Professional Documents
Culture Documents
Iv. Rights of The Unpaid Seller (Arts. 1525-1535)
Iv. Rights of The Unpaid Seller (Arts. 1525-1535)
1525-1535)
I. Definition of unpaid seller (1525)
A. What the term “seller” includes (1525)
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 and 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.
An unpaid seller is one who has not been paid or tendered the whole price or who has received
a bill of exchange or other negotiable instrument as conditional payment and the condition on which it
was received has been broken by reason of the dishonor of the instrument.
The term “unpaid seller” within the scope of Articles 1525 up to 1535 includes: (1) an agent of
the seller; (2) a consignor or agent who has himself paid or is directly responsible for the price; or (3) any
other person in the position of the seller. A seller is unpaid within the definition whether title has or has
not passed.
If the unpaid seller still retains ownership in the goods, he cannot be said to have a lien (on his
goods). But he does have, in addition to his other remedies, right of withholding delivery.
1. Where the goods have been sold without any stipulation as to credit – In a credit sale, the
seller binds himself to give the goods over to the buyer without receiving at that time
payment for them. Where there is a “stipulation as to credit”, a period for payment of the
price has been fixed in the contract. (see Art. 1193.)
In the absence of any stipulation as to the credit, the seller is entitled to the payment of
the price at the same time that he transfers the possession of the goods. Accordingly, the
seller has always a lien upon the goods which he sells until payment or tender of the entire
price.
2. Where the goods have been sold on credit, but the term of credit has expired – Even
where the parties agree upon a sale on credit, the seller’s right of lien may be exercised. By
the nature of a credit sale, the buyer is entitled to possession of the goods without paying
the price; but if he fails to exercise his right until the term of credit has expired and the price
becomes due, he loses the right which he theretofore had. In this case, the obligation of the
buyer to pay will also be governed by Article 1524.
3. Where the buyer becomes insolvent – This doctrine is only an application of a general
principle in the law of contracts that when one party to a bilateral contract is incapacitated
from performing his part of the agreement, the other party also is excused from performing.
It should be noticed that insolvency does not dissolve the bargain; it merely revives the
seller’s lien.
The insolvency of the debtor is one of the grounds for the loss of the right to make use
of the period fixed in an obligation. A person is “insolvent” 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.
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 – An unconditional delivery to an agent or bailee for the buyer is, so far as the
seller’s lien is concerned, the same as delivery to the buyer himself. It is true that the seller
may stop the goods while on their way to the buyer after delivery to a bailee for the buyer
but it cannot be said that the seller has still any lien upon them.
2. When the buyer or his agent lawfully obtains possession of the goods – If the goods are
already in the possession of the buyer at the time of the bargain, it is plain that when the
ownership is transferred, the seller has no lien simply because he has no possession
necessary for a lien. The wrongful taking, however, of the goods by the buyer without the
seller’s consent does not destroy the lien. Thus, if the goods are put into the possession of
the buyer merely for the purpose of allowing the latter to examine them, this would not
amount to an assent to a surrender of the lien.
3. By waiver thereof. The unpaid seller of goods, having a lien thereon, does not lose his lien
by reason only that he has obtained judgment or decree for the price of the goods – The
seller may lose his lien either by express agreement to surrender it. Thus, it has been held
that where the buyer was allowed to alter the character of the goods and make them much
more valuable, the seller could no longer assert a lien.
B. Right of stoppage in transitu (1526, No. 2)
ART. 1534. An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind
the transfer of title and resume the ownership in the goods, where he expressly reserved the right to do
so in case the buyer should make default, or where the buyer has been in default in the payment of the
price for an unreasonable time. The seller shall not thereafter be liable to the buyer upon the contract of
sale, but may recover from the buyer damages for any loss occasioned by the breach of the contract.
The third right of an unpaid seller is the right of resale. (Art. 1526[3].) An unpaid
seller can exercise the right to resell only when he has either a right of lien or a right to
stop the goods in transitu and under any of the three following cases:
Article 1533 provides that the seller having the right “may resell the goods.” The
language is permissive in nature rather than mandatory
2. Exception
c. Manner of resale
i. Any absolute rule requiring the formality of an auction sale might bear harshly on the
seller in case where the goods are of small value and the buyer is financially
irresponsible. The law “is satisfied with a fair sale made in good faith according to the
established business methods with no attempt to take advantage of the vendee.” The
seller is only required to exercise reasonable care and judgment in making a resale. He
cannot, however, directly or indirectly, buy the goods.
The transfer of title shall not be held to have been rescinded by an unpaid seller until he
has manifested by notice to the buyer or by some other overt act an intention to rescind. It is
not necessary that such overt act should be communicated to the buyer, but the giving or failure
to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the
question whether the buyer had been in default for an unreasonable time before the right of
re scission was asserted.
c. Effect of rescission
In the case of rescission, the seller resumes ownership in the goods. While the seller
shall not be liable to the buyer upon the contract of sale, the latter, however, may be made
liable to the seller for damages for any loss occasioned by the breach of contract.