June 18, 1949
The Civil Code of the Philippines
AN ACT TO ORDAIN AND INSTITUTE THE CIVIL CODE OF THE PHILIPPINES
BOOK IV
Obligations and Contracts
TITLE I
Obligations
CHAPTER 1
General Provisions
ARTICLE 1156. An obligation is a juridical necessity to give, to do or not to do. (n) acd
ARTICLE 1157. Obligations arise from: Liaiim
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (1089a)
ARTICLE 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. (1090)
ARTICLE 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a)
ARTICLE 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. (n)
ARTICLE 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. (1092a)
ARTICLE 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a)
CHAPTER 2
Nature and Effect of Obligations
ARTICLE 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. (1094a)
ARTICLE 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. (1095)
ARTICLE 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. (1096)
ARTICLE 1166. The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. (1097a)
ARTICLE 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (1098)
ARTICLE 1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. (1099a)
ARTICLE 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (1100a)
ARTICLE 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. (1101)
ARTICLE 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. (1102a)
ARTICLE 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. (1103)
ARTICLE 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. (1104a)
ARTICLE 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. (1105a)
ARTICLE 1175. Usurious transactions shall be governed by special laws. (n)
ARTICLE 1176. The receipt of the principal by the creditor, without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid.
The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that such installments have been paid. (1110a)
ARTICLE 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. (1111)
ARTICLE 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (1112)
CHAPTER 3
Different Kinds of Obligations
SECTION 1
Pure and Conditional Obligations
ARTICLE 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once.
Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. (1113)
ARTICLE 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of article 1197. (n)
ARTICLE 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. (1114)
ARTICLE 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. (1115)
ARTICLE 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid.
The condition not to do an impossible thing shall be considered as not having been agreed upon. (1116a)
ARTICLE 1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place. (1117)
ARTICLE 1185. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur.
If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated, bearing in mind the nature of the obligation. (1118)
ARTICLE 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. (1119)
ARTICLE 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different.
In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. (1120)
ARTICLE 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right.
The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. (1121a)
ARTICLE 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. (1122)
ARTICLE 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received.
In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return.
As for obligations to do and not to do, the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. (1123)
ARTICLE 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law. (1124)
ARTICLE 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. (n)
SECTION 2
Obligations with a Period
ARTICLE 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.
Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily come, although it may not be known when.
If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. (1125a)
ARTICLE 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in article 1189 shall be observed. (n)
ARTICLE 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests. (1126a)
ARTICLE 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. (1127)
ARTICLE 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. (1128a)
ARTICLE 1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond. (1129a)
SECTION 3
Alternative Obligations
ARTICLE 1199. A person alternatively bound by different prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131)
ARTICLE 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.
The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation. (1132)
ARTICLE 1201. The choice shall produce no effect except from the time it has been communicated. (1133)
ARTICLE 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable. (1134)
ARTICLE 1203. If through the creditor’s acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. (n)
ARTICLE 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the compliance of the obligation has become impossible.
The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which last became impossible.
Damages other than the value of the last thing or service may also be awarded. (1135a)
ARTICLE 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor.
Until then the responsibility of the debtor shall be governed by the following rules:
(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which the creditor should choose from among the remainder, or that which remains if only one subsists;
(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages;
(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages.
The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations should become impossible. (1136a)
ARTICLE 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative.
The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud. (n)
SECTION 4
Joint and Solidary Obligations
ARTICLE 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (1137a)
ARTICLE 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits. (1138a)
ARTICLE 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share. (1139)
ARTICLE 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. (n)
ARTICLE 1211. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. (1140)
ARTICLE 1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter. (1141a)
ARTICLE 1213. A solidary creditor cannot assign his rights without the consent of the others. (n)
ARTICLE 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him. (1142a)
ARTICLE 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of article 1219.
The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them. (1143)
ARTICLE 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. (1144a)
ARTICLE 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. (1145a)
ARTICLE 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. (n)
ARTICLE 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected. (1146a)
ARTICLE 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. (n)
ARTICLE 1221. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors, the obligation shall be extinguished.
If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor.
If through a fortuitous event, the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor, the provisions of the preceding paragraph shall apply. (1147a)
ARTICLE 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible. (1148a)
SECTION 5
Divisible and Indivisible Obligations
ARTICLE 1223. The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title. (1149)
ARTICLE 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. (1150)
ARTICLE 1225. For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible.
However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties.
In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each particular case. (1151a)
SECTION 6
Obligations with a Penal Clause
ARTICLE 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.
The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. (1152a)
ARTICLE 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his fault, the penalty may be enforced. (1153a)
ARTICLE 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. (n)
ARTICLE 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. (1154a)
ARTICLE 1230. The nullity of the penal clause does not carry with it that of the principal obligation.
The nullity of the principal obligation carries with it that of the penal clause. (1155)
CHAPTER 4
Extinguishment of Obligations
General Provisions
ARTICLE 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (1156a)
SECTION 1
Payment or Performance
ARTICLE 1232. Payment means not only the delivery of money but also the performance, in any other manner, of an obligation. (n)
ARTICLE 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. (1157)
ARTICLE 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. (n)
ARTICLE 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. (n)
ARTICLE 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. (1158a)
ARTICLE 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty. (1159a)
ARTICLE 1238. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which requires the debtor’s consent. But the payment is in any case valid as to the creditor who has accepted it. (n)
ARTICLE 1239. In obligations to give, payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid, without prejudice to the provisions of article 1427 under the Title on “Natural Obligations.” (1160a)
ARTICLE 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. (1162a)
ARTICLE 1241. Payment to a person who is incapacitated to administer his property shall be valid if he has kept the thing delivered, or insofar as the payment has been beneficial to him.
Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. Such benefit to the creditor need not be proved in the following cases:
(1) If after the payment, the third person acquires the creditor’s rights;
(2) If the creditor ratifies the payment to the third person;
(3) If by the creditor’s conduct, the debtor has been led to believe that the third person had authority to receive the payment. (1163a)
ARTICLE 1242. Payment made in good faith to any person in possession of the credit shall release the debtor. (1164)
ARTICLE 1243. Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. (1165)
ARTICLE 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due.
In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee’s will. (1166a)
ARTICLE 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n)
ARTICLE 1246. When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. (1167a)
ARTICLE 1247. Unless it is otherwise stipulated, the extrajudicial expenses required by the payment shall be for the account of the debtor. With regard to judicial costs, the Rules of Court shall govern. (1168a)
ARTICLE 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither may the debtor be required to make partial payments.
However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter. (1169a)
ARTICLE 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in abeyance. (1170)
ARTICLE 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. (n)
ARTICLE 1251. Payment shall be made in the place designated in the obligation.
There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be made wherever the thing might be at the moment the obligation was constituted.
In any other case the place of payment shall be the domicile of the debtor.
If the debtor changes his domicile in bad faith or after he has incurred in delay, the additional expenses shall be borne by him.
These provisions are without prejudice to venue under the Rules of Court. (1171a)
SUBSECTION 1
Application of Payments
ARTICLE 1252. He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract. (1172a)
ARTICLE 1253. If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered. (1173)
ARTICLE 1254. When the payment cannot be applied in accordance with the preceding rules, or if application can not be inferred from other circumstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately. (1174a)
SUBSECTION 2
Payment by Cession
ARTICLE 1255. The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws. (1175a)
SUBSECTION 3
Tender of Payment and Consignation
ARTICLE 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following cases:
(1) When the creditor is absent or unknown, or does not appear at the place of payment;
(2) When he is incapacitated to receive the payment at the time it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to collect;
(5) When the title of the obligation has been lost. (1176a)
ARTICLE 1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation.
The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. (1177)
ARTICLE 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.
The consignation having been made, the interested parties shall also be notified thereof. (1178)
ARTICLE 1259. The expenses of consignation, when properly made, shall be charged against the creditor. (1179)
ARTICLE 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation.
Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force. (1180)
ARTICLE 1261. If, the consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall be released. (1181a)
SECTION 2
Loss of the Thing Due
ARTICLE 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. (1182a)
ARTICLE 1263. In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation. (n)
ARTICLE 1264. The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation. (n)
ARTICLE 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of article 1165. This presumption does not apply in case of earthquake, flood, storm or other natural calamity. (1183a)
ARTICLE 1266. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. (1184a)
ARTICLE 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. (n)
ARTICLE 1268. When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the payment of its price, whatever may be the cause for the loss, unless the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it. (1185)
ARTICLE 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. (1186)
SECTION 3
Condonation or Remission of the Debt
ARTICLE 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly.
One and the other kinds shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation. (1187)
ARTICLE 1271. The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action which the former had against the latter.
If in order to nullify this waiver it should be claimed to be inofficious, the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. (1188)
ARTICLE 1272. Whenever the private document in which the debt appears is found in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved. (1189)
ARTICLE 1273. The renunciation of the principal debt shall extinguish the accessory obligations; but the waiver of the latter shall leave the former in force. (1190)
ARTICLE 1274. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged, after its delivery to the creditor, is found in the possession of the debtor, or of a third person who owns the thing. (1191a)
SECTION 4
Confusion or Merger of Rights
ARTICLE 1275. The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person. (1192a)
ARTICLE 1276. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. Confusion which takes place in the person of any of the latter does not extinguish the obligation. (1193)
ARTICLE 1277. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. (1194)
SECTION 5
Compensation
ARTICLE 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. (1195)
ARTICLE 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. (1196)
ARTICLE 1280. Notwithstanding the provisions of the preceding article, the guarantor may set up compensation as regards what the creditor may owe the principal debtor. (1197)
ARTICLE 1281. Compensation may be total or partial. When the two debts are of the same amount, there is a total compensation. (n)
ARTICLE 1282. The parties may agree upon the compensation of debts which are not yet due. (n)
ARTICLE 1283. If one of the parties to a suit over an obligation has a claim for damages against the other, the former may set it off by proving his right to said damages and the amount thereof. (n)
ARTICLE 1284. When one or both debts are rescissible or voidable, they may be compensated against each other before they are judicially rescinded or avoided. (n)
ARTICLE 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person, cannot set up against the assignee the compensation which would pertain to him against the assignor, unless the assignor was notified by the debtor at the time he gave his consent, that he reserved his right to the compensation.
If the creditor communicated the cession to him but the debtor did not consent thereto, the latter may set up the compensation of debts previous to the cession, but not of subsequent ones.
If the assignment is made without the knowledge of the debtor, he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment. (1198a)
ARTICLE 1286. Compensation takes place by operation of law, even though the debts may be payable at different places, but there shall be an indemnity for expenses of exchange or transportation to the place of payment. (1199a)
ARTICLE 1287. Compensation shall not be proper when one of the debts arises from a depositum or from the obligations of a depositary or of a bailee in commodatum.
Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title, without prejudice to the provisions of paragraph 2 of article 301. (1200a)
ARTICLE 1288. Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense. (n)
ARTICLE 1289. If a person should have against him several debts which are susceptible of compensation, the rules on the application of payments shall apply to the order of the compensation. (1201)
ARTICLE 1290. When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation. (1202a)
SECTION 6
Novation
ARTICLE 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor. (1203)
ARTICLE 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other. (1204)
ARTICLE 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237. (1205a)
ARTICLE 1294. If the substitution is without the knowledge or against the will of the debtor, the new debtor’s insolvency or non-fulfillment of the obligation shall not give rise to any liability on the part of the original debtor. (n)
ARTICLE 1295. The insolvency of the new debtor, who has been proposed by the original debtor and accepted by the creditor, shall not revive the action of the latter against the original obligor, except when said insolvency was already existing and of public knowledge, or known to the debtor, when he delegated his debt. (1206a)
ARTICLE 1296. When the principal obligation is extinguished in consequence of a novation, accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent. (1207)
ARTICLE 1297. If the new obligation is void, the original one shall subsist, unless the parties intended that the former relation should be extinguished in any event. (n)
ARTICLE 1298. The novation is void if the original obligation was void, except when annulment may be claimed only by the debtor, or when ratification validates acts which are voidable. (1208a)
ARTICLE 1299. If the original obligation was subject to a suspensive or resolutory condition, the new obligation shall be under the same condition, unless it is otherwise stipulated. (n)
ARTICLE 1300. Subrogation of a third person in the rights of the creditor is either legal or conventional. The former is not presumed, except in cases expressly mentioned in this Code; the latter must be clearly established in order that it may take effect. (1209a)
ARTICLE 1301. Conventional subrogation of a third person requires the consent of the original parties and of the third person. (n)
ARTICLE 1302. It is presumed that there is legal subrogation:
(1) When a creditor pays another creditor who is preferred, even without the debtor’s knowledge;
(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter’s share. (1210a)
ARTICLE 1303. Subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation. (1212a)
ARTICLE 1304. A creditor, to whom partial payment has been made, may exercise his right for the remainder, and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit. (1213)
TITLE II
Contracts
CHAPTER 1
General Provisions
ARTICLE 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (1254a)
ARTICLE 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)
ARTICLE 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles I and II of this Book, by the rules governing the most analogous nominate contracts, and by the customs of the place. (n)
ARTICLE 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. (1256a)
ARTICLE 1309. The determination of the performance may be left to a third person, whose decision shall not be binding until it has been made known to both contracting parties. (n)
ARTICLE 1310. The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall decide what is equitable under the circumstances. (n)
ARTICLE 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (1257a)
ARTICLE 1312. In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws. (n)
ARTICLE 1313. Creditors are protected in cases of contracts intended to defraud them. (n) emmrum
ARTICLE 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. (n)
ARTICLE 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (1258)
ARTICLE 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation. (n)
ARTICLE 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. (1259a)
CHAPTER 2
Essential Requisites of Contracts
General Provisions
ARTICLE 1318. There is no contract unless the following requisites concur: dstwmi
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)
SECTION 1
Consent
ARTICLE 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1262a)
ARTICLE 1320. An acceptance may be express or implied. (n)
ARTICLE 1321. The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with. (n)
ARTICLE 1322. An offer made through an agent is accepted from the time acceptance is communicated to him. (n)
ARTICLE 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. (n)
ARTICLE 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. (n)
ARTICLE 1325. Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer. (n)
ARTICLE 1326. Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. (n)
ARTICLE 1327. The following cannot give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)
ARTICLE 1328. Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. (n)
ARTICLE 1329. The incapacity declared in article 1327 is subject to the modifications determined by law, and is understood to be without prejudice to special disqualifications established in the laws. (1264)
ARTICLE 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a)
ARTICLE 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.
Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract.
A simple mistake of account shall give rise to its correction. (1266a)
ARTICLE 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. (n)
ARTICLE 1333. There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. (n)
ARTICLE 1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent. (n)
ARTICLE 1335. There is violence when in order to wrest consent, serious or irresistible force is employed.
There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.
To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind.
A threat to enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate consent. (1267a)
ARTICLE 1336. Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract. (1268)
ARTICLE 1337. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress. (n)
ARTICLE 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (1269)
ARTICLE 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. (n)
ARTICLE 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. (n)
ARTICLE 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former’s special knowledge. (n)
ARTICLE 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual. (n)
ARTICLE 1343. Misrepresentation made in good faith is not fraudulent but may constitute error. (n)
ARTICLE 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties.
Incidental fraud only obliges the person employing it to pay damages. (1270)
ARTICLE 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. (n)
ARTICLE 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. (n)
SECTION 2
Object of Contracts
ARTICLE 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a)
ARTICLE 1348. Impossible things or services cannot be the object of contracts. (1272)
ARTICLE 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. (1273)
SECTION 3
Cause of Contracts
ARTICLE 1350. In onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor. (1274)
ARTICLE 1351. The particular motives of the parties in entering into a contract are different from the cause thereof. (n)
ARTICLE 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy. (1275a)
ARTICLE 1353. The statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful. (1276)
ARTICLE 1354. Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary. (1277)
ARTICLE 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. (n)
CHAPTER 3
Form of Contracts
ARTICLE 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)
ARTICLE 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. (1279a)
ARTICLE 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by articles 1403, No. 2 and 1405. (1280a)
CHAPTER 4
Reformation of Instruments (n)
ARTICLE 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract.
ARTICLE 1360. The principles of the general law on the reformation of instruments are hereby adopted insofar as they are not in conflict with the provisions of this Code.
ARTICLE 1361. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed.
ARTICLE 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.
ARTICLE 1363. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed.
ARTICLE 1364. When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not express the true intention of the parties, the courts may order that the instrument be reformed.
ARTICLE 1365. If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper.
ARTICLE 1366. There shall be no reformation in the following cases:
(1) Simple donations inter vivos wherein no condition is imposed;
(2) Wills;
(3) When the real agreement is void.
ARTICLE 1367. When one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for its reformation.
ARTICLE 1368. Reformation may be ordered at the instance of either party or his successors in interest, if the mistake was mutual; otherwise, upon petition of the injured party, or his heirs and assigns.
ARTICLE 1369. The procedure for the reformation of instrument shall be governed by rules of court to be promulgated by the Supreme Court.
CHAPTER 5
Interpretation of Contracts
ARTICLE 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.
If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. (1281)
ARTICLE 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. (1282)
ARTICLE 1372. However general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. (1283)
ARTICLE 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual. (1284)
ARTICLE 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. (1285)
ARTICLE 1375. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. (1286)
ARTICLE 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established. (1287)
ARTICLE 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. (1288)
ARTICLE 1378. When it is absolutely impossible to settle doubts by the rules established in the preceding articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.
If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties, the contract shall be null and void. (1289)
ARTICLE 1379. The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts. (n)
CHAPTER 6
Rescissible Contracts
ARTICLE 1380. Contracts validly agreed upon may be rescinded in the cases established by law. (1290)
ARTICLE 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission. (1291a)
ARTICLE 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible. (1292)
ARTICLE 1383. The action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. (1294)
ARTICLE 1384. Rescission shall be only to the extent necessary to cover the damages caused. (n)
ARTICLE 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore.
Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.
In this case, indemnity for damages may be demanded from the person causing the loss. (1295)
ARTICLE 1386. Rescission referred to in Nos. 1 and 2 of article 1381 shall not take place with respect to contracts approved by the courts. (1296a)
ARTICLE 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking the rescission.
In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by the law of evidence. (1297a)
ARTICLE 1388. Whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them.
If there are two or more alienations, the first acquirer shall be liable first, and so on successively. (1298a)
ARTICLE 1389. The action to claim rescission must be commenced within four years.
For persons under guardianship and for absentees, the period of four years shall not begin until the termination of the former’s incapacity, or until the domicile of the latter is known. (1299)
CHAPTER 7
Voidable Contracts
ARTICLE 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. (n)
ARTICLE 1391. The action for annulment shall be brought within four years.
This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same.
And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases. (1301a)
ARTICLE 1392. Ratification extinguishes the action to annul a voidable contract. (1309a)
ARTICLE 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. (1311a)
ARTICLE 1394. Ratification may be effected by the guardian of the incapacitated person. (n)
ARTICLE 1395. Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment. (1312)
ARTICLE 1396. Ratification cleanses the contract from all its defects from the moment it was constituted. (1313)
ARTICLE 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. (1302a)
ARTICLE 1398. An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for damages. (1303a)
ARTICLE 1399. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him. (1304)
ARTICLE 1400. Whenever the person obliged by the decree of annulment to return the thing can not do so because it has been lost through his fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date. (1307a)
ARTICLE 1401. The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings.
If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff. (1314a)
ARTICLE 1402. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him. (1308)
CHAPTER 8
Unenforceable Contracts (n)
ARTICLE 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
ARTICLE 1404. Unauthorized contracts are governed by article 1317 and the principles of agency in Title X of this Book.
ARTICLE 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.
ARTICLE 1406. When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its registration in the Registry of Deeds, the parties may avail themselves of the right under Article 1357.
ARTICLE 1407. In a contract where both parties are incapable of giving consent, express or implied ratification by the parent, or guardian, as the case may be, of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated.
If ratification is made by the parents or guardians, as the case may be, of both contracting parties, the contract shall be validated from the inception.
ARTICLE 1408. Unenforceable contracts cannot be assailed by third persons.
CHAPTER 9
Void or Inexistent Contracts
ARTICLE 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
ARTICLE 1410. The action or defense for the declaration of the inexistence of a contract does not prescribe.
ARTICLE 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise. (1305)
ARTICLE 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other’s undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise. (1306)
ARTICLE 1413. Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor, with interest thereon from the date of the payment.
ARTICLE 1414. When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the parties before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the courts may, if the public interest will thus be subserved, allow the party repudiating the contract to recover the money or property.
ARTICLE 1415. Where one of the parties to an illegal contract is incapable of giving consent, the courts may, if the interest of justice so demands allow recovery of money or property delivered by the incapacitated person.
ARTICLE 1416. When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.
ARTICLE 1417. When the price of any article or commodity is determined by statute, or by authority of law, any person paying any amount in excess of the maximum price allowed may recover such excess.
ARTICLE 1418. When the law fixes, or authorizes the fixing of the maximum number of hours of labor, and a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed, he may demand additional compensation for service rendered beyond the time limit.
ARTICLE 1419. When the law sets, or authorizes the setting of a minimum wage for laborers, and a contract is agreed upon by which a laborer accepts a lower wage, he shall be entitled to recover the deficiency.
ARTICLE 1420. In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced.
ARTICLE 1421. The defense of illegality of contract is not available to third persons whose interests are not directly affected.
ARTICLE 1422. A contract which is the direct result of a previous illegal contract, is also void and inexistent.
TITLE III
Natural Obligations
ARTICLE 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. Some natural obligations are set forth in the following articles.
ARTICLE 1424. When a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered.
ARTICLE 1425. When without the knowledge or against the will of the debtor, a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed, but the debtor later voluntarily reimburses the third person, the obligor cannot recover what he has paid.
ARTICLE 1426. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian, after the annulment of the contract voluntarily returns the whole thing or price received, notwithstanding the fact that he has not been benefited thereby, there is no right to demand the thing or price thus returned.
ARTICLE 1427. When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. (1160a)
ARTICLE 1428. When, after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation, he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered.
ARTICLE 1429. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased, the payment is valid and cannot be rescinded by the payer.
ARTICLE 1430. When a will is declared void because it has not been executed in accordance with the formalities required by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with a clause in the defective will, the payment is effective and irrevocable.
TITLE IV
Estoppel (n)
ARTICLE 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.
ARTICLE 1432. The principles of estoppel are hereby adopted insofar as they are not in conflict with the provisions of this Code, the Code of Commerce, the Rules of Court and special laws.
ARTICLE 1433. Estoppel may be in pais or by deed.
ARTICLE 1434. When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.
ARTICLE 1435. If a person in representation of another sells or alienates a thing, the former cannot subsequently set up his own title as against the buyer or grantee.
ARTICLE 1436. A lessee or a bailee is estopped from asserting title to the thing leased or received, as against the lessor or bailor.
ARTICLE 1437. When in a contract between third persons concerning immovable property, one of them is misled by a person with respect to the ownership or real right over the real estate, the latter is precluded from asserting his legal title or interest therein, provided all these requisites are present:
(1) There must be fraudulent representation or wrongful concealment of facts known to the party ;
(2) The party precluded must intend that the other should act upon the facts as misrepresented;
(3) The party misled must have been unaware of the true facts; and
(4) The party defrauded must have acted in accordance with the misrepresentation.
ARTICLE 1438. One who has allowed another to assume apparent ownership of personal property for the purpose of making any transfer of it, cannot, if he received the sum for which a pledge has been constituted, set up his own title to defeat the pledge of the property, made by the other to a pledgee who received the same in good faith and for value.
ARTICLE 1439. Estoppel is effective only as between the parties thereto or their successors in interest.
TITLE V
Trusts (n)
CHAPTER 1
General Provisions
ARTICLE 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary. aawiii
ARTICLE 1441. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law. unidra
ARTICLE 1442. The principles of the general law of trusts, insofar as they are not in conflict with this Code, the Code of Commerce, the Rules of Court and special laws are hereby adopted.
CHAPTER 2
Express Trusts
ARTICLE 1443. No express trusts concerning an immovable or any interest therein may be proved by parol evidence.
ARTICLE 1444. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.
ARTICLE 1445. No trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust.
ARTICLE 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no proof to the contrary.
CHAPTER 3
Implied Trusts
ARTICLE 1447. The enumeration of the following cases of implied trust does not exclude others established by the general law of trust, but the limitation laid down in article 1442 shall be applicable.
ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.
ARTICLE 1449. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof.
ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him.
ARTICLE 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner.
ARTICLE 1452. If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each.
ARTICLE 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated.
ARTICLE 1454. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him.
ARTICLE 1455. When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong.
ARTICLE 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.
ARTICLE 1457. An implied trust may be proved by oral evidence.
TITLE VI
Sales
CHAPTER 1
Nature and Form of the Contract
ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional. (1445a)
ARTICLE 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. (n)
ARTICLE 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. (n)
ARTICLE 1461. Things having a potential existence may be the object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void. (n)
ARTICLE 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called “future goods.”
There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n)
ARTICLE 1463. The sole owner of a thing may sell an undivided interest therein. (n)
ARTICLE 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears. (n)
ARTICLE 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n)
ARTICLE 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. (n)
ARTICLE 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. (n)
ARTICLE 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. (1446a)
ARTICLE 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons.
Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by mistake, the courts may fix the price.
Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be. (1447a)
ARTICLE 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n)
ARTICLE 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n)
ARTICLE 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain. (1448)
ARTICLE 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. (1449a)
ARTICLE 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. (n)
ARTICLE 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. (1450a)
ARTICLE 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve.
(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation.
(4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. (n) Iddids
ARTICLE 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. (n)
ARTICLE 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. (n)
ARTICLE 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. (1451a)
ARTICLE 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262.
This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay. (1452a)
ARTICLE 1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description.
The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample. (n)
ARTICLE 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. (1454a)
ARTICLE 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties. (n)
ARTICLE 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)
ARTICLE 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (1454-A-a)
ARTICLE 1486. In the cases referred to in the two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (n)
ARTICLE 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary. (1455a)
ARTICLE 1488. The expropriation of property for public use is governed by special laws. (1456)
CHAPTER 2
Capacity to Buy or Sell
ARTICLE 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles.
Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in article 290. (1457a)
ARTICLE 1490. The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or temuim
(2) When there has been a judicial separation of property under article 191. (1458a)
ARTICLE 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession;
(6) Any others specially disqualified by law. (1459a)
ARTICLE 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n)
CHAPTER 3
Effects of the Contract When the Thing Sold Has Been Lost
ARTICLE 1493. If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the contract shall be without any effect.
But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon. (1460a)
ARTICLE 1494. Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible. (n)
CHAPTER 4
Obligations of the Vendor
SECTION 1
General Provisions
ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. (1461a)
ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n)
SECTION 2
Delivery of the Thing Sold
ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. (1462a)
ARTICLE 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.
With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. (1463a)
ARTICLE 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason. (1463a)
ARTICLE 1500. There may also be traditio constitutum possessorium. (n)
ARTICLE 1501. With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, with the vendor’s consent, shall be understood as a delivery. (1464)
ARTICLE 1502. When goods are delivered to the buyer “on sale or return” to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time. (n)
When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer:
(1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact. (n)
ARTICLE 1503. Where there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller’s property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are deliverable to order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful. (n)
ARTICLE 1504. Unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer’s risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk from the time of such delivery;
(2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault. (n)
ARTICLE 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors’ acts, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;
(3) Purchases made in a merchant’s store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. (n)
ARTICLE 1506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller’s defect of title. (n)
ARTICLE 1507. A document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document is a negotiable document of title. (n)
ARTICLE 1508. A negotiable document of title may be negotiated by delivery:
(1) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any specified person, and in such case the document shall thereafter be negotiated only by the indorsement of such indorsee. (n)
ARTICLE 1509. A negotiable document of title may be negotiated by the indorsement of the person to whose order the goods are by the terms of the document deliverable. Such indorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer or to another specified person. Subsequent negotiations may be made in like manner. (n)
ARTICLE 1510. If a document of title which contains an undertaking by a carrier, warehouseman or other bailee to deliver the goods to bearer, to a specified person or order of a specified person or which contains words of like import, has placed upon it the words “not negotiable,” “non-negotiable” or the like, such document may nevertheless be negotiated by the holder and is a negotiable document of title within the meaning of this Title. But nothing in this Title contained shall be construed as limiting or defining the effect upon the obligations of the carrier, warehouseman, or other bailee issuing a document of title or placing thereon the words “not negotiable,” “non-negotiable,” or the like. (n)
ARTICLE 1511. A document of title which is not in such form that it can be negotiated by delivery may be transferred by the holder by delivery to a purchaser or donee. A non-negotiable document cannot be negotiated and the indorsement of such a document gives the transferee no additional right. (n)
ARTICLE 1512. A negotiable document of title may be negotiated:
(1) By the owner thereof; or
(2) By any person to whom the possession or custody of the document has been entrusted by the owner, if, by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted, or if at the time of such entrusting the document is in such form that it may be negotiated by delivery. (n)
ARTICLE 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. (n)
ARTICLE 1514. A person to whom a document of title has been transferred, but not negotiated, acquires thereby, as against the transferor, the title to the goods, subject to the terms of any agreement with the transferor.
If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. (n)
ARTICLE 1515. Where a negotiable document of title is transferred for value by delivery, and the indorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to indorse the document unless a contrary intention appears. The negotiation shall take effect as of the time when the indorsement is actually made. (n)
ARTICLE 1516. A person who for value negotiates or transfers a document of title by indorsement or delivery, including one who assigns for value a claim secured by a document of title unless a contrary intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the validity or worth of the document; and
(4) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer without a document of title the goods represented thereby. (n)
ARTICLE 1517. The indorsement of a document of title shall not make the indorser liable for any failure on the part of the bailee who issued the document or previous indorsers thereof to fulfill their respective obligations. (n)
ARTICLE 1518. The validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake, duress, or conversion, if the person to whom the document was negotiated or a person to whom the document was subsequently negotiated paid value therefor in good faith without notice of the breach of duty, or loss, theft, fraud, accident, mistake, duress or conversion. (n)
ARTICLE 1519. If goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner and a negotiable document of title is issued for them they cannot thereafter, while in possession of such bailee, be attached by garnishment or otherwise or be levied under an execution unless the document be first surrendered to the bailee or its negotiation enjoined. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the document is surrendered to him or impounded by the court. (n)
ARTICLE 1520. A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which cannot readily be attached or levied upon by ordinary legal process. (n)
ARTICLE 1521. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller’s place of business if he has one, and if not his residence; but in case of a contract of sale of specific goods, which to the knowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery.
Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on the buyer’s behalf.
Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. (n)
ARTICLE 1522. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered, knowing that the seller is not going to perform the contract in full, he must pay for them at the contract rate. If, however, the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full, the buyer shall not be liable for more than the fair value to him of the goods so received.
Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate.
Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest.
In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject the whole of the goods.
The provisions of this article are subject to any usage of trade, special agreement, or course of dealing between the parties. (n)
ARTICLE 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in article 1503, first, second and third paragraphs, or unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the seller knows or ought to know that it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk during such transit. (n)
ARTICLE 1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fixed in the contract. (1466)
ARTICLE 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)
ARTICLE 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (n)
ARTICLE 1527. Subject to the provisions of this Title, the unpaid seller of goods 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;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. (n)
ARTICLE 1528. Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention. (n)
ARTICLE 1529. The unpaid seller of goods loses his lien thereon:
(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.
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. (n)
ARTICLE 1530. Subject to the provisions of this Title, when the buyer of goods is or becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, he may resume possession of the goods at any time while they are in transit, and he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession. (n)
ARTICLE 1531. Goods are in transit within the meaning of the preceding article:
(1) From the time when they are delivered to a carrier by land, water, or air, or other bailee for the purpose of transmission to the buyer, until the buyer, or his agent in that behalf, 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.
Goods are no longer in transit within the meaning of the preceding article:
(1) If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the appointed destination;
(2) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent; and it is immaterial that further destination for the goods may have been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the carrier as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his agent in that behalf, the remainder of the goods may be stopped in transitu, unless such part delivery has been under such circumstances as to show an agreement with the buyer to give up possession of the whole of the goods. (n)
ARTICLE 1532. The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the latter case the notice, to be effectual, must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the goods, he must redeliver the goods to, or according to the directions of, the seller. The expenses of such delivery must be borne by the seller. If, however, a negotiable document of title representing the goods has been issued by the carrier or other bailee, he shall not be obliged to deliver or justified in delivering the goods to the seller unless such document is first surrendered for cancellation. (n)
ARTICLE 1533. Where the goods are of perishable nature, or where the seller expressly reserves the right of resale 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, an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale.
Where a resale is made, as authorized in this article, the buyer acquires a good title as against 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.
The seller is bound to exercise reasonable care and judgment in making a resale, and subject to this requirement may make a resale either by public or private sale. He cannot, however, directly or indirectly buy the goods. (n)
ARTICLE 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 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 rescission was asserted. (n)
ARTICLE 1535. Subject to the provisions of this Title, the unpaid seller’s right of lien or stoppage in transitu is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller has assented thereto.
If, however, a negotiable document of title has been issued for goods, no seller’s lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller’s claim to a lien or right of stoppage in transitu. (n)
ARTICLE 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the terms as provided in article 1198. (1467a)
ARTICLE 1537. 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. (1468a)
ARTICLE 1538. In case of loss, deterioration or improvement of the thing before its delivery, the rules in article 1189 shall be observed, the vendor being considered the debtor. (n)
ARTICLE 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules:
If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated.
The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract.
The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold exceeds one-tenth of the price agreed upon.
Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area or inferior quality, he may rescind the sale. (1469a)
ARTICLE 1540. If, in the case of the preceding article, there is a greater area or number in the immovable than that stated in the contract, the vendee may accept the area included in the contract and reject the rest. If he accepts the whole area, he must pay for the same at the contract rate. (1470a)
ARTICLE 1541. The provisions of the two preceding articles shall apply to judicial sales. (n)
ARTICLE 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. (1471)
ARTICLE 1543. The actions arising from articles 1539 and 1542 shall prescribe in six months, counted from the day of delivery. (1472a)
ARTICLE 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (1473)
SECTION 3
Conditions and Warranties
ARTICLE 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. (n)
ARTICLE 1546. Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller’s opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. (n)
ARTICLE 1547. In a contract of sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer.
This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest. (n)
SUBSECTION 1
Warranty in Case of Eviction
ARTICLE 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. masero
The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.
The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor. (1475a)
ARTICLE 1549. The vendee need not appeal from the decision in order that the vendor may become liable for eviction. (n)
ARTICLE 1550. When adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer, the vendor shall not be liable for eviction. (n)
ARTICLE 1551. If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale, the vendor is liable for eviction. (n)
ARTICLE 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment. (n)
ARTICLE 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith. (1476)
ARTICLE 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction should take place, the vendor shall only pay the value which the thing sold had at the time of the eviction. Should the vendee have made the waiver with knowledge of the risks of eviction and assumed its consequences, the vendor shall not be liable. (1477)
ARTICLE 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him;
(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith. (1478)
ARTICLE 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the obligation to return the thing without other encumbrances than those which it had when he acquired it.
He may exercise this right of action, instead of enforcing the vendor’s liability for eviction.
The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other. (1479a)
ARTICLE 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a part thereof. (1480)
ARTICLE 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee. (1481a)
ARTICLE 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint, that the vendor be made a co-defendant. (1482a)
ARTICLE 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he may ask for the rescission of the contract, unless he should prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all burdens and encumbrances.
Within one year, to be computed from the execution of the deed, the vendee may bring the action for rescission, or sue for damages.
One year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date on which he discovered the burden or servitude. (1483a)
SUBSECTION 2
Warranty Against Hidden Defects of or Encumbrances Upon the Thing Sold
ARTICLE 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them. (1484a)
ARTICLE 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller’s skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose;
(2) Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. (n)
ARTICLE 1563. In the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. (n)
ARTICLE 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. (n)
ARTICLE 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample. (n)
ARTICLE 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. (1485)
ARTICLE 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. (1486a)
ARTICLE 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor was aware of them, he shall bear the loss, and shall be obliged to return the price and refund the expenses of the contract, with damages. If he was not aware of them, he shall only return the price and interest thereon, and reimburse the expenses of the contract which the vendee might have paid. (1487a)
ARTICLE 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a fortuitous event or through the fault of the vendee, the latter may demand of the vendor the price which he paid, less the value which the thing had when it was lost.
If the vendor acted in bad faith, he shall pay damages to the vendee. (1488a)
ARTICLE 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the judgment debtor shall not be liable for damages. (1489a)
ARTICLE 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. (1490)
ARTICLE 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for each of them, the redhibitory defect of one shall only give rise to its redhibition, and not that of the others; unless it should appear that the vendee would not have purchased the sound animal or animals without the defective one.
The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has been fixed for each one of the animals composing the same. (1491)
ARTICLE 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner be applicable to the sale of other things. (1492)
ARTICLE 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as condemned. (1493a)
ARTICLE 1575. The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract and they are found to be unfit therefor. (1494a)
ARTICLE 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith, should fail to discover or disclose it, he shall be liable for damages. (1495)
ARTICLE 1577.The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee.
This action can only be exercised with respect to faults and defects which are determined by law or by local customs. (1496a)
ARTICLE 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the disease which caused the death existed at the time of the contract. (1497a)
ARTICLE 1579. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect. (1498)
ARTICLE 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned in article 1567; but he must make use thereof within the same period which has been fixed for the exercise of the redhibitory action. (1499)
ARTICLE 1581. The form of sale of large cattle shall be governed by special laws. (n)
CHAPTER 5
Obligations of the Vendee
ARTICLE 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing sold. (1500a)
ARTICLE 1583. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments.
Where there is a contract of sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses without just cause to take delivery of or pay for one or more instalments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken. (n)
ARTICLE 1584. Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract, if there is no stipulation to the contrary.
Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by marking the goods with the words “collect on delivery,” or otherwise, the buyer is not entitled to examine the goods before the payment of the price, in the absence of agreement or usage of trade permitting such examination. (n)
ARTICLE 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. (n)
ARTICLE 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer knows, or ought to know of such breach, the seller shall not be liable therefor. (n)
ARTICLE 1587. Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he voluntarily constitutes himself a depositary thereof, he shall be liable as such. (n)
ARTICLE 1588. If there is no stipulation as specified in the first paragraph of article 1523, when the buyer’s refusal to accept the goods is without just cause, the title thereto passes to him from the moment they are placed at his disposal. (n)
ARTICLE 1589. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price. (1501a)
ARTICLE 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price. (1502a) temuim
ARTICLE 1591. Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price, he may immediately sue for the rescission of the sale.
Should such ground not exist, the provisions of article 1191 shall be observed. (1503)
ARTICLE 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. (1504a)
ARTICLE 1593. With respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the price at the same time, unless a longer period has been stipulated for its payment. (1505)
CHAPTER 6
Actions for Breach of Contract of Sale of Goods
ARTICLE 1594. Actions for breach of the contract of sale of goods shall be governed particularly by the provisions of this Chapter, and as to matters not specifically provided for herein, by other applicable provisions of this Title. (n)
ARTICLE 1595. Where, under a contract of sale, the ownership of the goods has passed to the buyer, and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract of sale, the seller may maintain an action against him for the price of the goods.
Where, under a contract of sale, the price is payable on a certain day, irrespective of delivery or of transfer of title, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the ownership in the goods has not passed. But it shall be a defense to such an action that the seller at any time before the judgment in such action has manifested an inability to perform the contract of sale on his part or an intention not to perform it.
Although the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, and if the provisions of article 1596, fourth paragraph, are not applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. Thereafter the seller may treat the goods as the buyer’s and may maintain an action for the price. (n)
ARTICLE 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance.
The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events, from the buyer’s breach of contract.
Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances showing proximate damage of a different amount, the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept.
If, while labor or expense of material amount is necessary on the part of the seller to enable him to fulfill his obligations under the contract of sale, the buyer repudiates the contract or notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for labor performed or expenses made before receiving notice of the buyer’s repudiation or countermand. The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages. (n)
ARTICLE 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. (n)
ARTICLE 1598. Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the application of the buyer, direct that the contract shall be performed specifically, without giving the seller the option of retaining the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just. (n)
ARTICLE 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. mdmiri
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure the payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (n)
CHAPTER 7
Extinguishment of Sale
ARTICLE 1600. Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title, and by conventional or legal redemption. (1506)
SECTION 1
Conventional Redemption
ARTICLE 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon. (1507)
ARTICLE 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (n)
ARTICLE 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. (n)
ARTICLE 1604. The provisions of article 1602 shall also apply to a contract purporting to be an absolute sale. (n)
ARTICLE 1605. In the cases referred to in articles 1602 and 1604, the apparent vendor may ask for the reformation of the instrument. (n)
ARTICLE 1606. The right referred to in article 1601, in the absence of an express agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase. (1508a)
ARTICLE 1607. In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard. (n)
ARTICLE 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. (1510)
ARTICLE 1609. The vendee is subrogated to the vendor’s rights and actions. (1511)
ARTICLE 1610. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted the property of the vendor. (1512)
ARTICLE 1611. In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of redemption. (1513)
ARTICLE 1612. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share.
The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part which he may have acquired. (1514)
ARTICLE 1613. In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the repurchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption. (1515)
ARTICLE 1614. Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property. (1516)
ARTICLE 1615. If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole. (1517)
ARTICLE 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold. (1518)
ARTICLE 1617. If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale, and some exist at the time of redemption, they shall be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale. (1519a)
ARTICLE 1618. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated. (1520)
SECTION 2
Legal Redemption
ARTICLE 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. (1521a)
ARTICLE 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. (1522a)
ARTICLE 1621. The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any rural land.
This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of other estates.
If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption. (1523a)
ARTICLE 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any adjoining land has a right of pre-emption at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred. (n)
ARTICLE 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners. (1524a)
ARTICLE 1624. An assignment of credits and other incorporeal rights shall be perfected in accordance with the provisions of article 1475. (n)
ARTICLE 1625. An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property. (1526)
ARTICLE 1626. The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation. (1527)
ARTICLE 1627. The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference. (1528)
ARTICLE 1628. The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.
Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of article 1616.
The vendor in bad faith shall always be answerable for the payment of all expenses, and for damages. (1529)
ARTICLE 1629. In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting parties should not have agreed upon the duration of the liability, it shall last for one year only, from the time of the assignment if the period had already expired.
If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after the maturity. (1530a)
ARTICLE 1630. One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his character as an heir. (1531)
ARTICLE 1631. One who sells for a lump sum the whole of certain rights, rents, or products, shall comply by answering for the legitimacy of the whole in general; but he shall not be obliged to warrant each of the various parts of which it may be composed, except in the case of eviction from the whole or the part of greater value. (1532a)
ARTICLE 1632. Should the vendor have profited by some of the fruits or received anything from the inheritance sold, he shall pay the vendee thereof, if the contrary has not been stipulated. (1533)
ARTICLE 1633. The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on the estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary. (1534)
ARTICLE 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on which the same was paid.
A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the assignee demands payment from him. (1535)
ARTICLE 1635. From the provisions of the preceding article shall be excepted the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is subject to the right in litigation assigned. (1536)
CHAPTER 9
General Provisions
ARTICLE 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 indorsement 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 indorsement 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. acd
(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)
ARTICLE 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. (1537a) smmEim
TITLE VII
Barter or Exchange
ARTICLE 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing. (1538a)
ARTICLE 1639. If one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages. (1539a)
ARTICLE 1640. One who loses by eviction the thing received in barter may recover that which he gave in exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only make use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third person. (1540a)
ARTICLE 1641. As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. (1541a)
TITLE VIII
Lease
CHAPTER 1
General Provisions
ARTICLE 1642. The contract of lease may be of things, or of work and service. (1542)
ARTICLE 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine years shall be valid. (1543a)
ARTICLE 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the relation of principal and agent does not exist between them. (1544a)
ARTICLE 1645. Consumable goods cannot be the subject matter of a contract of lease, except when they are merely to be exhibited or when they are accessory to an industrial establishment. (1545a)
CHAPTER 2
Lease of Rural and Urban Lands
SECTION 1
General Provisions
ARTICLE 1646. The persons disqualified to buy referred to in articles 1490 and 1491, are also disqualified to become lessees of the things mentioned therein. (n)
ARTICLE 1647. If a lease is to be recorded in the Registry of Property, the following persons cannot constitute the same without proper authority: the husband with respect to the wife’s paraphernal real estate, the father or guardian as to the property of the minor or ward, and the manager without special power. (1548a)
ARTICLE 1648. Every lease of real estate may be recorded in the Registry of Property. Unless a lease is recorded, it shall not be binding upon third persons. (1549a)
ARTICLE 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. (n)
ARTICLE 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing leased, in whole or in part, without prejudice to his responsibility for the performance of the contract toward the lessor. (1550)
ARTICLE 1651. Without prejudice to his obligation toward the sublessor, the sublessee is bound to the lessor for all acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee. (1551)
ARTICLE 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extra-judicial demand by the lessor.
Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor’s claim is concerned, unless said payments were effected in virtue of the custom of the place. (1552a)
ARTICLE 1653. The provisions governing warranty, contained in the Title on Sales, shall be applicable to the contract of lease.
In the cases where the return of the price is required, reduction shall be made in proportion to the time during which the lessee enjoyed the thing. (1553)
SECTION 2
Rights and Obligations of the Lessor and the Lessee
ARTICLE 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended;
(2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary;
(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract. (1554a)
ARTICLE 1655. If the thing leased is totally destroyed by a fortuitous event, the lease is extinguished. If the destruction is partial, the lessee may choose between a proportional reduction of the rent and a rescission of the lease. (n)
ARTICLE 1656. The lessor of a business or industrial establishment may continue engaging in the same business or industry to which the lessee devotes the thing leased, unless there is a stipulation to the contrary. (n)
ARTICLE 1657. The lessee is obliged:
(1) To pay the price of the lease according to the terms stipulated;
(2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated; and in the absence of stipulation, to that which may be inferred from the nature of the thing leased, according to the custom of the place;
(3) To pay the expenses for the deed of lease. (1555)
ARTICLE 1658. The lessee may suspend the payment of the rent in case the lessor fails to make the necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased. (n)
ARTICLE 1659. If the lessor or the lessee should not comply with the obligations set forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in force. (1556)
ARTICLE 1660. If a dwelling place or any other building intended for human habitation is in such a condition that its use brings imminent and serious danger to life or health, the lessee may terminate the lease at once by notifying the lessor, even if at the time the contract was perfected the former knew of the dangerous condition or waived the right to rescind the lease on account of this condition. (n)
ARTICLE 1661. The lessor cannot alter the form of the thing leased in such a way as to impair the use to which the thing is devoted under the terms of the lease. (1557a)
ARTICLE 1662. If during the lease it should become necessary to make some urgent repairs upon the thing leased, which cannot be deferred until the termination of the lease, the lessee is obliged to tolerate the work, although it may be very annoying to him, and although during the same, he may be deprived of a part of the premises.
If the repairs last more than forty days the rent shall be reduced in proportion to the time ‑ including the first forty days — and the part of the property of which the lessee has been deprived.
When the work is of such a nature that the portion which the lessee and his family need for their dwelling becomes uninhabitable, he may rescind the contract if the main purpose of the lease is to provide a dwelling place for the lessee. (1558a)
ARTICLE 1663. The lessee is obliged to bring to the knowledge of the proprietor, within the shortest possible time, every usurpation or untoward act which any third person may have committed or may be openly preparing to carry out upon the thing leased.
He is also obliged to advise the owner, with the same urgency, of the need of all repairs included in No. 2 of article 1654.
In both cases the lessee shall be liable for the damages which, through his negligence, may be suffered by the proprietor.
If the lessor fails to make urgent repairs, the lessee, in order to avoid an imminent danger, may order the repairs at the lessor’s cost. (1559a)
ARTICLE 1664. The lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased; but the lessee shall have a direct action against the intruder.
There is a mere act of trespass when the third person claims no right whatever. (1560a)
ARTICLE 1665. The lessee shall return the thing leased upon the termination of the lease, as he received it, save what has been lost or impaired by the lapse of time, or by ordinary wear and tear, or from an inevitable cause. (1561a)
ARTICLE 1666. In the absence of a statement concerning the condition of the thing at the time the lease was constituted, the law presumes that the lessee received it in good condition, unless there is proof to the contrary. (1562)
ARTICLE 1667. The lessee is responsible for the deterioration or loss of the thing leased, unless he proves that it took place without his fault. This burden of proof on the lessee does not apply when the destruction is due to earthquake, flood, storm or other natural calamity. (1563a)
ARTICLE 1668. The lessee is liable for any deterioration caused by members of his household and by guests and visitors. (1564a)
ARTICLE 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the need of a demand. (1565)
ARTICLE 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in articles 1682 and 1687. The other terms of the original contract shall be revived. (1566a)
ARTICLE 1671. If the lessee continues enjoying the thing after the expiration of the contract, over the lessor’s objection, the former shall be subject to the responsibilities of a possessor in bad faith. (n)
ARTICLE 1672. In case of an implied new lease, the obligations contracted by a third person for the security of the principal contract shall cease with respect to the new lease. (1567)
ARTICLE 1673. The lessor may judicially eject the lessee for any of the following causes:
(1) When the period agreed upon, or that which is fixed for the duration of leases under articles 1682 and 1687, has expired;
(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or service not stipulated which causes the deterioration thereof; or if he does not observe the requirement in No. 2 of article 1657, as regards the use thereof.
The ejectment of tenants of agricultural lands is governed by special laws. (1569a)
ARTICLE 1674. In ejectment cases where an appeal is taken, the remedy granted in article 539, second paragraph, shall also apply, if the higher court is satisfied that the lessee’s appeal is frivolous or dilatory, or that the lessor’s appeal is prima facie meritorious. The period of ten days referred to in said article shall be counted from the time the appeal is perfected. (n)
ARTICLE 1675. Except in cases stated in article 1673, the lessee shall have a right to make use of the periods established in articles 1682 and 1687. (1570)
ARTICLE 1676. The purchaser of a piece of land which is under a lease that is not recorded in the Registry of Property may terminate the lease, save when there is a stipulation to the contrary in the contract of sale, or when the purchaser knows of the existence of the lease.
If the buyer makes use of this right, the lessee may demand that he be allowed to gather the fruits of the harvest which corresponds to the current agricultural year and that the vendor indemnify him for damages suffered.
If the sale is fictitious, for the purpose of extinguishing the lease, the supposed vendee cannot make use of the right granted in the first paragraph of this article. The sale is presumed to be fictitious if at the time the supposed vendee demands the termination of the lease, the sale is not recorded in the Registry of Property. (1571a)
ARTICLE 1677. The purchaser in a sale with the right of redemption cannot make use of the power to eject the lessee until the end of the period for the redemption. (1572)
ARTICLE 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. (n)
ARTICLE 1679. If nothing has been stipulated concerning the place and the time for the payment of the lease, the provisions of article 1251 shall be observed as regards the place; and with respect to the time, the custom of the place shall be followed. (1574)
SECTION 3
Special Provisions for Leases of Rural Lands
ARTICLE 1680. The lessee shall have no right to a reduction of the rent on account of the sterility of the land leased, or by reason of the loss of fruits due to ordinary fortuitous events; but he shall have such right in case of the loss of more than one-half of the fruits through extraordinary and unforeseen fortuitous events, save always when there is a specific stipulation to the contrary.
Extraordinary fortuitous events are understood to be: fire, war, pestilence, unusual flood, locusts, earthquake, or others which are uncommon, and which the contracting parties could not have reasonably foreseen. (1575)
ARTICLE 1681. Neither does the lessee have any right to a reduction of the rent if the fruits are lost after they have been separated from their stalk, root or trunk. (1576)
ARTICLE 1682. The lease of a piece of rural land, when its duration has not been fixed, is understood to have been for all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year, or which it may yield once, although two or more years may have to elapse for the purpose. (1577a)
ARTICLE 1683. The outgoing lessee shall allow the incoming lessee or the lessor the use of the premises and other means necessary for the preparatory labor for the following year; and, reciprocally, the incoming lessee or the lessor is under obligation to permit the outgoing lessee to do whatever may be necessary for the gathering or harvesting and utilization of the fruits, all in accordance with the custom of the place. (1578a)
ARTICLE 1684. Land tenancy on shares shall be governed by special laws, the stipulations of the parties, the provisions on partnership and by the customs of the place. (1579a)
ARTICLE 1685. The tenant on shares cannot be ejected except in cases specified by law. (n)
SECTION 4
Special Provisions for the Lease of Urban Lands
ARTICLE 1686. In default of a special stipulation, the custom of the place shall be observed with regard to the kind of repairs on urban property for which the lessor shall be liable. In case of doubt it is understood that the repairs are chargeable against him. (1580a)
ARTICLE 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for the lease has been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place for over one month. (1581a)
ARTICLE 1688. When the lessor of a house, or part thereof, used as a dwelling for a family, or when the lessor of a store, or industrial establishment, also leases the furniture, the lease of the latter shall be deemed to be for the duration of the lease of the premises. (1582)
CHAPTER 3
Work and Labor
SECTION 1
Household Service (n)
ARTICLE 1689. Household service shall always be reasonably compensated. Any stipulation that household service is without compensation shall be void. Such compensation shall be in addition to the house helper’s lodging, food, and medical attendance.
ARTICLE 1690. The head of the family shall furnish, free of charge, to the house helper, suitable and sanitary quarters as well as adequate food and medical attendance.
ARTICLE 1691. If the house helper is under the age of eighteen years, the head of the family shall give an opportunity to the house helper for at least elementary education. The cost of such education shall be a part of the house helper’s compensation, unless there is a stipulation to the contrary.
ARTICLE 1692. No contract for household service shall last for more than two years. However, such contract may be renewed from year to year.
ARTICLE 1693. The house helper’s clothes shall be subject to stipulation. However, any contract for household service shall be void if thereby the house helper cannot afford to acquire suitable clothing.
ARTICLE 1694. The head of the family shall treat the house helper in a just and humane manner. In no case shall physical violence be used upon the house helper.
ARTICLE 1695. House helpers shall not be required to work more than ten hours a day. Every house helper shall be allowed four days’ vacation each month, with pay.
ARTICLE 1696. In case of death of the house helper, the head of the family shall bear the funeral expenses if the house helper has no relatives in the place where the head of the family lives, with sufficient means therefor.
ARTICLE 1697. If the period for household service is fixed, neither the head of the family nor the house helper may terminate the contract before the expiration of the term, except for a just cause. If the house helper is unjustly dismissed, he shall be paid the compensation already earned plus that for fifteen days by way of indemnity. If the house helper leaves without justifiable reason, he shall forfeit any salary due him and unpaid, for not exceeding fifteen days.
ARTICLE 1698. If the duration of the household service is not determined either by stipulation or by the nature of the service, the head of the family or the house helper may give notice to put an end to the service relation, according to the following rules:
(1) If the compensation is paid by the day, notice may be given on any day that the service shall end at the close of the following day;
(2) If the compensation is paid by the week, notice may be given, at the latest, on the first business day of the week, that the service shall be terminated at the end of the seventh day from the beginning of the week;
(3) If the compensation is paid by the month, notice may be given, at the latest, on the fifth day of the month, that the service shall cease at the end of the month.
ARTICLE 1699. Upon the extinguishment of the service relation, the house helper may demand from the head of the family a written statement on the nature and duration of the service and the efficiency and conduct of the house helper.
SECTION 2
Contract of Labor (n)
ARTICLE 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.
ARTICLE 1701. Neither capital nor labor shall act oppressively against the other, or impair the interest or convenience of the public.
ARTICLE 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.
ARTICLE 1703. No contract which practically amounts to involuntary servitude, under any guise whatsoever, shall be valid.
ARTICLE 1704. In collective bargaining, the labor union or members of the board or committee signing the contract shall be liable for non-fulfillment thereof.
ARTICLE 1705. The laborer’s wages shall be paid in legal currency.
ARTICLE 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.
ARTICLE 1707. The laborer’s wages shall be a lien on the goods manufactured or the work done.
ARTICLE 1708. The laborer’s wages shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance.
ARTICLE 1709. The employer shall neither seize nor retain any tool or other articles belonging to the laborer.
ARTICLE 1710. Dismissal of laborers shall be subject to the supervision of the Government, under special laws.
ARTICLE 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee’s own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employee’s lack of due care contributed to his death or injury, the compensation shall be equitably reduced.
ARTICLE 1712. If the death or injury is due to the negligence of a fellow worker, the latter and the employer shall be solidarily liable for compensation. If a fellow worker’s intentional or malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiff’s fellow worker.
SECTION 3
Contract for a Piece of Work
ARTICLE 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. (1588a)
ARTICLE 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. (n)
ARTICLE 1715. The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contractor fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor’s cost. (n)
ARTICLE 1716. An agreement waiving or limiting the contractor’s liability for any defect in the work is void if the contractor acted fraudulently. (n)
ARTICLE 1717. If the contractor bound himself to furnish the material, he shall suffer the loss if the work should be destroyed before its delivery, save when there has been delay in receiving it. (1589)
ARTICLE 1718. The contractor who has undertaken to put only his work or skill, cannot claim any compensation if the work should be destroyed before its delivery, unless there has been delay in receiving it, or if the destruction was caused by the poor quality of the material, provided this fact was communicated in due time to the owner. If the material is lost through a fortuitous event, the contract is extinguished. (1590a)
ARTICLE 1719. Acceptance of the work by the employer relieves the contractor of liability for any defect in the work, unless:
(1) The defect is hidden and the employer is not, by his special knowledge, expected to recognize the same; or
(2) The employer expressly reserves his rights against the contractor by reason of the defect. (n)
ARTICLE 1720. The price or compensation shall be paid at the time and place of delivery of the work, unless there is a stipulation to the contrary. If the work is to be delivered partially, the price or compensation for each part having been fixed, the sum shall be paid at the time and place of delivery, in the absence of stipulation. (n)
ARTICLE 1721. If, in the execution of the work, an act of the employer is required, and he incurs in delay or fails to perform the act, the contractor is entitled to a reasonable compensation.
The amount of the compensation is computed, on the one hand, by the duration of the delay and the amount of the compensation stipulated, and on the other hand, by what the contractor has saved in expenses by reason of the delay, or is able to earn by a different employment of his time and industry. (n)
ARTICLE 1722. If the work cannot be completed on account of a defect in the material furnished by the employer, or because of orders from the employer, without any fault on the part of the contractor, the latter has a right to an equitable part of the compensation proportionally to the work done, and reimbursement for proper expenses made. (n)
ARTICLE 1723. The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract. If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor.
Acceptance of the building, after completion, does not imply waiver of any of the causes of action by reason of any defect mentioned in the preceding paragraph.
The action must be brought within ten years following the collapse of the building. (n)
ARTICLE 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the land-owner, can neither withdraw from the contract nor demand an increase in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications, provided: EaEmmw
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by both parties. (1593a)
ARTICLE 1725. The owner may withdraw at will from the construction of the work, although it may have been commenced, indemnifying the contractor for all the latter’s expenses, work, and the usefulness which the owner may obtain therefrom, and damages. (1594a)
ARTICLE 1726. When a piece of work has been entrusted to a person by reason of his personal qualifications, the contract is rescinded upon his death.
In this case the proprietor shall pay the heirs of the contractor in proportion to the price agreed upon, the value of the part of the work done, and of the materials prepared, provided the latter yield him some benefit.
The same rule shall apply if the contractor cannot finish the work due to circumstances beyond his control. (1595)
ARTICLE 1727. The contractor is responsible for the work done by persons employed by him. (1596)
ARTICLE 1728. The contractor is liable for all the claims of laborers and others employed by him, and of third persons for death or physical injuries during the construction. (n)
ARTICLE 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. However, the following shall not prejudice the laborers, employees and furnishers of materials:
(1) Payments made by the owner to the contractor before they are due;
(2) Renunciation by the contractor of any amount due him from the owner.
This article is subject to the provisions of special laws. (1597a)
ARTICLE 1730. If it is agreed that the work shall be accomplished to the satisfaction of the proprietor, it is understood that in case of disagreement the question shall be subject to expert judgment. mdmiri
If the work is subject to the approval of a third person, his decision shall be final, except in case of fraud or manifest error. (1598a)
ARTICLE 1731. He who has executed work upon a movable has a right to retain it by way of pledge until he is paid. (1600)
SECTION 4
Common Carriers (n)
SUBSECTION 1
General Provisions
ARTICLE 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.
ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.
SUBSECTION 2
Vigilance Over Goods
ARTICLE 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
ARTICLE 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733.
ARTICLE 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738.
ARTICLE 1737. The common carrier’s duty to observe extraordinary diligence in the vigilance over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu.
ARTICLE 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.
ARTICLE 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in article 1734, No. 2.
ARTICLE 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility.
ARTICLE 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced.
ARTICLE 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss.
ARTICLE 1743. If through the order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue the order.
ARTICLE 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
ARTICLE 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omission of his or its employees;
(6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.
ARTICLE 1746. An agreement limiting the common carrier’s liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation.
ARTICLE 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier’s liability cannot be availed of in case of the loss, destruction, or deterioration of the goods.
ARTICLE 1748. An agreement limiting the common carrier’s liability for delay on account of strikes or riots is valid.
ARTICLE 1749. A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.
ARTICLE 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.
ARTICLE 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier’s liability is reasonable, just and in consonance with public policy.
ARTICLE 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration.
ARTICLE 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.
ARTICLE 1754. The provisions of articles 1733 to 1753 shall apply to the passenger’s baggage which is not in his personal custody or in that of his employee. As to other baggage, the rules in articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable.
SUBSECTION 3
Safety of Passengers
ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.
ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.
ARTICLE 1757. The responsibility of a common carrier for the safety of passengers as required in articles 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise.
ARTICLE 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier’s liability for negligence is valid, but not for wilful acts or gross negligence.
The reduction of fare does not justify any limitation of the common carrier’s liability.
ARTICLE 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.
ARTICLE 1760. The common carrier’s responsibility prescribed in the preceding article cannot be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise.
ARTICLE 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself.
ARTICLE 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced.
ARTICLE 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier’s employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.
SUBSECTION 4
Common Provisions
ARTICLE 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier.
ARTICLE 1765. The Public Service Commission may, on its own motion or on petition of any interested party, after due hearing, cancel the certificate of public convenience granted to any common carrier that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this Section.
ARTICLE 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws.
