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)

LOSS

1. In General

It is understood that the thing is loss when it perishes, goes out of commerce, or
disappears in such a way that its existence is unknown or it cannot be recovered. The
phrase risk of loss determines who is liable for the thing if it perishes; is lost, destroyed or
stolen. In general, the risk of loss in a contract of sale is transferred when the ownership
of the determinate thing is transferred through delivery. Thus, the transfer of ownership
of the determinate things is pivotal event in determining the rights and obligations of the
parties in case of its loss.

a. Determinate Thing

The object of a contract of sale is a determinate thing.

As a general rule, if the determinate thing perishes or is lost, destroyed or stolen, the
risk of loss is borne by the owner of the thing at the time of the loss under the
principle of res perit domino.

The principle of res perit domino is a civil law concept, where ownership is the basis
for consideration of who bears the risk of loss. Based on the principle, the risk of loss
of the determinate thing due to fortuitous event is transferred from the seller to the
buyer at the time of delivery.

An exception of this rule is when a law specifically provides for a separate rule in
determining the person who shall bear the risk of loss.
 b. Generic Thing

Article 1263. In an obligation to deliver a generic thing, the loss or destruction of

This article points out that a generic obligation is not extinguished by the loss or
destruction of a thing that belongs to a particular genus or class. If the obligation is to
deliver a thing in a generic sense, this obligation is not extinguished by its lost. This is
In accordance with the principle of genus nunquan perit or a genus of thing can never
perish. An example of a generic obligation is the obligation of the buyer to pay the
purchase price in money or its equivalent, which is pecuniary in nature.

LOSS OF THE DETERMINATE THING IN THE DIFFERENT STAGES OF A SALE

it is helpful to determine the stage of the sale transaction or contract of sale when the
thing perishes, or is lost, destroyed or stolen in order to determine who between the seller and the
buyer shall bear the risk of loss.

1. Before Perfection of the Contract of Sale

Since the seller still owns the determinate thing during negotiation or before the
perfection of the contract of sale, he bears the risk of loss during this stage of the sale
transaction under the principle of res perit domino.

2. At the Time of Perfection

At this stage of the contract of sale, the determination of who shall bear the risk of loss
and its effect shall be governed by Article 1493. The first paragraph speaks of the loss of
the thing its entirety; while the second paragraph speaks of partial loss or loss of the thing
in part. In the former, the contract is without effect; while in the latter, the buyer may
either:

Withdraw from the contract, OR

Demand the remaining part and pay a proportionate price therefor.

These two available options of the buyer in case of partial loss at the time of the
perfection of the contract are reiterated in Article 1494 of the Civil Code, which particularly
deals with the situation where, at the time the contract is made, specific goods have perished
without the knowledge of the seller.

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)

3. After Perfection but Before Delivery

The determination of who between the seller and the buyer shall bear the risk of loss of
the thing sold after the contract is perfected but before its delivery shall be in accordance
with their stipulation. In the absence of a stipulation, the determination shall be in
accordance with Articles 1480 and 1538 of the Civil Code.

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)

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.

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 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)