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June 1, 2022

RIGHTS OF PURCHASER UNDER THE TRUST RECEIPTS LAW

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Published — February 2, 2021 

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Read also: LIABILITY OF ENTRUSTEE FOR LOSS UNDER THE TRUST RECEIPTS LAW

  • A letter of credit is a financial device developed by merchants as a safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have in control of the goods before paying.

  • The use of credits in commercial transactions serves to reduce the risk of nonpayment of the purchase price under the contract of sale of the goods and to reduce the risk of non-performance of an obligation in a non-sale setting.

  • The purchaser of goods for value and in good faith, acquires goods free from the entruster’s security interest.

A letter of credit is a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have in control of the goods before paying. The use of credits in commercial transactions serves to reduce the risk of nonpayment of the purchase price under the contract of sale of the goods and to reduce the risk of non-performance of an obligation in a non-sale setting.

What then are the rights of the purchaser over the goods under a trust receipt agreement?

Presidential Decree No. 115 or Trust Receipts Law states that:

Section 11. Rights of purchaser for value and in good faith. Any purchaser of goods from an entrustee with right to sell, or of documents or instruments through their customary form of transfer, who buys the goods, documents, or instruments for value and in good faith from the entrustee, acquires said goods, documents or instruments free from the entruster’s security interest.

Thus, the purchaser of goods for value and in good faith, acquires goods free from the entruster’s security interest.


Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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