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Chapter 4 - OBLIGATIONS OF THE VENDOR Section 3. Conditions and Warranties

1. Conditions. This means an uncertain event or contingency on the happening of which the obligation of the contract depends. 2. Effects of condition. a. If the obligation of either party is subject to any condition and such condition is not fulfilled, such party may either: i. Refuse to proceed with the contract; or ii. Proceed with the contract, waiving the performance of the condition. (Art. 1545) PROBLEM: S offered for sale a specific parcel of land to B for P1,000,000, that is, 1,000 sq. m., at P1,000 per square meter. The area is inhabited by squatters. The parties agreed that B shall advance the amount of P100,000 to be used for the ejectment of squatters and this amount shall be considered as partial payment of the balance of P900,000 to be paid after the removal of the squatters. If 60 days after the execution of the conditional Deed of Sale, S shall not be able to remove the squatters, the P100,000 paid shall be returned to B, and if B failed to pay the balance within 30 days after notice of the squatters removal the amount of P100,000 shall be forfeited in favor of S. Meantime, S failed to eject the squatters, and offered to return the P100,000 to B because the condition was not complied with. B refused to accept the money instead he told S that he will be the one to take care of the squatters removal and will just deduct the expenses to be incurred to the balance of P900,000. S therefore, sued for rescission and consigned the P100,000 in court. Will the action for rescission prosper? b. If the condition is in the nature of a promise that it should happen, the non-performance of such condition may be treated by the other party as a breach of warranty. (Art. 1546) PROBLEM: (1) B (buyer) entered into a contract with S for the purchase of certain machinery. The arrival of the goods to be shipped from Japan is made a condition of the bargain, there being no promise by S that the goods will arrive. If the machinery does not arrive, will S be held guilty of breach of contract? (2) Using the data in number (1), if S promises or warrants that the machinery arrived, will S be held guilty of breach of contract if the machinery did not arrived? 3. Kinds of Warranties a. Express warranty. Any affirmation of fact or any promise by the seller relating to the thing if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same and if the buyer purchased the thing relying thereon. A warranty is a part of the contract of sale. It is, therefore, immaterial whether the seller did not know that it was false or true. No intent is necessary to make the seller liable for his warranty. PROBLEM: S sells to B an automobile for P60,000 telling that the latter is a 1990 model and that it is worth about P70,000. B sees the automobile and after a test run, expresses satisfaction over its condition. The automobile is really of 1988 vintage and is worth P50,000. Is S liable for breach of warranty? Effect of dealers talk in sale. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. (Art. 1340) A mere expression of an opinion does not signify fraud unless made by an expert and the other party has relied on the formers special knowledge. (Art. 1341) EXAMPLE: Expressions or advertisements like the cigarette that will give you utmost smoking pleasure, the most effective pain reliever, you like it, it likes you, etc. are mere sales talk or sellers puffing. They are not construed as warranties because the buyer knows that they are mere exaggerations. b. Implied warranties in a contract of sale i. implied warranty against eviction; and
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ii. implied warranty against hidden defects. 4. When implied warranty not applicable a. As is and where is sale. It means nothing than that the vendor makes no warranty as to the quality or workable condition of the goods, and that the vendee takes them in the conditions in which they are found and from the place they are located. b. Sale of second hand articles. There is no implied warranty as to the condition, adaptation, fitness or suitability for the purpose for which made, or the quality of an article sold as and for a second-hand article. But the buyer may make an express warranty that such article is in A-1 condition c. Sale by virtue of authority in fact or law. implied warranty does not apply to a sheriff, auctioneer, mortgaged, pledge or other person who sells. NOTE: The rule of caveat emptor (buyer beware) applies to execution sales since the sheriff does not warrant the title to real property sold by him as sheriff and it is not incumbernt upon him to place the purchaser in possession of such property. 5. Warranty in case of eviction. An implied warranty in contracts of sale, by virtue of which the vendee is deprived of the whole or part of the thing purchased by a final judgment based on the right prior to the sale or an act imputable to the vendor, such vendor shall answer for the eviction even though nothing has been said in the contract on the subject (Art. 1548) PROBLEM: a. B bought land from S. B did not register. C then bought the same land from S. C registers. B is defeated. Can B hold S liable for eviction although Cs right came after the sale to him? b. S sold a parcel of land to B owned by X. B entered and occupied the property. Subsequently, B was evicted of possession by court order. What right does B have? 6. Requisites of warranty against eviction a. There is a final judgment; (Art. 1557) b. Purchaser has been deprived in whole or in part of the thing sold; c. Deprivation was by virtue of a right prior to the sale effected by the seller; and d. Vendor has been previously notified of the complaint for eviction at the instance of the purchaser. (Art. 1558) e. There is no waiver on the part of the vendee. PROBLEM: S sells a parcel of land to B. Subsequently, C files an action for the recovery of possession claiming that he is the owner of the land. At the instance of B, S was summoned to defend his title. The court renders final judgment declaring that C has a better right. Accordingly, B is evicted. Is S liable for warranty against eviction? 7. Effect of stipulation waiving liability for eviction a. If the seller was in good faith - the exemption is valid b. If the seller was in bad faith - the stipulation is void 8. Waiver by the buyer (Warranty against eviction) a. Waiver consciente Without knowledge of risk of eviction. To pay the value which the thing sold had at the time of the eviction b. Waiver intencionada With knowledge of the risk of eviction and assumption of its consequences Vendor not liable 9. The seller must pay in case of eviction: a. Value of the thing at the time of eviction b. Income or fruits, if he has ordered to deliver them to the winning party c. Costs of the suit which caused eviction d. Expenses of the contract, if the vendee has paid them e. Damages and interest (on cost, expense and damages), if seller was in bad faith PROBLEM: S sold to B a parcel of land for P500,000. The real owner is X. if after 3 years B is evicted of possession by virtue of a final judgment, and at the time of execution, the value has appreciated and is now worth P700,000, how much can B recover from S? 10. Rights of vendee in case of partial eviction
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The vendee has the option either: a. To enforce the vendors liability for eviction b. To demand rescission of the contract This right is applicable a. When the vendee is deprived of a part of the ting sold if such part is of such importance to the whole that he would not have bought the thing without said part. b. When two or more things are jointly sold whether for a lump sum or of a separate price for each, and the vendee would not have purchased one without the other. PROBLEM: S sells to B a parcel of land, represented by S as containing 500 square meter, at the rate of P1,000 per square meter. B needs a lot of at least 500 square meters on which to build a factory. B is evicted from a 20-square-meter portion of the land. B would not have bought the land had he known of its smaller area. What are the remedies available to B? 11. Sale of immovable with non-apparent burden or servitude (Art. 1560) a. If the non-apparent burden or servitude is recorded in the registry of property The buyer has no remedy except if there is express warranty that the thing is free from all burden and encumbrances b. If the non-apparent burden or servitude is not recorded in the registry of property i. Rescission of the contract - within one year from the execution of the deed ii. Damages - within one year from the execution of the deed or one year having elapsed, within one year from the date on which he discovered the burden or servitude 12. Requisites of warranty against hidden defects a. The defect must be important or serious b. It must be hidden c. It must exist at the time of the sale d. The vendee must give notice of the defect to the vendor within a reasonable time (Art. 1586) e. The actions for rescission or reduction of the price must be brought within the proper period - six (6) months from the delivery of the thing sold (Art. 1571)) or within forty (40) days from the date of the delivery in case of animals (Art. 1577) f. There must be no waiver of warranty on the part of the vendee. (Art. 1548) PROBLEM: S sold to B a specific car for P100,000. While B is driving the car, the two front tires gave away at the same time. At the time of the sale, these tires are already worn-out. Can B file an action for warranty against hidden defect? 13. Implied warranties of quality a. Implied warranty of fitness. Warranty that the goods are suitable for the special purpose of the buyer which will not be satisfied by mere fitness for general purposes. PROBLEM: B goes to a hardware store to buy nails, 7 inches long and 7 kilos in weight. B told S that he will use them for cement purposes. S gave B, 7 inches long, weighing 7 kilos. It turns out that the goods delivered are wood nail and not concrete nail. Can B rescind the contract of sale? b. Implied warranty of merchantability. Warranty that the goods are reasonably fit for the general purpose for which they are sold. PROBLEM: S sold to B one can of Ligo sardines. When B opened it, he found out that bubbles are coming out of the can. Since the goods is perishable he concluded that it is already spoiled. Can B ask for rescission of the contract? 14. Contract of sale of a specified article under its patent or other trade name, there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. (Art. 1563) 15. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. (Art. 1564) 16. Doctrines of caveat venditor and caveat emptor Caveat venditor. The vendor is liable to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. It is based on the principle that a sound price warrants a sound article. Caveat emptor. The vendor is not liable to the vendee for any hidden faults or defects in the thing sold. (buyer beware) 17. Remedy in case of hidden defects
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c. Accion redhibitoria. (withdrawal or rescission) + damages d. Accion quanti minoris. (Proportionate reduction in the price) + damages e. Accion prescribed after 6 months from the delivery of the thing sold (Art. 1571) The buyer must sue within 6 months not mere notification to the seller of hidden defect 18. Loss of the thing with hidden defect a. Loss due to the hidden fault i. Vendor was aware. Return the price + refund the expenses of the contract + DAMAGES ii. Vendor was not aware. Return the rice + Interest + reimburse the expense of the contract b. Loss due to fortuitous even or fault of the vendee Price paid - value of the thing at loss; if action in bad faith liable for DAMAGES PROBLEM: S sold a car for P300,000 to B. Unknown to B, the car then had a cracked engine block, the replacement of which would cost P75,000. Despite his knowledge of this defect, S obtained a waiver from B of the latters right under the warranty against hidden defects. Subsequently, the car was wrecked due to the recklessness of B who only then discovered the defects. What right, and to what extent, if any, has B against S? Reason. 19. Sale of animal a. If two or more animals are sold together, the defect in one should not affect the sale of the others whether the price was for lump sum or separate for each animal except in case of team, yoke, pair or set is bought. (Art. 1572) b. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of livestock sold as condemned. (Art. 1574) c. The sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor. (Art. 1575) d. The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee. The action can only be exercised with respect to faults and defects which are determined by law or by local customs. (Art. 1577) e. If the animal should die within three days after its purchase, the vendor shall be liable if the disease which caused the death existed at the time of the contract. (Art. 1578) f. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect. (Art. 1579)

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