SALES

d. Proportional reduction of the price; or of such affirmation or promise is to induce the

e. Rescission of the contract provided the buyer to purchase the same, and if the buyer
deficiency is not less than 1/10 of the area purchases the thing relying thereon (Art. 1546).
stated in the contract (NCC, Art. 1539).
Requisites: (AIR)
Prescription period for the action of rescission 1. It must be an Affirmation of fact relating to
of contract the subject matter of sale;
2. Natural tendency is to Induce buyer to
6 months from the day of delivery (NCC, Art. purchase subject matter; and
1543). 3. Buyer purchases the subject matter Relying
thereon
How payment is made by the buyer
Liability of the seller for breach of express
Price is paid at the time and place stipulated in the warranties
contract. It is made to the person in whose favor
the obligation has been constituted or his The seller is liable for damages (Villanueva, 2009).
successor in interest, or any person authorized to
receive (Villanueva, 2009). Implied warranties

WARRANTIES Warranties deemed included in all contracts of sale

by operation of law (NCC, Art. 1547).
Warranty
1. Warranty that seller has right to sell – refers to
A statement or representation made by the seller consummation stage. Not applicable to sheriff,
of goods, as part of the contract of sale, having auctioneer, mortgagee, pledgee (NCC, Art.
reference to the character, quality, or title, of the 1547); and
goods, and by which he promises or undertakes to 2. Warranty against eviction (Art. 1548).
insure that certain facts are or shall be as he then
represents (De Leon, 2011). Requisites: (JPENS)
a. Final Judgment;
Effect of a breach of warranty b. Buyer is Evicted in whole or in part from
the subject matter of sale;
Buyer may: c. Basis of eviction is a right Prior to sale or
1. Refuse to proceed with the contract; or act imputable to seller;
2. Proceed with the contract and waive the d. Seller has been Summoned in the suit for
condition. eviction at the instance of buyer; or
made 3rd party defendant through 3rd
NOTE: If the condition is in the nature of a party complaint brought by buyer; and
promise that it should happen or be performed, e. No waiver on the part of the buyer.
the non-performance may be treated as a breach
of warranty. NOTE: For eviction – disturbance in law is
required and not just trespass in fact.
Kinds of warranties
3. GR: Warranty against non-apparent burden or
1. Express; or servitude (NCC, Art. 1560).
2. Implied
Requisites:
NOTE: Prescriptive period of actions based on a. Immovable sold is encumbered with non-
express warranty: apparent burden or servitude not
mentioned in the agreement; and
1. That specified in the contract and in the b. Nature of non-apparent servitude or
absence thereof; or burden is such that it must be presumed
2. 4 years (Rabuya, 2017) that the buyer would not have acquired it
had he been aware thereof.
Express warranties
XPN: Warranty not applicable when non-
Any affirmation of fact or any promise by the apparent burden or servitude is recorded in
seller relating to the thing if the natural tendency the Registry of Property – unless there is

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 CIVIL LAW
expressed warranty that the thing is free from Effects of waiver of an implied warranty
all burdens and encumbrances
1. Seller in bad faith and there is waiver against
4. Warranty against Hidden Defects (NCC, Art. eviction –void.
1561) 2. When buyer without knowledge of a
particular risk, made general renunciation of
Requisites: (HENNAS) warranty – is not a waiver but merely limits
a. Defect is important or Serious; liability of seller in case of eviction.
i. The thing sold is unfit for the use 3. When buyer with knowledge of risk of
which it is intended; and eviction assumed its consequences and made
ii. Diminishes its fitness for such use or a waiver – seller not liable (applicable only to
to such an extent that the buyer waiver of warranty against eviction).
would not have acquired it had he
been aware thereof. WARRANTY AGAINST EVICTION

b. Defect is Hidden; In a contract of sale, unless a contrary intention

c. Defect Exists at the time of the sale; appears, there is an implied warranty on the part
d. Buyer gives Notice of the defect to the of the seller that he has the right to sell the thing
seller within reasonable time; at the time when the ownership is to pass, and
e. Action for rescission or reduction of the that the buyer shall from that time have and enjoy
price is brought within the proper period; the legal and peaceful possession of the thing
i. 6 months – from delivery of the thing [NCC, Art. 1547(1)].
sold(NCC, Art. 1571); and
ii. Within 40 days – from the delivery in Coverage of a warranty against eviction
case of animals (NCC, Art. 1577).
It covers eviction by a final judgment based on a
f. There must be No waiver of warranty on right prior to the sale or an act imputable to the
the part of the buyer. vendor, the vendee is deprived of the whole or of a
part of the thing purchased.
NOTE: Hidden faults or defects pertain only to
those that make the object of sale unfit for the use The vendor shall answer for the eviction even
for which it was intended at the time of the sale. though nothing has been said in the contract on
the subject.
Non-applicability of implied warranty (ASAP)
NOTE: The contracting parties, however, may
1. “As is and where is” sale; increase, diminish, or suppress this legal
2. Sale of second hand articles; obligation of the vendor (Art. 1548).
3. Sale by virtue of authority in fact or law; and
4. Sale at public auction for tax delinquency. Effect of a breach of warranty against eviction

Where the cause of action is to hold the seller The buyer shall have the right to demand the R-I-
of a vehicle for breach of implied warranty C-E with damages from seller:

Under Article 1599 of the Civil Code, once an 1. The Return of the value which the thing sold
express warranty is breached, the buyer can had at the time of the eviction, be it greater or
accept or keep the goods and maintain an action lesser than the price of the sale;
against the seller for damages. In the absence of 2. The Income or fruits, if he has been ordered to
an existing express warranty a complaint for deliver them to the party who won the suit
damages may be anchored on the enforcement of against him;
an implied warranty against hidden defects. 3. The Costs of suit which caused the eviction,
However, this right must be exercised within six and, in a proper case, those of suit brought
(6) months from the delivery of the thing sold, else against the vendor for the warranty;
his cause of action had become time-barred 4. The Expenses of contract if buyer has paid
(De Guzman v. Toyota Cubao, G.R. No. 141480, them; and
November 29, 2006). 5. The damages, interests and ornamental
expenses if sale was made in bad faith (NCC,
Art. 1555).

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2019 GOLDEN NOTES 462
 SALES
NOTE: Vendor is liable for any hidden defect even nature, of certain importance; and a minor defect
if he is not aware (Caveat Venditor). does not give rise to redhibition (De Leon, 2005).

Purchaser must be aware of the title of the vendor Redhibitory defect on animals (NCC, Art. 1576)
(Caveat Emptor).
If the hidden defect of animals, even in case a
Rights of buyer in case of partial eviction professional inspection has been made, should be
of such a nature that expert knowledge is not
1. Restitution (with obligation to return the sufficient to discover it, the defect shall be
thing w/o other encumbrances than those considered as redhibitory.
which it had when he acquired it); and
2. Enforcement of warranty against eviction Void sale of animal (NCC, Art. 1575)
(Paras, 2013 and NCC, Art. 1556).
The sale is void if animal is:
Inapplicability of rescission 1. Suffering from contagious diseases; or
2. Unfit for the use or service for which they
GR: Rescission is not a remedy in case of eviction were purchased as indicated in the
because rescission contemplates that the one contract.
demanding it is able to return whatever he has
received under the contract. Since the vendee can Responsibility of a vendor for hidden defects
no longer restore the subject matter of the sale to
the vendor, rescission cannot be carried out (NCC, If the hidden defects which the thing sold may
Art. 1385). have:
1. Render it unfit for the use for which it is
XPN: The buyer may demand rescission in case of intended; or
partial eviction, because there still remains a 2. Diminish its fitness for such use to such
portion of the thing sold (De Leon, 2009). an extent that had the vendee been aware
thereof, he would not have acquired it or
WARRANTY AGAINST HIDDEN DEFECT would have given a lower price for it
(NCC, Art. 1561).
Hidden defect (NCC, Art.1561)
Extent of warranty by the seller against hidden
One which is unknown or could not have been defects
known to the buyer (Diaz, 2006.)
The seller is responsible to the vendee for any
NOTE: Seller does not warrant patent defect. hidden faults or defects in the thing sold, even
Reason: caveat emptor (buyer beware). though he was not aware thereof.

Application When the seller is not answerable for the

defects of the thing sold
The seller shall be responsible for warranty
against “hidden defect” only when: 1. For patent defects or those which are visible;
2. Even for those which are not visible if the
1. The nature of the hidden defect is such buyer is an expert who, by reason of his
that it should render the subject matter trade or profession, should have known them
unfit for the use for which it is intended; (NCC, Art. 1561);
or 3. If the contrary has been stipulated, and the
2. Should diminish its fitness for such use to vendor was not aware of the hidden faults or
such an extent that, had the buyer been defects in the thing sold (NCC, Art. 1566).
aware thereof, he would not have
acquired it or would have given a lower Effect of a breach of warranty against hidden
price for it. defects

Redhibitory defect It would depend on whether the seller had

knowledge of such defect and whether there has
It is a defect in the article sold against which been a waiver of the warranty.
defect the seller is bound to warrant. The vice
must constitute an imperfection, a defect in its

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 CIVIL LAW
1. If the thing should be lost in consequence of the REMEDIES IN CASE OF BREACH OF WARRANTY
hidden faults, and seller was aware of them –
he shall: Remedies of the buyer in case of breach of
a. bear the loss; warranty
b. return the price; and
c. refund the expenses of the contract 1. Accept goods and set up breach of warranty
with damages. by way of recoupment in diminution or
extinction or the price;
2. If the thing is lost and seller was not aware of 2. Accept goods and maintain action against
the hidden faults – he shall: seller for damages;
a. return the price and interest; and 3. Refuse to accept goods and maintain action
b. reimburse the expenses of the against seller for damages; or
contract which the buyer might have 4. Rescind contract of sale and refuse to receive
paid, but not for damages (Villanueva, goods/return them when already received.
2004).
Remedies of the buyer in case of breach of
Prescriptive period: six (6) months from date of warranty NOT absolute
the delivery of the thing sold (NCC, Art. 1571).
The vendee's remedies against a vendor with
Remedies of the buyer in case of sale of things respect to the warranties against hidden defects
with hidden defects (NCC, Art. 1567) or encumbrances upon the thing sold, in the case
of Arts. 1561, 1562, 1564, 1565 and 1566 of the
The vendee may elect between: Civil Code, may either be to withdraw from the
1. Withdrawing from the contract, or contract or demand a proportionate reduction of
2. Demanding a proportionate reduction of the price, with damages in either case.
the price, with damages in either case.
The vendee may also ask for the annulment of the
Waiver of warranty against eviction contract upon proof of error or fraud, in which
case the ordinary rule on obligations shall be
There is waiver of warranty against eviction when applicable; responsibility arising from fraud is
the lessee has inspected the premises and decides demandable in all obligations and any waiver of
to consummate the contract based on such an action for future fraud is void. Responsibility
inspection. Under Arts. 1561 and 1653 of the Civil arising from negligence is also demandable in any
Code, the lessor is responsible for warranty obligation, but such liability may be regulated by
against hidden defects, but he is not answerable the courts, according to the circumstances.
for patent defects or those, which are visible, and
which can be seen upon inspection (Jon and The vendor could likewise be liable for quasi-delict
Marissa De Ysasi v. Arturo and Estela Arceo, G.R. under Article 2176 of the Civil Code, and an action
No. 136586, November 22, 2001). based thereon may be brought by the vendee
(Coca-Cola Bottlers Philippines, Inc. v. CA, G.R. No.
Specific implied warranties in sale of goods 110295, October 18, 1993).
(NCC, Art. 1562)
Instances when the buyer cannot rescind the
1. Warranty of fitness sale in case there is a breach of warranty

GR: No implied warranty 1. If he knew of the breach of warranty;

2. If he fails to return or offer to return goods to
XPN: seller in substantially as good condition as
a. Buyer manifests to the seller the they were at time ownership was transferred;
particular purpose for which the goods or
are required; and 3. If he fails to notify the seller within a
b. Buyer relies upon the seller’s skill or reasonable time of his election to rescind.
judgment
Q: Goodyear Philippines sold a car to Anthony
2. Warranty of merchantability Sy. Later on, Sy sold the car to Jose Lee. When
That goods are reasonably fit for the general Lee tried to register the car in his name, he
purpose for which they are sold. failed to have it registered because it turned
out that the car was stolen before and was only

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2019 GOLDEN NOTES 464
 SALES
subsequently recovered by Goodyear. As to nature
However, PNP did not lift the alert alarm over Purports to the Purports to the
the said car. Due to this, the car was existence of obligation. performance of
impounded and Lee was sued by PNP. This obligation.
problem was relayed by Lee to Sy. It led to Sy
filing a case against Goodyear for breach of As to the need for stipulation
warranty. It is Sy’s argument that it is Must be stipulated to Need not be
Goodyear’s duty to convey the vehicle to Sy form part of the stipulated; may form
free from all liens, encumbrances and legal obligation. part of obligation by
impediments. Was there a breach of warranty provision of law.
by Goodyear?
As to subject matter
A: NO. Upon the execution of the Deed of Sale, May attach itself to Relates to the
Goodyear did transfer ownership of and deliver obligation of seller to subject matter itself or
the vehicle to Sy. The impoundment of the vehicle deliver possession and to obligation of the
and the failure to register it were clearly acts that transfer. seller as to the subject
were not deliberately caused by Goodyear, but matter of the sale.
that resulted solely from the failure of the PNP to
lift the latter’s own alarm over the vehicle.
EXTINGUISHMENT OF SALE
Assuming there was a breach of the implied
warranty against hidden encumbrances, notice of
breach was not given to the Goodyear within a Causes for extinguishment of sale
reasonable time. Article 1586 of the Civil Code
requires that notice be given after the breach, of A contract of sale is extinguished by:
which Sy ought to have known. (Goodyear 1. Same causes as how an obligation is
Philippines, Inc. v. Sy and Lee, G.R. No. 154554, extinguished, namely:
November 9, 2005). a. Payment or performance;
b. Loss of the thing due;
CONDITION vis-à-vis WARRANTY c. Condonation or remission of the debt;
d. Confusion or merger of the rights of
Condition creditor and debtor;
e. Compensation;
An uncertain event or contingency upon the f. Novation;
happening of which the obligation or right of the g. Annulment;
contract depends. In such case, the obligation of h. Rescission;
the contract does not attach until the condition is i. Fulfillment of resolutory condition; or
performed (De Leon, 2011). j. Prescription

NOTE: There may be a contract of sale of goods, 2. Conventional Redemption

whose acquisition by the seller depends upon a 3. Legal redemption
contingency, which may or may not happen [NCC,
Art. 1462(2)]. Redemption

Effect of non-fulfillment of a condition It is a mode of extinguishment wherein the seller

has the right to redeem or repurchase the thing
If imposed on the perfection of contract – prevents sold upon return of the price paid.
the juridical relation itself from coming into
existence. Kinds of redemption

The other party may: 1. Legal; and

1. Refuse to proceed with the contract; or 2. Conventional
2. Proceed w/ contract, waiving the
performance of the condition. Incorporation of right to redeem in every
contract of sale
Condition v. Warranty
The right of the vendor to redeem/repurchase
CONDITION WARRANTY must appear in the same instrument. However,

465