuses to deli,er the !oods to
the %uyer or his a!ent in that %ehalf. (Art. 1/#1- 011)
&' What are the effects of the Exercise of the Right of toppage in
!ransit(?
After the e+ercise of the ri!ht of stoppa!e in transit- the
conse=uential effects are'
(1) The !oods are no lon!er in transit*
(2) The contract of carria!e ends* instead- the carrier no& %ecomes a
mere %ailee- and &ill %e lia%le as such.
(#) The carrier should not deli,er anymore to the %uyer or the latter>s
a!ent* other&ise- he &ill clearly %e lia%le for dama!es.
($) The carrier must redeli,er to- or accordin! to the directions of- the
seller.
Problem: Suppose that the %uyer sold the !oods to another %efore the
unpaid seller could e+ercise his ri!ht of lien or his ri!ht of stoppa!e in
transit- &hat is the effect of such sale upon the latter>s ri!ht?
A' The unpaid seller>s ri!ht of lien or stoppa!e in transit is not affected-
unless he has assented thereto.
7o&e,er- a ne!otia%le document of title has %een issued for !oods-
no seller?s lien or ri!ht of stoppa!e in transitu shall defeat the ri!ht of any
purchaser for ,alue in !ood faith to &hom such document has %een
ne!otiated- &hether such ne!otiation %e prior or su%se=uent to the
notification to the carrier- or other %ailee &ho issued such document- of
the seller?s claim to a lien or ri!ht of stoppa!e in transitu. (Art. 1/#/- 011)
). Ri!*t to Re"e%%
&' When is the right of resale available to the unpaid seller?
A' The ri!ht of resale is a,aila%le to the unpaid seller of !oods in the
follo&in! cases'
(1) Where the !oods are of perisha%le nature*
(2) Where the seller has e+pressly reser,ed the ri!ht of resale in case the
%uyer should ma.e default*
(#) Where the %uyer has %een in default in the payment of the price for an
unreasona%le time.
&' What is the effect of such resale?
W*ere a re"a%e i" ade+ a" a(t*ori,ed in t*i" artic%e+ t*e -(yer
ac.(ire" a !ood tit%e a" a!ain"t t*e ori!ina% -(yer.
": How is a resale effected?
A' The seller is %ound to e+ercise reasona%le care and :ud!ment in
ma.in! a resale- and su%:ect to this re=uirement may ma.e a resale either
%y pu%lic or pri,ate sale. 7e cannot- ho&e,er- directly or indirectly %uy the
!oods.
&: # it essential that notice of such resale should be given to the
original buyer?
It is not essential to the ,alidity of resale that notice of an intention
to resell the !oods %e !i,en %y the seller to the ori!inal %uyer. "ut &here
the ri!ht to resell is not %ased on the perisha%le nature of the !oods or
upon an e+press pro,ision of the contract of sale- the !i,in! or failure to
!i,e such notice shall %e rele,ant in any issue in,ol,in! the =uestion
&hether the %uyer had %een in default for an unreasona%le time %efore the
resale &as made.
/. Ri!*t to re"cind
&' How is the right to rescind exercised?
An unpaid seller ha,in! the ri!ht of lien or ha,in! stopped the
!oods in transitu- may rescind the transfer of title and resume the
o&nership in the !oods- &here he e+pressly reser,ed the ri!ht to do so in
case the %uyer should ma.e default- or &here the %uyer has %een in
default in the payment of the price for an unreasona%le time. The seller
shall not thereafter %e lia%le to the %uyer upon the contract of sale- %ut
may reco,er from the %uyer dama!es for any loss occasioned %y the
%reach of the contract.
The transfer of title shall not %e held to ha,e %een rescinded %y an
unpaid seller until he has manifested %y notice to the %uyer or %y some
other o,ert act an intention to rescind. It is not necessary that such o,ert
act should %e communicated to the %uyer- %ut the !i,in! or failure to !i,e
notice to the %uyer of the intention to rescind shall %e rele,ant in any issue
in,ol,in! the =uestion &hether the %uyer had %een in default for an
unreasona%le time %efore the ri!ht of rescission &as asserted. (Art. 1/#$-
011)