RFBT 3

CONDITIONS AND WARRANTIES

Arts. 1545-1547
I. Conditions (see 1179 et seq.)

Please review your RFBT 1 on Conditional Obligations.

Condition  is an uncertain event or contingency on the happening of which the obligation of the
contract depends.

1. Suspensive  is an uncertain event upon the happening of which the obligation (or right) subject
to it becomes demandable.
2. Resolutory  is an uncertain event upon the happening of which the obligation (or right) subject
to it is extinguished.

A. Effect of non-fulfillment of condition (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 fulfillment 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.

A. If the obligation of either party is subject to any condition and such condition is not fulfilled, such
party may either:
1) refuse to proceed with the contract; or
2) proceed with the contract, waiving the performance of the condition.

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.

II. Warranties; Kinds

Warranty  is any representation made by the seller of thing with respect to its character, quality, or
ownership, by which he induces the buyer to purchase the same relying on said representation.

1. Express warranty  is any affirmation of fact or any promise by the seller relating to the thing,
the natural tendency of which is to induce the buyer to purchase the thing, and the buyer thus
induced, does purchase the same.
2. Implied warranty  is that by which the law derives from implication or inference from the nature
of the transaction or the relative situation or circumstances of the parties, irrespective of any
intention of the seller to create it.

A. Express (1546, 1st sentence)

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 purchase the thing relying thereon. xxx

B. Implied (1547, 1562)

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.

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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.

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the
goods, as follows:

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for
which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be
reasonably fit for such purpose;

(2) Where the goods are brought by description from a seller who deals in goods of that description
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be
of merchantable quality.

INSTANCES WHERE IMPLIED WARRANTY IS NOT APPLICABLE:

1. “As is and where is” Sale – where the Vendor makes no warranty as to the quality or workable
condition of the goods, and the Vendee takes them in the condition in which they are found and from
the place where they are located.
2. Sale of second-hand articles (Note: But there may be express warranty in this instance.)
3. Sale by virtue of authority in fact or law (Article 1547, last par.)

Caveat emptor  Let the buyer beware.

 This doctrine applies when one who buys real property without checking the vendor’s title
where persons other than the vendor are in possession takes all the risks and losses
consequent to such failure in case the vendor’s title is defective.
 This also applies to execution sales since the sheriff does not warrant the title to real
property sold by him as sheriff and it is not incumbent upon him to place the purchaser in
possession of such property.

a. Effect of seller’s opinion (1546, 2nd sentence)

Art. 1546. xxx. 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.

1.) WARRANTY IN CASE OF EVICTION

Arts. 1548-1559
I. Requisites of warranty:
A. Eviction of the buyer (1548)

Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an
act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased.

The vendor shall answer for the eviction even though nothing has been said in the contract on the
subject.

The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor.

Eviction  is the judicial process whereby the vendee is deprived of the whole or part of the thing
purchased by virtue of a final judgment based on a right prior to the sale or an act imputable to the
vendor.

ESSENTIAL ELEMENTS:
1. The vendee is deprived in whole or in part of the thing purchased.

Disturbance in law  requires that a person go to the courts of justice claiming the thing sold, or
part thereof, and giving reasons.
 -vs- Mere trespass in fact  when the trespasser claims no right whatsoever.

2. He is so deprived by virtue of a final judgment.

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Art. 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the
vendee loses the thing acquired or a part thereof.

Art. 1549. The vendee need not appeal from the decision in order that the vendor may become liable for
eviction.

3. The judgment is based on a right prior to the sale or an act imputable to the vendor.

Art. 1550. When adverse possession had been commenced before the sale but the prescriptive period is
completed after the transfer, the vendor shall not be liable for eviction.

Art. 1551. If the property is sold for non-payment of taxes due and not made known to the vendee
before the sale, the vendor is liable for eviction.

4. The vendor was summoned in the suit for eviction at the instances of the vendee.
5. There is no waiver on the part of the vendee.

Art. 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise
decreed in the judgment.

B. No express waiver (1554)

Art. 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.

KINDS OF WAIVER:
1. Consciente  the waiver is voluntarily made by the vendee without the knowledge and assumption
of the risks of eviction.
2. Intencionada  the waiver is made by the vendee with knowledge of the risk of eviction and
assumption of its consequences.

C. Seller duly summoned (1558, 1559)

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in
the suit for eviction at the instance of the vendee.

PURPOSE OF SUMMON: To give him an opportunity to show that the action interposed against the
vendee is unjust and to defend his title that he has transferred.

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the
complaint, that the vendor be made a co-defendant.

II. Effect of warranty (1555)

Art. 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/less than
the price of 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
against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith.

A. If the seller is in good faith

 Value, Income/fruits, Costs of suit, and Expenses of contract (VICE)

B. If the seller is in bad faith

 Value, Income/fruits, Costs of suit, and Expenses of contract (VICE)

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  PLUS Damages, Interests, and Ornamental expenses (+DIO)
C. Effect of loss of an important part (1556)

Art. 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance,
in relation to the whole, that he would not have bought it without said part, he may demand the
rescission of the contract; but with the obligation to return the thing without other encumbrances than
those which it had when he acquired it.

He may exercise this right of action, instead of enforcing the vendor's liability for eviction.

The same rule shall be observed when 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.

D. Obligation of the vendee

 to return the thing w/o other encumbrances than those which it had when he acquired it.

III. Waiver of warranty

A. Must be express
a. Effect if made with knowledge of risk (1554, supra.)
 vendor shall not be liable.

b. Effect if made without knowledge of risk (1554, supra.)

 vendor shall only pay the value which the thing sold had at the time of the eviction

B. Effect if seller is in bad faith (1553)

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

2.) WARRANTY AGAINST HIDDEN DEFECT OF OR ENCUMBRANCES UPON THE THING SOLD

Arts. 1561-1571
I. Warranty against hidden defects
A. Requisites
a. Serious (1561)
b. Not visible (1561)

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold
may have, should they render it unfit for the use for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the vendee been aware thereof, he would not have
acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent
defects or those which may be visible, or for those which are not visible if the vendee is an expert who,
by reason of his trade or profession, should have known them.

c. Not known to buyer

d. Existed prior to the sale
e. Notified to seller
f. Action must be within 6 months or 40 days
g. No stipulation against warranty has been agreed

ESSENTIAL ELEMENTS:
1. The defect must be important or serious.
a. if it renders the thing sold unfit for the use for which it is intended; or
b. if it diminishes its fitness for such use to such an extent that the vendee would not have acquired
it had he been aware thereof or would have given a lower price for it.
2. It must be hidden or latent.
Latent defect  if it was not known and could not have been known to the vendee. Defect of such
character that inspection will reveal not it.
-vs- Patent defect  Defect of such character that inspection will reveal it.
3. It must exist at the time of the sale.
4. The vendee must give notice of the defect to the vendor within a reasonable time.
5. The actions for rescission or reduction of the price must be brought within the proper period.

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 a. 6 months from the delivery of the thing sold
b. 40 days from the date of delivery in case of animals

B. Vice need not be known to vendor (1566)

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.

The ignorance of the vendor does not relieve him from liability to the vendee for any hidden faults or
defects in the thing sold. Good faith cannot be availed of as a defense by the vendor. However, the
parties may provide otherwise in their contract provided the vendor acted in good faith, that is, he was
unaware of the existence of the hidden fault or defect.

Caveat venditor  Let the seller beware.

 This doctrine is adopted in accordance with which the vendor is liable to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware thereof.

C. Effects of warranty
a. Options of vendee (1567)

Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with damages in
either case.

1. Accion redhibitoria  is the remedy chosen by the buyer to enforce the vendor’s warranty
against hidden defects resulting in the withdrawal from the contract.

2. Accion quanti minoris  is the remedy chosen by the buyer to enforce the vendor’s warranty
against hidden defects resulting in the proportionate reduction of the price.

1561: Requisites for warranty against hidden defects

1562: Implied warranties of quality – Fitness and Merchantability
1564: Warranty of fitness may be annexed by usage of trade
1565: Merchantability of goods sold by sample
1566: Effect of ignorance of vendor of hidden defects

b. Rule if the thing is lost (1568)

Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor was aware
of them, he shall bear the loss, and shall be obliged to return the price and refund the expenses of the
contract, with damages. If he was not aware of them, he shall only return the price and interest thereon,
and reimburse the expenses of the contract which the vendee might have paid.

1. If the vendor is aware

 he shall bear the loss, and shall be obliged to return the price and refund the
expenses of the contract, with damages. (LPED)
2. If the vendor is not aware
 he shall only return the price and interest thereon, and reimburse the expenses
of the contract which the vendee might have paid. (PIE)

c. Rule if the thing is lost by fortuitous event (1569)

Art. 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by
a fortuitous event or through the fault of the vendee, the latter may demand of the vendor the price
which he paid, less the value which the thing had when it was lost.

If the vendor acted in bad faith, he shall pay damages to the vendee.

1. If vendor is in good faith  price LESS value at the time of loss

2. If vendor is in bad faith  damages
Art. 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the
judgment debtor shall not be liable for damages.

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Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six
months, from the delivery of the thing sold.

Arts. 1572-1581
I. Warranty against hidden vices of animals

Art. 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for
each of them, the redhibitory defect of one shall only give rise to its redhibition, and not that of the
others; unless it should appear that the vendee would not have purchased the sound animal or animals
without the defective one.

The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has
been fixed for each one of the animals composing the same.

Art. 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner
be applicable to the sale of other things.

Art. 1576. If the hidden defect of animals, even in case a professional inspection has been made, should
be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered
as redhibitory.

But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be
liable for damages.

Redhibitory vice or defect  is a defect in the article sold against which the seller is bound to warrant.

Art. 1577. 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. This action can only be exercised with respect to
faults and defects which are determined by law or by local customs.

A. When no warranty exists (1574)

Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of
live stock sold as condemned.

B. When sale of animals is void (1575)

Art. 1575. 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.

C. When redhibitory vice is presumed (1578)

Art. 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the
disease which cause the death existed at the time of the contract.

D. Effects of warranty (1579)

Art. 1579. 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.

a. Options of the vendee (1580)

Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned
in article 1567; but he must make use thereof within the same period which has been fixed for the
exercise of the redhibitory action.
Art. 1560
II. Warranty against hidden encumbrance (1560, par. 1)

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Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not
mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have
acquired it had he been aware thereof, he may ask for the rescission of the contract, unless he should
prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden or servitude
is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all
burdens and encumbrances.

ESSENTIAL ELEMENTS:
1. The immovable sold should be encumbered with any non-apparent burden or servitude, not
mentioned in the agreement.
2. The nature of the non-apparent burden or servitude is such that it must be presumed that the vendee
would not have acquired it had he been aware there of.
3. Within the prescriptive period.

Servitude or easement  is an encumbrance imposed upon an immovable for the benefit of another
immovable belonging to a different owner.
1. Apparent easement  those which are made known and are continually kept in view by external
signs that reveal the use and enjoyment of the same.
2. Non-apparent easement  those which shown no external indication of their existence.

EXAMPLES OF LEGAL EASEMENTS:

1. Easements relating to waters
2. Easement of right of way
3. Easement of party wall
4. Easement of light and view
5. Easement against nuisance

A. Requisites
a. Must be important
b. Is not recorded
c. Is claimed in due time (1586)

Art. 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the
buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give
notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer
knows, or ought to know of such breach, the seller shall not be liable therefor.

B. Effects: Buyer’s action

a. Rescission or damages (1560, par. 2)

Within one year, to be computed from the execution of the deed, the vendee may bring the action for
rescission, or sue for damages.

b. Damages only (1560, par. 3)

One year having elapsed, he may only bring an action for damages within an equal period, to be counted
from the date on which he discovered the burden or servitude.

Rights of the vendee cannot be exercised:

1. if the burden or servitude is apparent, that is made known and is continually kept in view by
external signs that reveal the use and enjoyment of the same;
2. if the non-apparent burden or servitude is registered; or
3. if the vendee had knowledge of the encumbrance whether it is registered or not.

Registration of non-apparent burden or servitude in the Registry of Property operates as a constructive

notice to the vendee.

Action for rescission must be brought within one (1) year form the execution of the deed of sale.
Thereafter, the vendee may only bring an action for damages within one year from the date of the
discovery of the non-apparent burden or servitude.

3.) WARRANTY OF FITNESS OR MERCHANTABILITY (1562-1565)

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Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the
goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for
which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall
be reasonably fit for such purpose;
(2) Where the goods are brought by description from a seller who deals in goods of that description
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall
be of merchantable quality.

RESTATEMENT OF THE PROVISION:

 There is no implied warranty as to the quality or fitness for any particular purpose of goods under a
contract of sale, except as follows:
1. the buyer expressly or impliedly manifests to the seller the particular purpose for which the goods
are acquired
2. the buyer relies upon the seller’s skill or judgment whether he be the grower or manufacturer or
not, there is implied warranty

 Quality of goods refers to the state or condition of the goods.

 Merchantability is not a warranty of quality in the sense of requiring a particular grade, but it does
require identity between what is described in the contract and what is tendered.

Warranty of merchantability  is a warranty that the goods are reasonably fit for the general purpose
for which they are sold.

Warranty of fitness  is a warranty that the goods are suitable for the special purpose of the buyer
which will not satisfied by mere fitness for general purposes.

Art. 1563. In the case of 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. 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be
annexed by the usage of trade.

Art. 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there
is an implied warranty that the goods shall be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the sample.