What is a condition?

A future and uncertain event which may or may not happen

Resolutory – which must happen and the happening of that condition gives rise to an obligation

Suspensive- extinguishes an already existing obligation

If an obligation is conditional, the party obliged to perform upon a suspensive condition may waive it. He
can perform the obligation even if the condition does not happen or he may refuse to proceed with the
obligation if the condition does not happen

The performance of the obligation depends upon the choice of the one obligated to perform – debtor

Coronel case – conditional deed of sale- the buyer chose to waive fulfillment of the obligation

But if one of the parties promises and states as a fact that a condition will happen – warranty

The non-fulfillment of that positive condition by one of the parties – breach of warranty

What is a warranty?

A statement or representation that a fact is true or that it will happen; statement or representation
made by seller of goods

2 kinds

1.) Express- affirmation of fact or promise by seller relating to the thing which induces buyer to
enter into contract of sale; not an essential element – accidental – agreed by parties
2.) Implied- not agreed by parties; deemed included in contract

3 types – warranty against eviction, warranty against hidden defects, warranty of

merchantability or fitness

Ang vs ca – implied warrant is that which law derives by application or inference from the nature
of the transaction or the relative situation or circumstances irrespective of intention of seller to create..

What about a statement of the seller with respect to a thing he is selling?

Mere statement of seller with respect to the thing being sold is not a warranty unless the statement is
relied upon by the buyer and induces him to enter to contract, it becomes an express warranty.

Harrison motors vs Navarro- Navarro engaged in trucking business and purchased two
reassembled trucks from Harrison (assembler of vehicles importing motor parts outside country
to reassemble them here). One of the representatives of Harrison when asked if all taxes and
customs have been paid, he said yes, and because of that Navarro, purchased 2 vehicles. Turns
out they failed to pay the full amount. LTO impounded the vehicles. Navarro sought
reimbursement for amount paid for the trucks. Harrison claims they are not liable anymore.
 Court said- statement by that representative of Harrison was an express warranty because it
induced Navarro to purchase. Navarro was allowed to recover amount she paid to the govt as
deficiency tax

What if it is a sale in real property and seller warrants that it is free from liens and encumbrances but
there are occupants in the property and buyer could not enter and take physical possession because
there are settlers or tenants. Is there breach of warranty if he says it is free from liens and
encumbrances? No. because existence of tenants is not a lien on the property.

Investment devt vs ca

There are 2 sales here. One for gatbayato to investment then from investment to agencia. 1 st
sale, gatbayato’s warranty was that it was free from liens and encumbrances. Next sale from
investment to agencia, investment warranted that it was free from liens and encumbrances and
from claims of tenants. But there were tenants. Agencia bulldozed to develop, tenants were
displaced. Tenant sued for disturbance compensation. Agrarian court awarded 24 k disturbance
compensation. Court condemned agencia and agencia filed counterclaim against investment
who also filed counterclaim against gatbayato. Court said- only investment made express
warranty – they are the only ones liable for breach of warranty.

Soler vs chesley

2 sales involved. 1st soler bought from Anderson. Anderson warrantied that all machinery and
equipment were underway or already in manila. Soler then sold to chesly. Express warranty by
soler that machineries were on their way to manila but infact they were not yet shipped to
manila. It took a long time to be delivered to chesly. Chesly wrote soler that he will rescind
contract. Court said- time was of the essence. Effect of breach of express warranty?- the
nonfulfillment deprived vendor of right of action to demand payment from vendee of the price
of the sale. Because here it was soler who filed a case against chesly for payment of balance of
purchase price. Although the court did not allow rescission because court said rescission does
not lie in cases like this but it did not allow soler to collect from chesly.

If there is breach of express warranty when can buyer file an action (damages or rescission of contract)?

Ordinary contract -4yrs. (ang vs ca 2008)

When do you reckon the counting of 4yr period?

Under 1389 – 4yrs from the ___________

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Implied warranties

3 Kinds:
A.)Warranty against eviction

Eviction – judicial process by virtue of which buyer deprived of ownership, not merely possession but
also ownership of whole or material part of thing he purchased by final judgment or act imputable to
vendor

There is breach if buyer deprived not merely of possession but of whole or material portion of thing
purchased by virtue of a final judgment

When can buyer sue for breach of warranty against eviction?

1.) when deprived of whole or material part of the thing.

2 kinds of deprivation

In law- that which takes places by virtue of a judicial process which entitles buyer to sue for
breach of warranty

In fact- mere trespass does not entitle buyer to sue for breach of warranty

2.) That deprivation is by virtue of a final judgment

final judgment - case filed by 3rd person against buyer for recovery of property sold to buyer by
seller.
Which court are we referring to whose decision final and executory? Trial court. Thus it is not
required that buyer must appeal from decision of trial court. They can just allow decision to be
final and executory – that satisfies the requirement that the deprivation must be by a final and
executoyr judgment.

3.) that the basis is a right prior to the sale

4.) and that vendor has been summoned in the case for eviction

The basis for the eviction must be a right that accrued prior to the sale. Basis may be acquisitive
prescription. When does it take place? What kind of occupation is it? Adverse claim or possession – 30
years – which has lapsed prior to the sale. Right accruing before the sale. Because if the 30 year period
accrues after the sale, it is incumbent upon buyer to protect himself and he should arrest the continued
possession of claimant. If the 30 year period happens after the sale, and the buyer is deprived of
ownership then he can’t fault the seller for breach of warranty anymore because it is his duty to protect
himself after sale unless period is so short that it is impossible for buyer to protect himself.

The seller must also be summoned. If you have read the law the law says that the buyer must ask the
court to summon the seller. The adverse claimant files an action against the buyer for recovery of
ownership and because the buyer is the registered owner, the case is filed only against the buyer.
The law says that the seller must also be summoned, the buyer must ask the court also to summon the
seller.

Is it required therefore that the 3 rd person must file only against buyer and buyer must summon seller?
Or is it possible for claimant to file action against both simultaneously?- yes. But if buyer is the only one
impleaded then the buyer must file a 3 rd party claim against seller because seller must also be heard in
the case. If seller is not heard because he is not summoned then the buyer can’t sue him for breach
because you have deprived him of his day in court. He must be summoned and made co defendant.

If there is eviction and all elements for breach present what is effect of eviction?

What is the obligation or liability of seller because of breach? –must return value of the price.

If he acted in good faith? Did not know that there is a 3 rd party claimant – (good faith)

-return the price paid by buyer

-If buyer also required to deliver fruits to claimant, seller must reimburse

-Costs of the suit

-If buyer paid expenses of contract – seller must reimburse

(bad faith)

-return value of the thing

-reimburse income or fruits

-reimburse cost of suit including costs for new action against seller for enforcement of liability of
seller for breach

-expenses of contract + damages

*note: maam made an erratum, I think with regards to breach of warranty against eviction, seller must
pay/return the VALUE of the thing, not the price. Pag first kay she kept on saying price man. But I think
she meant value. Pls check the book.

If the buyer is deprived not of the entire thing but only of material portion such that he would not have
purchased without the material portion, the buyer can sue for rescission or reduction of price. The
choice is on the buyer- go through with the contract, ask reduction of price or rescission – he must
return the remainder of the property because that is the effect of rescission of contract- mutual
restitution

Dela rive vs ah kee

A business entity (panabutan lumber) obtained a loan from pnb and to secure the loan they executed a
chattel mortgage. Panabutan lumber obtained loan, secure mortagaged over certain movables and
certain real properties. At the same time panagutan was indebted to ah kee, ah kee was a creditor who
was not paid by panagutan. Ah kee filed a case, obtained favorable judgment and obtained a writ of
execution. On the other hand, Pnb is an unpaid creditor, pnb foreclosed the mortgage and was even
allowed by court to sell properties covered by mortgage. But ah kee was able to nullify the chattel
mortgage in so far as the real properties are concerned. 2 cases here are material. The case filed by ah
kee for collection against panagutan and the case filed by ah kee against pnb and panagutan for
annulment of mortgage in so far as real properties are concerned. Court annulled mortgage in so far as
real properties are concerned – thus only the personal properties are properly the subject matter of the
chattel mortgage and which can be the proper subject of foreclosure. But in the foreclosure of pnb, they
sold all properties including the real properties, pnb sold to another person. And because of judgment
declaring the mortgage void in so far as the real properties, thus the foreclosure of real properties was
also void. Because pnb sold to another, it was also an invalid sale. Thus ah kee was able to get back the
real properties included in the execution. The buyer from pnb was deprived of ownership of the real
properties and there was a breach of implied warranty because pnb claimed to be the owner but they
were not. Thus, there was a breach of implied warranty against eviction.

Auction sale

Is there implied warranty against eviction in an auction?

Does the auctioneer warrant that the buyer shall have peaceful enjoyment of property?

Can buyer sue the auctioneer for breach of warranty against eviction?

Bisarra case- Auctioneer in an auction sale, does not warrant that the buyer shall have peaceful
enjoyment of the property

Can warranty against eviction be waived by buyer- yes- expressly made- cannot be impliedly inferred
from the acts of the parties even from the contemporaneous acts – it must be expressly made by buyer

Liability of the seller depends on kind of express waiver

If it is merely pro forma (consciente?), without really knowing the risk of eviction – can seller be held
liable? Yes but not for damages.

But if waiver by the buyer is with full knwolegdge of risk of eviction (intentionada) then seller is
completely released from liability

Andaya vs manansala
Court said that andaya knew of risk of eviction because in fact naniguro cya and 2 ka deed iya gipahimo,
thus manansala is not even obliged to restore to them the price of land at time of eviction

Angelo vs pacheco

Pacheco purchased a parcel of land which was subject of an application for registration. In fact he
substituted the seller and actively participated in the registration proceedings so he was fully aware that
there was another claimant and in fact the court awarded to the other claimant the land. But in sale
between angelo and Pacheco there was waiver on the part of Pacheco (intentionada)

Even if there is waiver of warranty but seller acted in BF in not disclosing risk of eviction- waiver void

If buyer ordered to surrender to 3rd person, surrender without additional encumbrances other than
those existing at time of sale – there must be no new encumbrances

If buyer sues for breach of warranty against eviction-within what period must he file - ______

Warranty against hidden defects or encumbrances

Encumbrance- claim attached to property or some other right that may lessen its value such as a
lien or mortgage

- Applies only if encumbrance is not registered. Mortgage is not a hidden encumbrance, because
to be valid it must be registered.

For warranty to exist encumbrance must be important that if buyer had known, he would not have gone
thru with the contract, must not be registered otherwise it is not hidden

Must be claimed on due time

Although warranty applied to both personal and real properties

When do you file action against hidden encumbrance? 1 yr from date of the contract

What if you discover hidden encumbrance later than 1 yr from the contract? Because within 1 yr from
the contract you can sue for rescission and damages, what if it was discovered after 1 yr – you can sue
only for damages and only 1 yr from date of discovery

Hidden defects

For there to be breach of warranty the defect must not be visible and could not be known to buyer even
if buyer is an expert. It must be serious as to render it unfit for the purpose intended. It must not be
known to the buyer and must exist prior to the sale and the hidden defect must be notified to the buyer
within a reasonable time (less than 6mos) because the action for breach of warranty against hidden
defects – 6 months counted from delivery of the thing

You cant sue for breach of warranty against hidden defects if you have not notified seller – notify seller
first. If no notification- action will not prosper

There must be no waiver on part of buyer

Does warranty against hidden defects apply to personal property sold second hand on an as is/where is
basis?-no warranty against hidden defects

Moles vs iac

There was a sale of printing machine where seller certified to buyer machine that was in a1 condition.
Pag deliver di gyud magamit sa buyer. Buyer even hired an expert to repair it. By the way it was 2 nd hand.
Was there a breach of warranty against hidden defects? Court said-no. But there was breach of an
express warranty because of the certification that the machine was in a1 condition. Because were it not
for that positive affirmation, buyer would not have purchased it.

GR – no warranty against hidden defects for items sold second hand

What is the option available to buyer if there is breach of warranty of hidden defects – withdraw from
contract or opt for reduction of price

Supercars vs flores

Flores purchased brand new isuzu cantor from supercars. When delivered- byahe dayon to la union.
While in tarlac, fanbelts snapped – basta daghan deprensya. They returned it to supercars. Supercars
repaired it. Returned to flores, guba gihapon. After a few days same defects resurfaced – flores returned
to rescind and sue for breach of warranty for hidden defects – flores was allowed to rescind

If thing is lost due to the hidden defect or vice, vendor must return the price and expenses of contract.
This is regardless of vendor was aware of the hidden defect of not. GF,BF does not matter. The difference
is

If he knew, there is BF- he must return price, expenses and damages. If he did not know– GF but
he is still liable to return the price + interest and expenses.

*maam noted that it seems unfair that even if you are in GF you are still liable for interest and in BF,
there is no mention of paying the interest. – law needs to reconsideration (by lawmakers)
What if lost thru fortuitous event?- seller is still liable because there was still breach of warranty of
hidden defect but liability is less because if he was in GF he must return the difference between price
paid by buyer and the value for the thing at the time of loss. Why price minus value not value minus
price? – because value has deteriorated because of hidden defect (movable)

The seller must pay buyer the difference between price and value at time of loss because that’s the
damage suffered by the buyer

If seller in bf on top of that, damages

Period to file action – 6mos reckoned from the date of delivery

What if subject matter of sale consists in 1 contract but mode of delivery is by installment. And there is a
breach of warranty. When do you start counting the 6 month period? – from the last delivery –(dino vs
ca)

Guzman vs Toyota

Action for breach of warranty against hidden defects filed by guzman after 19 months from date of
delivery. Cause of action has prescribed. If you are buyer do not wait that seller replies, within 6mos file
action whether seller has acted or not

It is not required that it is in writing but how will you prove that you notified the seller?

Animals – redhibitory defect against animals

No warranty against redhibitory defects against animals for animals sold in public auctions or fairs

Sales of condemned livestock – no warranty

If defect not declared redhibitory by law or local custom- no warranty

If purpose for buying animal is stated in contract and animal not fit for the purpose- there is no breach
but the sale is void

If animal purchased suffering from contagious disease

If animal dies within 3 days from purchase and disease existed at time of sale – presumption is that the
animal suffers from redhibitory defect

What is the option of the buyer if there is a redhibotry defect?- reduction of price or rescission
If animals bought in pairs- can sue for rescision for both? – GR: no-only the one with redhibitory defect,
unless buyer would not have purchased the pair if one is suffering from a redhibitory defect

If buyer opts for rescission- must retrun animal free from any injury due to his own fault

Prescription – 40 days from date of delivery