BUSTRA - PART 2

• Negotiable document

  Document of title to goods that can be transferred by delivery or indorsement
• Negotiation of negotiable document by delivery

  1. If the goods are deliverable to the bearer

  2. When it is indorsed in blank or to the bearer by the person to whose order the goods are deliverable or by subsequent indorsee
• Indorsement in blank

  When the holder merely signs his name at the back of the receipt without specifying to whom the goods are to be delivered
• Negotiation of negotiable document by indorsement

  1. A negotiable document of title by the terms of which the goods are deliverable to a person specified, they may be negotiated only by indorsement of such person

  2. Special Indorsement - It becomes an order document of title and negotiation can only be effected by the indorsement of the indorsee. It specifies the person to whom or to whose order, the goods are to be delivered
• Words "not negotiable", "non-negotiable" and the like in which the goods are to be delivered to "order" or to "bearer" have no effect and the document continues to be negotiable
• Non-negotiable document

  Cannot be negotiated but can be transferred or assigned by delivery
• Persons who may negotiate


  • Owner
  • Any person to whom the possession or custody of the document has been entrusted by the owner
• If the owner of the goods permit another to have the repossession or custody of negotiable receipts running to the order of the latter or to bearer, it is a representation or title upon which bona fide purchasers for value are entitled to rely
• As between two innocent persons, the loss must fall upon him who misplaced confidence made the loss possible
• Rights of person to whom document has been negotiated


  • Title of the person negotiating the document, over the goods covered by the document (the one who is negotiating-ability to convey)
  • Title of the person to whose order by the terms of the document the goods were to be delivered, over such goods (title of ownership over the goods)
  • Direct obligation of the bailee to hold possession of the goods for him, as if bailee had contracted directly with him
• Thief acquires no right over the goods as the thief has no right to transfer even if purchaser is innocent
• Purchaser acquires good title where the owner, by his conduct, is estopped from asserting his title
• Rights of person to whom document has been transferred

  • Title to goods as against transferor
  • The right to notify the bailee of the transfer
  • The right, thereafter, to acquire the obligation of the bailee to hold the goods for him
• Rights of the assignee - right of the transferee is not absolute as it is subject to the terms of any agreement with the transferor, merely steps into the shoes of the transferor
• Transfer of a non-negotiable document of title does not effect the delivery of the goods covered by it
• If document is negotiable, the goods cannot be attached or be levied under an execution unless the document be first surrendered
• Rights of a person whom an order document of title which may not properly be negotiated by mere delivery has been delivered without indorsement

  • Right to the goods as against the transferor
  • Right to compel the transferor to indorse the indorsement
• If the intention of the parties is that the document should be merely transferred, the transferee has no right to acquire the transferor to indorse the document
• Negotiation shall take effect as of the time when the indorsement is actually made, not at the time the document is delivered
• Warranties on sale of documents

  • Document is genuine
  • He has a legal right to negotiate or transfer
  • He has knowledge of no fact which would impair the validity or worth of the document
  • That he has a right to transfer the title to the goods and that goods are merchantable or fit for a particular purpose
• Indorser of a negotiable instrument is a guarantor, while indorser of a document of title is not a guarantor
• A negotiable document may be negotiated by any person in possession of the same, however such possession may have been acquired
• While in possession of the bailee, the goods covered by a negotiable document cannot be attached or levied under an execution unless the document be first surrendered or its negotiation prohibited by the court
• The above rules do not apply if the person depositing the document is not the owner of the goods, or if the attachment is made before the issuance of the negotiable document of title
• If an injunction is issued but the negotiable document of title is negotiated to an innocent person, the transfer is nevertheless, effectual
• Determination of place of delivery of goods sold

  • When there is an agreement - express or implied, place of delivery is that agreed upon
  • When there is no agreement - determined by usage of trade, if no prevalent usage - seller's place of business, in any other case - seller's residence
  • In cases of specific goods, to the knowledge of parties at time of contract were in some other place, that is the place of delivery
• Presumption is that the buyer must take goods from seller's place of business or residence and not vice versa
• Determination of time of delivery of goods sold

  • Determined by agreement or in absence thereof, by usage of trade
  • If no time is fixed - send goods within reasonable time
  • If contract provides a fixed time for performance - whether time is of the essence
  • Where contract does not specify time for delivery - buyer cannot make time of the essence without giving notice to seller of his intention to cancel unless delivery is made on or before fixed time
• Seller can hardly be discharged from his obligation where the goods are in the possession of a third person by bailee to deliver to the buyer
• Determination of hour of delivery of goods sold

  • Demand or tender of delivery to be effectual, must be made at a reasonable hour of the day
  • Where all that is required of the other party is to receive a payment or performance which can be readily accepted, at any hour when the debtor could find the creditor would be reasonable for that purpose
  • Goods which are bulky or needed special care - an hour might be unreasonable which would not be so in an ordinary payment of a small amount of money
• Seller bears the expenses to place the thing in a deliverable state
• Buyer's options when seller delivers a smaller quantity than contracted

  • Reject goods
  • Accept goods and pay for them at the contract rate if he knew no more will be delivered
  • Accept goods and pay for them at the fair value if he did not know seller is going to be guilty of breach
• Buyer's options when seller delivers a larger quantity than contracted

  • Accept the quantity contracted for and reject the excess
  • If he accepts, he makes himself liable for the price of all of them
• Buyer's options when delivered goods are mixed with others of different description not included in the contract


  • Accept those in accordance with contract and reject the rest
  • Accept all
• If the subject matter is indivisible, in case of delivery of larger quantities or of mixed goods, buyer may reject the whole of the goods
• Delivery of goods to carrier on behalf of buyer constitutes delivery to buyer, except when contrary intent appears
• Seller's duties after delivery to carrier

  • To enter on behalf of buyer into contracts reasonable under circumstances
  • To give notice to buyer regarding necessity to insure goods
• Trade terms


  • C.O.D. - "Collect on Delivery"
  • F.O.B. - "Free on Board"
  • C.I.F. - "Cost Insurance and Freight"
  • F.A.S. - "Free Alongside Vessel"
  • Ex Factory, Ex Warehouse, etc. - (point of origin)
  • Ex Dock - (port of importation)
• The contract of purchase and sale is bilateral and from it arises not only the obligation to deliver the thing but also that of paying the price
• If a time for payment has been fixed in the contract, the vendor is obliged to deliver the thing sold though the price be not first paid