BULK SALES LAW

ACT NO. 3952

AN ACT TO REGULATE THE SALE, TRANSFER, MORTGAGE OR ASSIGNMENT OF GOODS, WARES,

Section 1. This Act shall be known as "The Bulk Sales Law."

Sec. 2. Sale and transfer in bulk. — Any sale, transfer, mortgage or assignment of a stock of goods,
wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the
regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or sale, transfer,
mortgage or assignment of all, or substantially all, of the business or trade theretofore conducted by the
vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the fixtures and equipment
used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a
sale and transfer in bulk, in contemplation of this Act: Provided, however, That if such vendor,
mortgagor, transferor or assignor, produces and delivers a written waiver of the provisions of this Act
from his creditors as shown by verified statements, then, and in that case, the provisions of this section
shall not apply.

Sec. 3. Statement of creditors. — It shall be the duty of every person who shall sell, mortgage, transfer,
or assign any stock of goods, wares, merchandise, provisions or materials in bulk, for cash or on credit,
before receiving from the vendee, mortgagee, or his, or its agent or representative any part of the
purchase price thereof, or any promissory note, memorandum, or other evidence therefor, to deliver to
such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be a corporation, then to the
president, vice-president, treasurer, secretary or manager of said corporation, or, if such vendee or
mortgagee be a partnership firm, then to a member thereof, a written statement, sworn to substantially
as hereinafter provided, of the names and addresses of all creditors to whom said vendor or mortgagor
may be indebted, together with the amount of indebtedness due or owing, or to become due or owing by
said vendor or mortgagor to each of said creditors, which statement shall be verified by an oath to the
following effect:

PHILIPPINE ISLANDS
PROVINCE OR CITY OF _________________}

Before me, the undersigned authority, personally appeared __________________ (vendor, mortgagor,
agent or representative, as the case may be), bearing cedula No. ____________ issued at ___________
on the day of _____________ who, by me being first duly sworn, upon his oath, deposes and states
that the foregoing statement contains the names of all of the creditors of ________________ (vendor,
or mortgagor) together with their addresses, and that the amount set opposite each of said
respective names, is the amount now due and owing, and which shall become due and owing by
_____________ (vendor or mortgagor) to such creditors, and that there are no creditors holding
claims due or which shall become due, for or on account of goods, wares, merchandise,
provisions or materials purchased upon credit or on account of money borrowed, to carry on
the business of which said goods, wares, merchandise, provisions or materials are a part, other
than as set forth in said statement.

______________________

Subscribed and sworn to before me this _______ day of ______, 19___, at ________
Sec. 4. Fraudulent and void sale, transfer or mortgage. — Whenever any person shall sell, mortgage,
transfer, or assign any stock of goods, wares, merchandise, provisions or materials, in bulk, for cash or
on credit, and shall receive any part of the purchase price, or any promissory note, or other evidence of
indebtedness for said purchase price or advance upon mortgage, without having first delivered to the
vendee or mortgagee or to his or its agent or representative, the sworn statement provided for in
section three hereof, and without applying the purchase or mortgage money of the said property to the
pro rata payment of the bona fide claim or claims of the creditors of the vendor or mortgagor, as shown
upon such sworn statement, he shall be deemed to have violated this Act, and any such sale, transfer or
mortgage shall be fraudulent and void.

Sec. 5. Inventory. — It shall be the duty of every vendor, transferor, mortgagor, or assignor, at least ten
days before the sale, transfer or execution of a mortgage upon any stock of goods, wares, merchandise,
provisions or materials, in bulk, to make a full detailed inventory thereof and to preserve the same
showing the quantity and, so far as is possible with the exercise of reasonable diligence, the cost price to
the vendor, transferor, mortgagor or assignor of each article to be included in the sale, transfer or
mortgage, and notify every creditor whose name and address is set forth in the verified statement of the
vendor, transferor, mortgagor, or assignor, at least ten days before transferring possession thereof,
personally or by registered mail, of the price, terms conditions of the sale, transfer, mortgage, or
assignment.

Sec. 6. Any vendor, transferor, mortgagor or assignor of any stock of goods, wares, merchandise,
provisions or materials, in bulk, or any person acting for, or on behalf of any such vendor, transferor,
mortgagor, or assignor, who shall knowingly or willfully make, or deliver or cause to be made or
delivered, a statement, as provided for in section three hereof, which shall not include the names of all
such creditors, with the correct amount due and to become due to each of them, or shall contain any
false or untrue statement, shall be deemed to have violated the provisions of this Act.

Sec. 7. It shall be unlawful for any person, firm or corporation, as owner of any stock of goods, wares,
merchandise, provisions or materials, in bulk, to transfer title to the same without consideration or for a
nominal consideration only.

Sec. 8. Nothing in this Act contained shall apply to executors, administrators, receivers, assignees in
insolvency, or public officers, acting under judicial process.

Sec. 9. The sworn statement containing the names and addresses of all creditors of the vendor or
mortgagor provided for in section three of this Act, shall be registered in the Bureau of Commerce. For
the registration of each such sworn statement a fee of five pesos shall be charged to the vendor or
mortgagor of the stock of goods, wares, merchandise, provisions or materials, in bulk.

Sec. 10. The provisions of this Act shall be administered by the Director of the Bureau of Commerce and
Industry, who is hereby empowered, with the approval of the Department Head, to prescribe and adopt
from time to time such rules and regulations as may be deemed necessary for the proper and efficient
enforcement of the provisions of this Act.

Sec. 11. Any person violating any provision of this Act shall, upon conviction thereof, be punished by
imprisonment not less than six months, nor more than five years, or fined in sum not exceeding five
thousand pesos, or both such imprisonment and fine, in the discretion of the court.

Sec. 12. This Act shall take effect on its approval.

Approved: 01 December 1972

1.) There is a sale, transfer, mortgage or assignment of stock other than in the
ordinary course of business
2.) All or substantially all of the trade or business is sold, transferred or
mortgaged
3.) All or substantially all of the fixtures and equipment of the business are sold

The purpose of the bulk sales law (Act 3952) is to prevent the defrauding of
creditors by secret sale or disposal in bulk of all or substantially all of the
merchant's stock or goods. "Substantially" means 80%. It doesn't only apply to
creditors whose claims are already due at the time of the sale, but also to those
whose claims aren't due but are already existing at the time of the sale.

The bulk sales law will not apply to the following:

1.) Sales/transfers in the ordinary course of trade or business

When a bulk sale is made, the seller must do the following:

1.) Deliver a sworn statement containing a list of all his creditors with the
corresponding amounts of indebtedness to the buyer
2.) Apply the payment received from the sale pro rata to the claims of the
creditors as shown in the sworn statement
3.) Make a full and detailed inventory of the stock to be sold/mortgaged in bulk
4.) Inform the creditors of the sale at least 10 days before it actually takes place

Penalties

Violations of the bulk sales law makes the sale valid between the parties but void
for the affected creditors. The buyer will hold the property in trust for the seller
and is liable to the seller's creditors for properties forming part of the bulk and
already disposed by him.

Also, the seller can be punished with a prison term of 6 months to 5 years and/or
a fine of up to Php5,000.00.