Purports to existence of obligation Purports to performance of obligation
Condition must be stipulated to form part of the obligation Need not be stipulated; may form part of obligation by provision of law
May attach itself to obligation of seller to deliver possession &
transfer ownership
Relates to the subject matter itself or to obligation of the seller as to the subject matter of the sale
Warranty vs Promise (See Art. 1545)
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may treat the fulfilment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing.
Kinds of Warranty
1. Express (Art. 1546)
Art. 1546: Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller's opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer.
- Requisites: [AIR]
1. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale 2. natural tendency of affirmation or promise is to induce buyer to purchase subject matter 3. buyer purchases the subject matter relying thereon
when breached, seller is liable for damages
Art. 1340: The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent.
Art. 1341: A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former's special knowledge.
Art. 1343: Misrepresentation made in good faith is not fraudulent but may constitute error.
Art. 1338: There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (CAUSAL FRAUD / DOLO CAUSANTE = FRAUD IN THE PERFECTION OF THE CONTRACT)
Art. 1344: In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties.
Incidental fraud only obliges the person employing it to pay damages. (INCIDENTAL FRAUD / DOLO INCIDENTE)
Art. 1170: Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.
2. Implied (Art. 1547)
Art. 1547: In a contract of sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer.
This Article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest.
IMPLIED WARRANTIES
* warranty that seller has a right to sell
refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition
not applicable to sheriff, auctioneer, mortgagee, pledgee (the principle applicable to execution sales is caveat emptor)
* warranty against eviction
implied, unless contrary provision appears in contract
when ownership is transferred, buyer shall enjoy the legal and peaceful possession of the thing
[There are 2 general classifications of implied warranty: (1) warranty against eviction; and (2) warranty against hidden defects.]
REQUISITES OF BREACH OF WARRANTY AGAINST EVICTION: [EFBS]
1. buyer is evicted in whole or in part from the subject matter of sale (Art. 1548) 2. there is a final judgement (Art. 1557)
3. basis of eviction is a right prior to sale or an act imputable to vendor (Art. 1548)
4. seller has been summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer (Art. 1558)
no appeal needed nor a need for buyer to resist eviction for right to accrue; it is enough that the aforementioned requisites are complied with [Art. 1549]
warranty cannot be enforced until aforementioned requisites concur
applies to judicial sale; judgment debtor responsible for eviction unless otherwise decreed in judgment [Art. 1552]
vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is completed after transfer [Art. 1550]
If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale, vendor is liable for eviction [Art. 1551]
Rescission is not a remedy in case of eviction because rescission contemplates that the one demanding it is able to return whatever he has received under the contract. Since the vendee can no longer restore the subject-matter of the sale to the vendor, rescission cannot be carried out. [See Art. 1385] EXCEPTION: Partial Eviction.
The suit for the breach can be directed only against the immediate seller, unless the sellers of the seller had promised to warrant in favor of later buyers or the immediate seller has expressly assigned to the buyer his own right to sue his own seller.
The disturbance referred to in the case of eviction is a disturbance in law which requires that a person go to courts of justice claiming the thing sold, or part thereof and invoking reasons.
Mere trespass in fact does not give rise to the application of the doctrine of eviction.
Vendor’s liability is waivable but any stipulation exempting the vendor from the obligation to answer for eviction shall be void if he acted in bad faith. [Art. 1553]
KINDS OF WAIVER: [Art. 1554]
1. CONSCIENTE – voluntarily made by the vendee without the knowledge and assumption of the risks of eviction (vendor shall only pay the value which the thing sold had at the time of the eviction)
2. INTENCIONADA – made by the vendee with knowledge of the risks of eviction and assumption of its consequences (vendor shall not be liable)
LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole subject matter) [TISED]
1. value of thing at time of eviction ( be it greater/lesser than price of sale ) 2. value of income of fruits
3. costs of suit which caused the eviction 4. expenses of contract if buyer paid for them
5. damages & interests and ornamental expenses if sale was made in bad faith
RIGHT OF BUYER WHEN DEPRIVED OF ONLY PART OF THE SUBJECT MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART IF NOT IN RELATION TO THE WHOLE:
1. demand rescission but with the obligation to return the thing without other encumbrances than those which it has when the subject matter was acquired.
2. Enforce vendor’s liability for eviction (TISED)
HYPOTHETICAL QUESTIONS:
1. A found a ring which he sold to B, honestly believing and representing to B that it was a diamond ring. In truth, the ring was ordinary glass. Is there a breach of warranty?
No breach of warranty. A merely expressed an opinion. (Arts. 1341 on mere expression of opinion; and Art. 1343 on misrepresentation made in good faith)
2. Advertisement: ―the cigarette that will give you utmost smoking pleasure.‖ Is this a warranty?
No. Consequently, breach of the same is not breach of warranty. (Arts. 1340 on usual exaggerations on trade) 3. A sold to B a parcel of land which is claimed by C, who has been in possession of the property in the concept of
owner publicly and continuously for 30 years. Rule the case.
C is deemed to have acquired ownership over the land by prescription without need of title or good faith (apply Art.
1137). Hence, A shall be liable to be in case of eviction. (Art. 1550)
4. Same facts as #3, only that C was in adverse possession of the land for only 25 years at the time of sale, and the prescriptive period is completed after the sale.
S shall not be liable to B in case of eviction as B could have brought action against C during the remaining 5 year period to recover the property. (Art. 1550)
5. B purchased land from A after having been informed of prior right of another to purchase the same based on prior occupancy. Is B entitled to the vendor’s warranty against eviction and damages under Art. 1555?
No. He had knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. (J.M Tuazon vs CA)
* WARRANTY AGAINST NON-APPARENT BURDEN OR SERVITUDES (ART.1560) -REQUISITES:
a. immovable sold is encumbered with non–apparent burden or servitude not mentioned in the agreement; and b. nature of non–apparent servitude or burden is such that it must be presumed that the buyer would not have
acquired it had he been aware thereof
When breach of warranty exist, buyer may ask for:
(a) rescission; or (b) indemnity
warranty not applicable when: [ARAK]
(a) servitude is apparent
(b) non – apparent burden or servitude is recorded in the Registry of Property (EXCEPT when there is express warranty that the thing is free from all burdens & encumbrances)
(c) the servitude is mentioned in the agreement (d) vendee had knowledge of servitude
* PRESCRIPTION (Rescission): 1 year
- after 1 year, only action for damages may be brought (to be counted from the date on which the burden or servitude was discovered).
* WARRANTY AGAINST HIDDEN DEFECTS: (Art. 1561)
- When liability attaches, REQUISITES: [Art. 1561] – [HIS-NRW]
(a) the defect is hidden
HIDDEN – not known or could not have been known to the vendee;
- hidden to the eyes and cannot be discovered by ordinary careful inspection.
(b) the defect is serious or important such that –
(b.1) the hidden defect should render the subject matter UNFIT for the use for which it is intended; or
(b.2) the hidden defect should DIMINISH the thing’s FITNESS such that the BUYER WOULD NOT HAVE ACQUIRED IT OR WOULD HAVE GIVEN A LOWER PRICE FOR IT HAD HE BEEN AWARE OF IT.
(c) the defect must exist at the time of sale
(d) vendee must give notice of the defect to the vendor within a reasonable time (e) the action must be brought within a reasonable period
(f) there must be no waiver of warranty
- Vendor is not liable for:
(a) patent defects; or
(b) those that are not visible but should have been known by an expert by reason of his profession.
- KNOWLEDGE OF VENDOR, NOT IMPORTANT (CAVEAT VENDITOR or SELLER BEWARE): [1566, NCC]
Art. 1566: The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold.
GENERAL RULE: Seller or vendor is liable even though he is not aware of the hidden defect. [Art. 1566, par. 1]
EXCEPTION: there is a stipulation to the contrary and the seller is not aware of it. [Art. 1566, par. 2]
Rationale behind Caveat Venditor: a sound price warrants a sound article
- OBLIGATION of seller for breach of warranty:
* IF THERE WAS NO WAIVER OF WARRANTY: [Art. 1568]
- the thing is lost in consequence of hidden defects.
- When vendor is AWARE of the hidden defects: [L-PED]
(a) Bear the loss (b) Return the price
(c) Refund the expenses of the contract (d) Pay damages
- When vendor is NOT AWARE of the hidden defects:[L-PIE]
(a) Bear the loss (b) Return the price (c) Return the interest
(d) Reimburse expenses of the contract
* IF THERE WAS A WAIVER OF THE WARRANTY: [Art. 1566, par. 2]
- When vendor is AWARE of the hidden defects:
- waiver is in bad faith; as a corollary, seller is still liable - When vendor is NOT AWARE of the hidden defects:
- not liable
* IF THE DEFECTIVE THING IS LOST THROUGH FORTUITOUS EVENT OR FAULT OF VENDEE: [Art. 1569, par. 2]
-the thing must be defective at the time of sale - BUYER may DEMAND for:
Price paid minus value of the thing at the time it was lost
-the aforesaid formula represents the damage suffered and the benefits incurred by the buyer - REMEDY OF BUYER in case of breach of warranty against hidden defect: [Art. 1567]
- buyer may choose any of the following:
(a) ACCION REDHIBITORIA (Redhibitory Action) - withdrawing from the contract
- avoidance of the sale due to vice in the thing sold (b) ACCION QUANTI MINORIS
- proportionate reduction of price
- APPLICABILITY TO JUDICIAL SALES (Art. 1570) – however, judgment debtor is not liable for damages for the reason that he is merely compelled to sell his property.
- PRESCRIPTIVE PERIOD: [Art. 1571]
- SIX MONTHS from delivery
COMPARATIVE TABLE OF PRESCRIPTIVE PERIODS RELATING TO WARRANTIES