Short answer. Under Article 1525 of the Civil Code, a seller is an unpaid seller when the whole price has not been paid or tendered, or when a negotiable instrument received as conditional payment was dishonored or the buyer became insolvent. Agents, consignors, and others in the seller's position are included.
What the law says
The seller of goods is deemed to be an unpaid seller within the meaning of this Title: (1) When the whole of the price has not been paid or tendered; (2) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise.
Civil Code, Article 1525 — Who Is an Unpaid Seller. Read the full provision →
First ground: the full price has not been paid or tendered
The most straightforward case is when the buyer has not paid the price in full and has not made a valid tender of payment. Even a partial payment does not remove the seller from the definition of an unpaid seller — Article 1525 requires that the whole of the price has not been paid or tendered. A seller who has received part of the purchase price remains an unpaid seller for the outstanding balance and retains the legal remedies that go with that status. The concept of tender is also included: a buyer who formally offers the full amount but whose offer is refused does not leave the seller unpaid, because a valid tender satisfies the payment obligation.
Second ground: conditional payment instrument dishonored or buyer insolvent
When a seller accepts a check, bill of exchange, or other negotiable instrument as payment, that instrument is ordinarily received as conditional payment — not absolute payment. The sale price is treated as unpaid if the condition breaks down. Article 1525 lists three ways this can happen: the instrument is dishonored (e.g., the check bounces), the buyer becomes insolvent, or the condition is broken otherwise. Each of these events restores the seller's status as an unpaid seller, even if the instrument was accepted at the time of sale. The seller is not required to treat a dishonored check as the end of their rights.
Who counts as a seller under this provision
Article 1525 extends the definition of seller beyond the literal owner who entered the sale contract. The term 'seller' for purposes of the unpaid seller provisions covers: an agent of the seller to whom the bill of lading has been endorsed; a consignor or agent who has personally paid the price or is directly responsible for it; and any other person who is in the position of a seller. This broad definition ensures that intermediaries and agents who have a financial stake equivalent to a seller's can also invoke the remedies available to unpaid sellers, such as the lien over the goods, stoppage in transit, and the right of resale.
Why the definition matters
The remedies available to an unpaid seller — including retaining the goods under a lien, stopping goods in transit if the buyer becomes insolvent, reselling the goods, and rescinding the sale — all depend on the seller qualifying as an unpaid seller under Article 1525. A seller who has received full and unconditional payment loses these protective rights. The definition in Article 1525 therefore acts as the gateway: only sellers who meet one of its two grounds can invoke the special protections that the Civil Code gives to unpaid sellers over the goods they have sold but not yet been compensated for.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Mary Ann Carmen Ferrer vs. St. Mary's Publishing, G.R. No. 258486, August 2, 2023 — read the decision on LawPhil →
- M.Y. Intercontinental Trading Corporation, Tedwin T. Uy, and Allianz Marketing and Publishing Corporation vs. St. Mary'S Publishing Corporation, G.R. No. 249715, April 12, 2023 — read the decision on LawPhil →