Short answer. Yes. The Civil Code says the vendor is not bound to deliver the thing sold if the buyer has lost the right to make use of the payment term under Article 1198. Once the buyer forfeits the credit period, the seller can withhold delivery until paid.
What the law says
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.
Civil Code, Article 1536 — Delivery Excused by Buyer's Loss of the Term. Read the full provision →
The rule protects a seller on credit
A sale on credit assumes the buyer will get the goods now and pay later. Article 1536 gives the seller a safeguard when the reason for extending that trust falls apart. It states that 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. In other words, if the buyer forfeits the benefit of the payment period, the seller no longer has to hand over the goods on the original credit footing. The buyer who has lost the term must be ready to pay to receive delivery.
When the buyer loses the term
The trigger is Article 1198, which lists when a debtor shall lose every right to make use of the period. Among them: when the buyer becomes insolvent after the sale, unless he gives a guaranty or security; when he fails to furnish securities he promised; when he impairs securities already given; when he violates an undertaking the seller relied on in granting the period; and when he attempts to abscond. Each situation shares a theme — the buyer's own conduct or changed condition has destroyed the seller's confidence that credit given now will be honored later.
What the seller may and may not do
Article 1536 excuses the seller from delivering on credit; it does not, by itself, cancel the sale. The buyer can usually still take the goods by paying, or, where allowed, by giving adequate new security to restore the arrangement. The seller is protected against being forced to part with the goods while the price hangs on a buyer who is now insolvent or evasive. But the seller should be careful to act on a real ground under Article 1198. Withholding delivery when the buyer has not actually lost the term risks turning the seller into the one in breach.
Practical steps
If you are a seller thinking of refusing delivery, identify the specific ground: is the buyer insolvent, has he failed to give promised security, has he broken a condition of the credit? Keep evidence of it, because the buyer may dispute that the term was ever lost. If you are a buyer told that goods will not be released, ask which paragraph of Article 1198 is being invoked and whether offering fresh security cures it. Because the line between a justified refusal and a wrongful one is factual, the surrounding documents and the buyer's actual financial state deserve careful review.