!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !

"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 9: LCSS, DL1LkICkA1ICN,
IkUI1S AND C1nLk 8LNLII1S

1he prevalllng docLrlnes ln our [urlsdlcLlon on rlsk of loss and
deLerloraLlon and Lhe beneflLs of Lhe frulLs and lmprovemenL ls
a comblnaLlon of clvll law and common law concepLs.
o 1he hybrld rule on Lhe rlsk of loss under Lhe presenL
Clvll Code happens noL aL Lhe polnL of perfecLlon buL aL
Lhe polnL of dellvery.
1he baslc concepL ls res perlL domlno (Lhe owner shall bear Lhe
rlsk of loss). (1hls ls derlved from common law.)
Cwnershlp can only be Lransferred by dellvery. (1hls ls from clvll
law.)

I. No App||cat|on When Sub[ect Matter |s Determ|nab|e (Art|c|e 1263)

Art|c|e 1263.
In an ob||gat|on to de||ver a gener|c th|ng, the |oss or destruct|on of
anyth|ng of the same k|nd does not ext|ngu|sh the ob||gat|on. (n)

II. Lffect of Loss]Deter|orat|on of 1h|ng So|d:

A. 8efore erfect|on ("#$%& '( )*+$%,-, . /0+,( 1. 2314.5).
1he purporLed seller owns Lhe Lhlng. Loss, deLerloraLlon, frulLs
and lmprovemenLs perLaln Lo hlm.
1he purporLed buyer sLlll has no legal relaLlonshlp Lo Lhe Lhlng.

"#$%& '( )*+$%,-

Iacts: 8oman and CrlmalL enLered lnLo a conLracL of sale for a schooner
payable by 3 lnsLallmenLs provlded Lhe LlLle papers Lo Lhe vessel were ln
proper form. lL musL be noLed LhaL Lhe LlLle of Lhe vessel was ln Lhe
name of aullna Clron and noL 8oman. 1he vessel sank before 8oman
could presenL hls LlLle and as a resulL, CrlmalL refused Lo pay Lhe prlce ln
Lhe conLracL.

Issue: WheLher or noL Lhe sale was perfecLed maklng CrlmalL llable Lo
pay Lhe purchase prlce.

ne|d: nC. 1he defendanL was under no obllgaLlon Lo pay Lhe prlce of Lhe
vessel, Lhe purchase of whlch had noL been concluded. 1he
conversaLlons had beLween Lhe parLles and Lhe leLLer wrlLLen by
defendanL Lo plalnLlff dld noL esLabllsh a conLracL sufflclenL ln lLself Lo
creaLe reclprocal rlghLs beLween Lhe parLles. 1here was yeL Lo be a
perfecLed conLracL beLween Lhem for Lhe fallure of 8oman Lo perfecL hls
LlLle. 1haL belng Lhe case, Lhe loss ls for Lhe accounL of 8oman as Lhe
owner Lhereof.

Doctr|ne: lf no conLracL of sale was acLually execuLed by Lhe parLles Lhe
loss of Lhe vessel musL be borne by lLs owner and noL by a parLy who
only lnLended Lo purchase lL and who was unable Lo do so on accounL of
fallure on Lhe parL of Lhe owner Lo show proper LlLle Lo Lhe vessel and
Lhus enable Lhem Lo draw up Lhe conLracL of sale.

8. At 1|me of erfect|on (Art|c|es 1493 and 1494).

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Art|c|e 1493.
If at the t|me the contract of sa|e |s perfected, the th|ng wh|ch |s the
ob[ect of the contract has been ent|re|y |ost, the contract sha|| be
w|thout any effect.

8ut |f the th|ng shou|d have been |ost |n part on|y, the vendee may
choose between w|thdraw|ng from the contract and demand|ng the
rema|n|ng part, pay|ng |ts pr|ce |n proport|on to the tota| sum agreed
upon. (1460a)

Art|c|e 1494.
Where the part|es purport a sa|e of spec|f|c goods, and the goods
w|thout the know|edge of the se||er have per|shed |n part or have
who||y or |n a mater|a| part so deter|orated |n qua||ty as to be
substant|a||y changed |n character, the buyer may at h|s opt|on treat
the sa|e:

(1) As avo|ded, or

(2) As va||d |n a|| of the ex|st|ng goods or |n so much thereof as have
not deter|orated, and as b|nd|ng the buyer to pay the agreed pr|ce for
the goods |n wh|ch the ownersh|p w||| pass, |f the sa|e was d|v|s|b|e.
(n)

noLe LhaL ArLlcle 1493 says LhaL Lhe conLracL ls wlLhouL any
effecL." lL does noL use Lhe Lerm vold because lL hlghllghLs Lhe
facL LhaL Lhe perfecLlon of Lhe conLracL ls noL affecLed by Lhe
loss of Lhe sub[ecL maLLer.
o Powever, Lhe effecL of Lhe loss ls LhaL as lf Lhe sale was
vold.
lf Lhe sub[ecL maLLer ls losL aL Lhe polnL of perfecLlon, and Lhe
seller bears Lhe loss and Lhe buyer ls relleved of hls obllgaLlons
under Lhe conLracL, Lhen Lhe lmpllcaLlon ls LhaL afLer perfecLlon
Lhe buyer Lhen bears Lhe rlsk of loss and deLerloraLlon even
wlLhouL prlor dellvery Lo hlm.

C. After erfect|on 8ut 8efore De||very (Art|c|es 1164, 1189, and
1262).

Art|c|e 1164.
1he cred|tor has a r|ght to the fru|ts of the th|ng from the t|me the
ob||gat|on to de||ver |t ar|ses. nowever, he sha|| acqu|re no rea| r|ght
over |t unt|| the same has been de||vered to h|m. (109S)

Art|c|e 1189.
When the cond|t|ons have been |mposed w|th the |ntent|on of
suspend|ng the eff|cacy of an ob||gat|on to g|ve, the fo||ow|ng ru|es
sha|| be observed |n case of the |mprovement, |oss or deter|orat|on of
the th|ng dur|ng the pendency of the cond|t|on:

(1) If the th|ng |s |ost w|thout the fau|t of the debtor, the ob||gat|on
sha|| be ext|ngu|shed,

(2) If the th|ng |s |ost through the fau|t of the debtor, he sha|| be
ob||ged to pay damages, |t |s understood that the th|ng |s |ost when |t
per|shes, or goes out of commerce, or d|sappears |n such a way that |ts
ex|stence |s unknown or |t cannot be recovered,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

(3) When the th|ng deter|orates w|thout the fau|t of the debtor, the
|mpa|rment |s to be borne by the cred|tor,

(4) If |t deter|orates through the fau|t of the debtor, the cred|tor may
choose between the resc|ss|on of the ob||gat|on and |ts fu|f|||ment,
w|th |ndemn|ty for damages |n e|ther case,

(S) If the th|ng |s |mproved by |ts nature, or by t|me, the |mprovement
sha|| |nure to the benef|t of the cred|tor,

(6) If |t |s |mproved at the expense of the debtor, he sha|| have no
other r|ght than that granted to the usufructuary. (1122)

Art|c|e 1262.
An ob||gat|on wh|ch cons|sts |n the de||very of a determ|nate th|ng
sha|| be ext|ngu|shed |f |t shou|d be |ost or destroyed w|thout the fau|t
of the debtor, and before he has |ncurred |n de|ay.

When by |aw or st|pu|at|on, the ob||gor |s ||ab|e even for fortu|tous
events, the |oss of the th|ng does not ext|ngu|sh the ob||gat|on, and he
sha|| be respons|b|e for damages. 1he same ru|e app||es when the
nature of the ob||gat|on requ|res the assumpt|on of r|sk. (1182a)

ln case of deLerloraLlon or lmprovemenL of Lhe Lhlng before lLs
dellvery, Lhe rules of ArLlcle 1189 shall be observed.

1. Genera| ku|e: 8efore dellvery, rlsk of loss ls borne by seller
under Lhe rule of !"# %"!&' ()*&+), 670*89,:* /0+,( '( 7#;*- #<
=>>:%,9? 3@@ A7"= B.C D31EFG.
ln Lhe case of a moLor vehlcle, where Lhere was nelLher physlcal
nor consLrucLlve dellvery of a deLermlnaLe Lhlng, Lhe Lhlng sold
remalned aL Lhe seller's rlsk( 6H&+#& I#-#* 7#*> '( 7#;*- #<
=>>:%,9? @.3 A7"= B4. DJ443G(

2. Loss 8y Iau|t Cf A arty (Art|c|es 1480, 1S04, 1S38)

Art|c|e 1480.
Any |n[ury to or benef|t from the th|ng so|d, after the contract has
been perfected, from the moment of the perfect|on of the contract to
the t|me of de||very, sha|| be governed by art|c|es 1163 to 116S, and
1262.

1h|s ru|e sha|| app|y to the sa|e of fung|b|e th|ngs, made |ndependent|y
and for a s|ng|e pr|ce, or w|thout cons|derat|on of the|r we|ght,
number, or measure.

Shou|d fung|b|e th|ngs be so|d for a pr|ce f|xed accord|ng to we|ght,
number, or measure, the r|sk sha|| not be |mputed to the vendee unt||
they have been we|ghed, counted, or measured and de||vered, un|ess
the |atter has |ncurred |n de|ay. (14S2a)

Art|c|e 1S04.
Un|ess otherw|se agreed, the goods rema|n at the se||er's r|sk unt|| the
ownersh|p there|n |s transferred to the buyer, but when the ownersh|p
there|n |s transferred to the buyer the goods are at the buyer's r|sk
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
whether actua| de||very has been made or not, except that:

(1) Where de||very of the goods has been made to the buyer or to a
ba||ee for the buyer, |n pursuance of the contract and the ownersh|p |n
the goods has been reta|ned by the se||er mere|y to secure
performance by the buyer of h|s ob||gat|ons under the contract, the
goods are at the buyer's r|sk from the t|me of such de||very,

(2) Where actua| de||very has been de|ayed through the fau|t of e|ther
the buyer or se||er the goods are at the r|sk of the party |n fau|t. (n)

Art|c|e 1S38.
In case of |oss, deter|orat|on or |mprovement of the th|ng before |ts
de||very, the ru|es |n art|c|e 1189 sha|| be observed, the vendor be|ng
cons|dered the debtor. (n)

lf Lhe loss ls Lhru Lhe faulL of Lhe seller, Lhe buyer shall have Lhe
rlghL Lo recover damages. (ArLlcle 1189)

3. Loss 8y Iortu|tous Lvent (Art|c|es 1480, 1163, 1164, 116S,
1S04, 1S38, And 1189, kLAD Comments Cf aras, 1o|ent|no,
ad|||a, And 8av|era).

Art|c|e 1163.
Lvery person ob||ged to g|ve someth|ng |s a|so ob||ged to take care of |t
w|th the proper d|||gence of a good father of a fam||y, un|ess the |aw
or the st|pu|at|on of the part|es requ|res another standard of care.
(1094a)

Art|c|e 116S.
When what |s to be de||vered |s a determ|nate th|ng, the cred|tor, |n
add|t|on to the r|ght granted h|m by art|c|e 1170, may compe| the
debtor to make the de||very.

If the th|ng |s |ndeterm|nate or gener|c, he may ask that the ob||gat|on
be comp||ed w|th at the expense of the debtor.

If the ob||gor de|ays, or has prom|sed to de||ver the same th|ng to two
or more persons who do not have the same |nterest, he sha|| be
respons|b|e for any fortu|tous event unt|| he has effected the de||very.
(1096)

aras and adllla say LhaL even lf Lhe sub[ecL maLLer ls losL by
forLulLous evenL, Lhe buyer ls sLlll obllged Lo pay. 1hey don'L clLe
any auLhorlLy for Lhls poslLlon.
1olenLlno says LhaL Lhe obllgaLlon of Lhe buyer Lo pay ls also
exLlngulshed slnce sale creaLes a reclprocal obllgaLlon. 1he seller
should Lhus reLurn whaLever was pald by Lhe buyer, lf Lhere had
been paymenL already.
CLv agrees wlLh 1olenLlno's vlew. Pe says LhaL Lhls vlew beLLer
harmonlzes ArLlcle 1480, 1338 and 1304.

4. Deter|orat|on (Art|c|es 1480, 1163-6S, And 1262, Art|c|es 1189
And 1S38)
ArLlcle 1189 shall apply

S. Iru|ts Cr Improvements Irom 1|me Cf erfect|on erta|n 1o
8uyer (Art|c|es 1480, 1S37-1S38)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Art|c|e 1S37.
1he vendor |s bound to de||ver the th|ng so|d and |ts access|ons and
accessor|es |n the cond|t|on |n wh|ch they were upon the perfect|on of
the contract.

A|| the fru|ts sha|| perta|n to the vendee from the day on wh|ch the
contract was perfected. (1468a)

When Lhe LlLle and beneflclal lnLeresL over Lhe sub[ecL maLLer of
Lhe sale do noL perLaln Lo Lhe same person, who should suffer
Lhe loss and deLerloraLlon Lhereof, and beneflL from Lhe frulLs
and lmprovemenLs?
o CLv: 1he proper resoluLlon Lherefore should be
obLalned from Lhe same legal auLhorlLles from whence
Lhe Code Commlsslon copled Lhe res perlL domlno
docLrlne - Lhe common law sysLem. 1he resoluLlon Lo
Lhls lssue would be and should be LhaL Lhe person who
should bear Lhe rlsk of loss should be Lhe parLy who had
greaLer sLake on Lhe sub[ecL maLLer aL Lhe polnL of loss,
deLerloraLlon or lmprovemenL.

D. After De||very (Art|c|e 1S04) K%L8:*M9 7##> '( N%O#*%? 3@ A7"= C.J
D31.BG,
-


K%L8:*M9 7##>:*%-+': '( N%O#*%


1
Song Fo & Co. v. Oria, 33 Phil. 3 (1915); Lawyer's Coop v. Narciso, 55 O.G. 3313).
Iacts: 1abora purchased volumes of Am!ur from Lawyers Coop. 1he
agreemenL was for ownershlp Lo remaln wlLh Lawyers Coop unLll
paymenL of Lhe full prlce. Loss or damage Lo Lhe goods afLer dellvery Lo
Lhe buyer ls for Lhe accounL of Lhe laLLer." 1he books were dellvered Lo
hls offlce, LhaL same nlghL, hls offlce was razed by flre. 1abora falled Lo
pay Lhe full purchase prlce. now Lawyers Coop sues hlm for Lhe balance.
1abora lnvokes force ma[eure.

Issue: WheLher or noL 1abora musL bear Lhe loss.

ne|d: ?LS. 1he conLracL speclflcally sLaLed LhaL afLer dellvery, 8uyer
would bear Lhe loss. Moreover under Art|c|e 1S04, when
LlLle/ownershlp remalns ln seller merely Lo secure performance by
buyer of hls obllgaLlons, Lhe goods are aL Lhe buyer's rlsk from Llme of
dellvery." 1he rule LhaL Lhe obllgor should be exempL when loss occurs
Lhrough force ma[eure only applled when Lhe obllgaLlon conslsLs ln Lhe
dellvery of a deLermlnaLe Lhlng. 1he obllgaLlon of 1abora conslsLs of Lhe
dellvery noL a deLermlnaLe Lhlng, buL a generlc Lhlng - money. 1hus, he
ls noL absolved from llablllLy.

Doctr|ne:

Genera| ku|e: AfLer dellvery Lo Lhe buyer, ownershlp ls
Lransferred Lo Lhe buyer. 1he goods shall Lhen be aL Lhe buyer's
rlsk. (ArLlcle 1304)
o Lxcept|ons:
! lf dellvery Lo Lhe buyer was made, buL
ownershlp was reLalned by Lhe seller only for
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe purpose of securlng Lhe buyer's obllgaLlon
Lo pay, Lhe buyer shall sLlll bear Lhe rlsk.
! lf acLual dellvery had been delayed Lhrough Lhe
faulL of elLher Lhe buyer or seller, Lhe goods are
aL Lhe rlsk of Lhe parLy aL faulL.
lf Lhe Lhlng ls losL when Lhe buyer bears Lhe rlsk, Lhe buyer shall
sLlll pay Lhe balance of Lhe purchase prlce. A#&P Q# R 7#( '(
S*+%? @@ /0+,( @ D313BG(

SUMMAk

Se||er 8uyer
erfect|on x
After perfect|on,
8efore de||very
x
(Loss and deLerloraLlon
" owner)
x
(lrulLs " beneflclal
owner)
De||very x
Confus|on
" lf Lhe Lhlng has
been dellvered buL
Lhe ownershlp
remalns wlLh Lhe
seller
x
" SLlll Lhe owner lf Lhe
prlce has noL been fully
pald.
x
" Cwner once fully
pald, condlLlon ls
saLlsfled
*8efore perfecLlon and afLer dellvery " Lhe owner ls always llable,
whlch ls merged ln one person.