LOSS AND DETERIORATION,

FRUITS AND OTHER BENEFITS

Introduction:

The Roman law principle embodied in the Spanish Civil Code

previously applicable to the Philippines, mandated that from
the moment of perfection of sale, the risk of loss on a
determinate subject matter passes to the buyer without
need of delivery, provided that the sale is unconditional.
On the other hand, under common law principles, it is the
owner who bears the risk of loss (res perit domino), in the
absence of any stipulation to the contrary.
However, in a sale, ownership of the subject matter is
transferred to the buyer from the moment the contract is
entered into and the goods are available to be delivered to
the buyer.
In amending the provisions relating to the risk of loss, the
Code Commission decided to adopt the common law
principle that it should be the owner of the subject
matter of the sale that should bear the risk of loss (res
perit domino); but they maintained the civil law principle
that ownership can only be transferred by delivery. This
legal fusion on principles have caused the current confusion
that prevails on the issue of risk of loss.
When is a thing loss?

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. (Art. 1189[2].)
The word “perishes” is sufficiently inclusive as to cover a
case where there has been material deterioration or
complete change in the nature of the thing in such a manner
that it loses its former utility taking into consideration the
time the contract was entered into. (see 10 Manresa 129.)
BEFORE PERFECTION
If the object has been lost before perfection, the seller bears the
loss.

Reason:
There was no contract for there was no cause or consideration.
Being the owner, the seller bears the loss. This means that he
cannot demand payment of the price.
Notwithstanding the extent of the negotiations that have taken
place, prior to perfection, the purported subject matter bears no
legal or even equitable relationship to the purported buyer, and
therefore no assumption of risk of loss or deterioration can be
ascribed to the latter.
Roman v Grimalt
6 Phil 96

Facts:
Grimalt bought a vessel from Roman on condition that he could
prove he (Roman) was the owner thereof by pertinent documents.
Before the condition was accomplished with, the vessel sank in a
storm. Roman now demands the price.

Held:
Roman cannot demand the price. The condition was never
fulfilled; therefore, the contract of sale was never perfected.
Therefore also, Roman bears the loss.
AT THE TIME OF PERFECTION
Art. 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.

The loss or injury referred to in this article is one which has taken
place before or at the time the contract of sale is perfected.
(1) Thing entirely lost. — Where the thing is entirely lost at
the time of perfection, the contract is inexistent and void
(Art. 1409[3].) because there is no object. (Art. 1318, par.
2.)
There being no contract, there is no necessity to bring an
action for annulment.

Example:
S sold his car to B. Unknown to both of them, the car has
been totally destroyed before they agreed on the sale. In
this case, there is no valid contract of sale for lack of
object. S, as owner, bears the loss and B does not have to
pay for the price.
(2) Thing only partially lost. — If the subject matter is only
partially lost, the vendee may elect between withdrawing from
the contract and demanding the remaining part, paying its
proportionate price. (Art. 1493, par. 2.)
Example:
If the car sold is only partially destroyed, there still remains of the
object. However, since it is not of the character or in the
condition contemplated by the parties, the buyer may withdraw
from the contract or demand the delivery of the car, paying its
proportionate price.
Art. 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.
(1) Sale divisible. — The second option is available only if the sale
is divisible. (Art. 1494, par. 2.) A contract is divisible when its
consideration is made up of several parts. (see Art. 1420.) When
the consideration is entire and single, the contract is indivisible.

(2) Sale indivisible. — Suppose the sale is not divisible, what price
is the buyer to pay for the remaining goods if he elects to
continue with the sale? It is believed that the buyer should be
made to pay only the proportionate price of the remaining goods
as provided for in paragraph 2 of the preceding article. If the sale
is indivisible, the object thereof may be considered as a specific
thing.
EXAMPLE:

Suppose the subject matter sold was 100 cavans of rice in the
warehouse of S at P1,000.00 per cavan or for a total price of
P100,000.00. If 60 cavans of rice were lost, B may, at his option,
withdraw from the contract without the obligation to pay for the
rice; or demand the delivery of the 40 cavans, but binding him to
pay the agreed price thereof which is P40,000.00.

If the contract is indivisible, that is, the 100 cavans of rice were
sold for P100,000.00 fixed without consideration of the number of
cavans, B should be made to pay only the proportionate price of
40 cavans which is also P40,000.00.
 AFTER
PERFECTION BUT
BEFORE DELIVERY
ART. 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)
 If the thing is lost after perfection
but before its delivery, that is, even
before the ownership is transferred
to the buyer, the risk of loss is
shifted to the buyer as an exception
to the rule of res perit domino (Arts.
1480, pars. 1 and 2, 1538, 1189,
and 1269.);
2 Rules:

1. where the thing is lost after perfection but

before its delivery (see Rule No. 3, supra.) —
is applicable if the thing is determinate. It
also applies to fungible things sold for a
price not fixed in relation to weight,
number, or measure.
(2) Fungible things sold for a price fixed in relation to
weight, number, or measure
- The risk shall not be mputed to the vendee until
they have been weighed,counted or measured and
delivered .

- Vendee assumes the risk if he has incurred in delay in

receiving the goods sold.
ART. 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)
General rule:
 If the thing is lost by fortuitous event , the risk
is borne by the owner of the thing at the time
of the loss under the principle of res perit
domino
 Unless otherwise agreed , the goods
remain at the seller’s risk until the
ownership therein is transferred to
the buyer - Sec 22 of the Uniform
Sales Act
 Conflict between Article 1480 and Article
1504

 Article1504 should be restricted in its

application to sale of goods as defined in
Article 1636 and Article 1480 to sale of things
which cannot be called “ goods”- ( sales of
real estate )
Deterioration, Fruits
and Improvements
 When the thing deteriorates without the fault of the
seller the impairment is to be borne by the buyer ;
 If the thing deteriorates through the fault of the seller
the buyer may choose between the recession of the
obligation and its fulfilment, with indemnity for
damages in either case;
 If the thing is improved by it’s nature or by the time
the improvements shall inure to the benefit of the
buyer ;
 If the thing is improved at the expense of the seller ,
he shall have no right than that granted to the
usufructuary.