CONDITIONS AND WARRANTIES

Condition vs Warranty
Condition - A future and an uncertain event

which may or may not happen, upon which depends the rising or extinction of an obligation.
Warranty - a collateral undertaking in a sale of

either realty or personalty, express or implied, that if the property sold does not possess certain incidents or qualities, the purchaser may either consider the sale void or claim damages or breach of warranty. It is a promise that a fact is true.

Law on conditional sale (Art. 1545)

Article 1545 grants two alternative remedies to a party where the obligation of the other party to a contract of sale is subject to any condition which is not performed, in that such first may either:
(a) refuse to proceed with the contract, or (b) he may waive performance of the condition.

Effect of dealer's talk (Art. 1546)

In Azarraga v. Gay, the Court recognized that the

law allows considerable latitude to sellers statements, or dealers talk; and experience teaches that it is exceedingly risky to accept it at its face value.
Assertions concerning the property which is the

subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no ground for omitting to make inquiries.

Implied Warranties (Art. 1547)

Although the phrase unless a contrary intention

appears is used, there can be no legal waiver of such warranty without changing the basic nature of the relationship, for the warranty on the part of the seller that he has the capacity to sell, i.e. to transfer ownership of the subject matter pursuant to the sale, is the essence of the sale; unless it amounts to clear assumption of risk on the part of the buyer, as when the obligation of the seller is subject to a condition.
A buyer at a tax sale is supposed to take all the

chances because there is no warranty on the part of the state (Govt v. Adriano, 41 Phil 1121) and a

Implied Warranties (Art. 1547)

In general, the actions based on the implied

warranties prescribed in 10 years since these obligations are imposed by law. (Phil. National Bank v. Lasos, [C.A.] 40 O.G. [Supp. 5], p. 10).

Warranty Against Eviction

Articles 1548 - 1560

When is there breach of warranty against eviction? (Art. 1548)

Whenever by a final judgment, the buyer is

deprived of the whole or of a part of the thing purchased;

The basis of eviction is a right prior to the sale or

an act imputable to the vendor;

The seller has been summoned in the suit for

eviction at the instance of the buyer and be made a co-defendant or a third-party defendant by the buyer who files a third party complaint Escaler vs. CA (138 SCRA 1)

ARTICLE 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a part thereof.
Example: after the buyer purchased the property,

a third person filed a case for forcible entry against the buyer. The buyer must make the seller a co-defendant in the forcible entry suit. The case of forcible entry ousting the buyer must be decided with finality before the buyer may enforce the warranty against the seller.

ARTICLE 1549. The vendee need not appeal from the decision in order that the vendor may become liable for eviction.
In the foregoing example, even if the buyer does

not appeal the decision ousting him from the purchased property, he may still enforce the warranty against the seller because the warranty is a covenant on the part of the seller. Case: Jovellano vs. Lualhati (47 Phil 371)

had been commenced before the sale but the prescriptive period is completed after the transfer, the vendor shall not be liable for eviction.
Prescription is a mode of acquiring ownership

through the lapse of time, in the manner and under the conditions laid down by law.
When prior to the sale, a third person already

acquired ownership over the subject matter by means of prescription, the seller is liable for the warranty against eviction should the buyer be ousted from the subject matter by the third person. If the buyer knew beforehand of the acquisitive prescription by the third person and still proceeded to buy the property, he is deemed

 If the adverse possession by the third person

started before the sale and finally completed the requisites of acquisitive prescription after the sale, the seller is not liable for warranty against eviction. The reason is that the title arising out of the adverse possession is not yet perfected. The buyer should have used diligence to effectively interrupt the running of the prescriptive period. But if the time left for the interruption is too short for the buyer to be given full opportunity to perform acts of interruption, the seller shall still be liable for the warranty.

 ARTICLE 1551. If the property is sold for

nonpayment of taxes due and not made known to the vendee before the sale, the vendor is liable for eviction.
ARTICLE 1552. The judgment debtor is also

responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment. -The reason is that the sheriff, auctioneer, etc. are not liable for the warranty. Hence, resort must be had to the judgment debtor.

ARTICLE 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith.

What can the buyer demand from the seller in case of breach of warranty against eviction?
ARTICLE 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor: (1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale; (2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him;
(3) The costs of the suit which caused the eviction,

and, in a proper case, those of the suit brought

What are the rights of the buyer if eviction is only partial?

Governing rule: Art. 1556
THUS: If the part of the thing sold is of such

importance in relation to the whole, that the buyer would not have bought it without said part, OR if two or more things have been jointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other, the buyer may: Enforce the rights provided under Article 1555 of the Civil Code as above-cited; Rescind the contract; but with the obligation to return the thing without other encumbrances than those

 If the part wherein eviction occurs is separable from

the rest, the buyer may enforce the rights under Art. 1555 only with respect to the part.

What are the effects of waiver of the warranty against eviction?

1) ARTICLE 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith.
The waiver is void if the seller acted in bad faith.

Thus, despite the stipulation exempting the vendor from the obligation to answer for eviction, he will still be liable.

2) ARTICLE 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction should take place, the vendor shall only pay the value which the thing sold had at the time of the eviction. Should the vendee have made the waiver with knowledge of the risks of eviction and assumed its consequences, the vendor shall not be liable.
Thus, if the waiver is in general terms without

knowledge by the buyer of a particular risk, the seller shall only pay the value which the thing sold had at the time of the eviction. Hence, a

 If the buyer made the waiver with knowledge of

the risks of eviction and assumed its consequences, the seller shall not be liable in case of eviction. Here, liability is not only limited but is entirely extinguished.

Warranty on Hidden Defects

Articles 1561, 1566, 1567, 1568, 1569 and 1570

Warranty as to Fitness or Quality

Articles 1562, 1563, 1564 and 1565

When can the seller be held liable for warranty against the hidden defects?
General Rule The thing sold may or should render the subject matter unfit for the use for which it is intended (Art. 1561) Should they diminish its fitness for such use to such extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it. (Art. 1561)

Exemptions If there are patent defects or those which may be visible (Art. 1561) Those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them (Art. 1561) Stipulation between parties; provided, the vendor was not aware of the hidden faults or defects in the thing sold. Case: Investment & Development Inc. vs. Court of Appeals 162 SCRA 636 (1988)

What are the requisites for breach of warranty?

Defect must be hidden; Defect must exist at the time the sale was made; Defect must ordinarily have been excluded from the contract; Defect must be important (render the thing unfit or considerably decreases fitness); and Action must be instituted within the statute of limitations Case: Nutrimix Feeds Corp. vs. Court of Appeals

What are the remedies of the vendee for breach of warranty?

Accion redhibitoria with damages withdrawal from the contract Accion quanti minoris with damages demand of proportionate reduction of the price Article 1599

What are the obligations of the vendor for breach of warranty?

Articles 1568 & 1569

Applicability to Judicial Sales

General Rule: The warranty against hidden defects shall be applicable to judicial sales Exemption: Judgment debtor shall not be liable for damages

When can there be an implied warranty on the sale of goods?

General Rule: Article 1562 (1) Article 1562 (2) Article 1564 Article 1565 Exception to the General Rule: Article 1563 Exception to the Exception: If there is stipulation to the contrary (Art. 1563)

What are the remedies of a buyer in case of breach of any warranty?

Article 1599

Prescriptive Period Six (6) months (Art. 1571)

Warranty as to the Sale of Animals

Articles 1572, 1573, 1574, 1575, 1576, 1578, 1579, 1580, and 1581

Redhibitory Defects (Art. 1576)

A hidden defect of an animal of such a nature that

expert knowledge is not sufficient to discover it, even when a professional inspection has been made.
But the veterinarian, who has failed to discover or

disclose such defect through ignorance or bad faith, shall be liable for damages.

Sale of Two or More Animals Together (Art. 1572-1573)

GR : A defect in one should not affect the sale of

the others. This is true whether the price was a lump sum or separate rate for each animal.
Exception: In a sale of team of animals

Other rules on sales of animals

Art. 1574 GR: No warranty against hidden defects of animals that are sold at fairs or at public auctions or those live stock that are sold as condemned. Exception: The fact that the livestock is condemned must be communicated to the buyer, otherwise, the seller is still liable. Art. 1575 - Two (2) kinds of void sales with respect to animals: 1) Sale of animals suffering from contagious diseases; and 2)When the animals were found to be unfit for the

Prescriptive period (Art. 15771578)

Redhibitory action - within forty (40) days from the

date of their delivery to the buyer.

Should the animal die within three (3) days after

its purchase, the vendor shall be liable if the disease which causes the death existed at the time of the contract.
Withdrawing from the contract - six (6) months

from the delivery of the thing sold.

Obligation of the Buyer to Return (Art. 1579)

The animal shall be returned in the condition in

which it was sold and delivered if the sale be rescinded.

The buyer is shall be liable for any injury due to

his negligence.

with Redhibitory Defects (Art. 1580)

A buyer of animals with redhibitory defects has two (2) remedies (with damages in either case):
Withdrawal from the contract or rescission; To demand proportionate reduction of the price.

Sale of Large Cattle (Art. 1581)

In cases of sale of large cattle, special laws

govern the form of such sale.

PD 533, THE ANTI-CATTLE RUSTLING LAW OF

1974

Thank you!