Chapter 9

GENERAL PROVISIONS

Art. 1636. In the preceding articles in this Title governing the sale of goods,
unless the context or subject matter otherwise requires:

(1) "Document of title to goods" includes any bill of lading, dock warrant,

"quedan," or warehouse receipt or order for the delivery of goods, or any other
document used in the ordinary course of business in the sale or transfer of
goods, as proof of the possession or control of the goods, or authorizing or
purporting to authorize the possessor of the document to transfer or receive,
either by endorsement or by delivery, goods represented by such document.

"Goods" includes all chattels personal but not things in action or money of legal
tender in the Philippines. The term includes growing fruits or crops.

"Order" relating to documents of title means an order by endorsement on the

documents.

"Quality of goods" includes their state or condition.

"Specific goods" means goods identified and agreed upon at the time a contract
of sale is made.

An antecedent or pre-existing claim, whether for money or not, constitutes

"value" where goods or documents of title are taken either in satisfaction thereof
or as security therefor.

(2) A person is insolvent within the meaning of this Title who either has ceased to
pay his debts in the ordinary course of business or cannot pay his debts as they
become due, whether insolvency proceedings have been commenced or not.

(3) Goods are in a "deliverable state" within the meaning of this Title when they
are in such a state that the buyer would, under the contract, be bound to take
delivery of them. (n)

Definition of terms.

This article defines or explains the various terms used in the preceding articles
governing the sale of goods. They hardly require comment. The definitions in this article do not
apply if the context or subject matter of any particular portion of the law otherwise requires.

(1) “Goods” does not include things or chooses in action or negotiable instruments.
A chose in action is any claim or right which may be pleaded in a suit at law, such as a claim of
reparation for a tort or quasi-delict, or a right acquired under a contract. Stock certificates,
however, have been held to be goods within the meaning of the U.S. Uniform Sales Act. (Babb
& Martin, op. cit., p. 86.) Real property is not the proper subject of a transaction involving a
sale of goods within the definition of the term. However, growing crops or fruits which are
agreed to be severed under the contract of sale are treated as goods and not as interest in
reality.

The (U.S.) Uniform Commercial Code excludes money from the term “goods” but only
where money is the medium of payment. Said another way, money in which the price is to be
paid for the goods involved, is not to be considered part of the goods which are the subject
matter of the transaction. Said Code (Sec. 2-105 thereof) specifically provides that money,
when treated as a commodity, is a good and the contract formed out of the transaction is one
for the sale of goods. (1 Williston, 4th ed., p. 152.)

Any transaction between the parties, even if in the form of an unconditional contract to
sell or when if in the form of present sale, is excluded from the sale of goods if the parties to
the transaction intended that the transaction operate only as a security transaction but the
provision on sales will govern the general sales aspects of such transaction.(Ibid., p.176.)

(2) Ascertained goods means goods that are identified and agreed upon as forming
the subject matter of the bargain. They are “specific” if they are identified and agreed upon at
the time the contract of sale is made. If identification takes place afterward, the goods are
specified but not specific. Existing goods (owned or possessed by the seller) may or not be
specific. Future goods (to be manufactured or acquired by the seller after the making of the
contract to sell) cannot be specific. (Ibid., pp. 101-102.)

Art. 1637. The provisions of this Title are subject to the rules laid down by the
Mortgage Law and the Land Registration Law with regard to immovable property.

Sale of immovable subject to registration law.

Under the Spanish Mortgage Law and the Land Registration Law, the registration of
documents or titles pertaining to immovable property is the operative act that binds the
property and serves as constructive notice to the public. This means that the rights of third
persons are not adversely affected by the sale of immovable property until after its
registration.

The Spanish Mortgage Law has been discontinued by Presidential Decree No. 892.
This discontinuance was reiterated in Presidential Decree No. 1529, the Property Registration
Decree, which superseded Act No. 496, as amended, the Land Registration Law. Under the
decree, “no deed, mortgage, lease or other voluntary instrument, except the will purporting to
convey or affect registered land shall take effect as a conveyance or bind the land, but shall
operate only as a contract between the parties and as evidence of authority to the Register of
Deeds to make registration. The act of registration shall be the operative act to convey or
affect the land insofar as third persons are concerned.” (Sec. 51 thereof.)”The registration shall
be made in the office of the Register of Deeds for the province or city where the land lies.”
(Sec. 51 thereof.)