CONDITIONS AND WARRANTIES of which will not, however, affect the validity of the contract.

Thus, a provision “this

Contract of Sale of rights, interests and participations shall become effective only
SECTION 3. - Conditions and Warranties upon the approval by the Honorable Court,” in the event of non-approval by the
courts, affect only the effectivity and not the validity of the contract of sale. √Heirs
of Pedro Escanlar v. CA, 281 SCRA 176 (1997).
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 The phrase “as is, where is” in sale pertains solely to the physical condition of the
proceed with the contract or he may waive performance of the condition. If thing sold, not to its legal situation. Assets Privatization Trust v. T.J. Enterprises, 587
the other party has promised that the condition should happen or be SCRA 481 (2009).
performed, such first mentioned party may also treat the non-performance
The vendor is bound to transfer the ownership of and deliver, as well as warrant the
of the condition as a breach of warranty.
thing which is the object of the sale. Assets Privatization Trust v. T.J. Enterprises,
Where the ownership in the thing has not passed, the buyer may treat the 587 SCRA 481 (2009).
fulfillment by the seller of his obligation to deliver the same as described
DISTINCTIONS BETWEEN CONDITIONS AND WARRANTIES
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 Unlike in the non-fulfi llment of a warranty which would constitute a breach of the
and pay for the thing. (n) contract, the non-happening of the condition, although it may extinguish the
obligation upon which it is based, generally does not amount to a breach of the
NOTE: contract of sale.

Conditions (Art. 1545) Under Article 1545 of the Civil Code, where the ownership in the things has not
passed, the buyer may treat the fulfi llment by the seller of his obligation to deliver
Failure to comply with condition imposed upon perfection of the contract results in
the same, as described and as warranted expressly or by implication in the contract of
failure of a contract, while the failure to comply with a condition imposed on the
sale, as a condition of the obligation of the buyer to perform his promise to accept
performance of an obligation only gives the other party the option either to refuse to
and pay for the thing.
proceed with sale or waive the condition. √Laforteza
On the other hand, if the party has promised that the condition should happen or be
In a “Sale with Assumption of Mortgage,” the assumption of mortgage is a condition
performed, the other party may also treat the non-performance of the condition as a
to the seller’s consent so that without approval by the mortgagee, no sale is
breach of war-ranty.7 Such stipulation would elevate the condition to a warranty, and
perfected. In such case, the seller remains the owner and mortgagor of the property
the non-happening of the condition would itself constitute a breach of such warranty,
and retains the right to redeem the foreclosed property. xRamos v. CA, 279 SCRA
and would entitle the other party to sue for damages.
118 (1997).166 But such condition is deemed fulfilled when the seller takes any
action to prevent its happening. De Leon v. Ong, 611 SCRA 381 (2010). In addition to the foregoing differences in the legal effects of the non-happening of
the condition and non-fulfillment of the warranty, the following difference also
There has arisen here a confusion in the concepts of validity and the efficacy of a
apply:
contract. Under Art. 1318 of Civil Code, the essential requisites of a contract are:
consent of the contracting parties; object certain which is the subject matter of the (a) Condition generally goes into the root of the existence of the obligation,
contract and cause of the obligation which is established. Absent one of the above, whereas a warranty goes into the performance of such obligation, and in
no contract can arise. Conversely, where all are present, the result is a valid contract. fact may constitute an obligation in itself;
However, some parties introduce various kinds of restrictions or modalities, the lack
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 (b) Condition must be stipulated by the parties in order to form part of an or promise is to induce the buyer to purchase the same, and if the buyer
obligation, while a warranty may form part of the obligation or contract by purchase the thing relying thereon. No affirmation of the value of the thing,
provision of law, without the parties having expressly agreed thereto; and nor any statement purporting to be a statement of the seller's opinion only,
(c) Condition may attach itself either to the obligations of the seller or of the shall be construed as a warranty, unless the seller made such affirmation or
buyer; whereas, warranty, whether express or implied, relates to the subject statement as an expert and it was relied upon by the buyer. (n)
matter itself or to the obligations of the seller as to the subject matter of the
sale. NOTES:
Power Commercial and Industrial Corp. v. Court of Appeals, demonstrates the A warranty is a statement or representation made by the seller of goods,
difference in the legal effect between a condition and a warranty: contemporaneously and as part of the contract of sale, having reference to the
character, quality or title of the goods, and by which he promises or undertakes to
The alleged “failure” of [sellers] to eject the lessees from the lot in question
insure that certain facts are or shall be as he then represents them Ang v. CA, 567
and to deliver actual and physical possession thereof cannot be considered a
SCRA 53 (2008).
substantial breach of a condition for two reasons: first, such “failure” was
not stipulated as a condition — whether resolutory or suspensive — in the A warranty is an affirmation of fact or any promise made by a vendor in relation to
contract; and second, its effects and consequences were not specified either. the thing sold. The decisive test is whether the vendor assumes to assert a fact of
which the vendee is ignorant. xGoodyear Philippines, Inc. v. Sy, 474 SCRA 427
XXX
(2005).
If the parties intended to impose on the [sellers] the obligation to eject the
The principle of caveat emptor only requires the purchaser to exercise care and
tenants from the lot sold, it should have included in the contract a provision
attention ordinarily exercised by prudent men in like business affairs, and only
similar to that referred to in Romero vs. Court of Appeals, where the
applies to defects which are open and patent to the service of one exercising such
ejectment of the occupants of the lot sold ... was the operative act which set
care. It can only be applied where it is shown or conceded that the parties to the
into motion the period of [buyer’s] compliance with his own obligation, i.e.,
contract stand on equal footing and have equal knowledge or equal means of
to pay the balance of the purchase price. Failure to remove the squatters
knowledge and there is no relation of trust or confidence between them. It does not
within the stipulated period gave the other party the right to either refuse to
apply to a representation that amounts to a warranty by the seller and the situation
proceed with the agreement or to waive that condition of ejectment in
requires the buyer to rely upon such promise or affirmation. √Guinhawa v. People,
consonance with Article 1545 of the Civil Code ...
468 SCRA 278 (2005).167
XXX
“The law allows considerable latitude to seller’s statements, or dealer’s talk; and
As stated, the provision adverted to in the contract pertains to the usual experience teaches that it is exceedingly risky to accept it at its face value. Assertions
warranty against eviction, and not to a condition that was not met. The concerning the property which is the subject of a contract of sale, or in regard to its
terms of the contract are so clear as to leave no room for any other qualities and characteristics, are the usual and ordinary means used by sellers to
interpretation. obtain a high price and are always understood as affording to buyers no ground for
omitting to make inquiries. A man who relies upon such an affirmation made by a
Express Warranties (Art. 1546) person whose interest might so readily prompt him to exaggerate the value of his
property does so as his peril, and must take the consequences of his own
Art. 1546. Any affirmation of fact or any promise by the seller relating to imprudence.” xSongco v. Sellner, 37 Phil. 254 (1917).
the thing is an express warranty if the natural tendency of such affirmation

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Breach of an express warranty makes the seller liable for damages. The following same from all claims or any claim whatsoever [and] will save the vendee
requisites must be established in order that there be an express warranty in sale: (1) from any suit by the government of the Republic of the Philippines,” he
the express warranty must be an affirmation of fact or any promise by the seller gave a warranty against eviction, and the prescriptive period to file a breach
relating to the subject matter of the sale; (2) the natural tendency of such affirmation thereof is six months after the delivery of the vehicle. √Ang v. CA, 567
or promise is to induce the buyer to purchase the thing; and (3) the buyer purchases SCRA 53 (2008).
the thing relying on such affirmation or promise thereon. xCarrascoso, Jr. v. CA, 477
SCRA 666 (2005). C. Warranty Against Non-Apparent Servitudes (Arts. 1560)

Implied Warranties (Art. 1547) D. Warranty Against Hidden Defects (Arts. 1561-1580)

Art. 1547. In a contract of sale, unless a contrary intention appears, there

The stipulation in a lease with option to purchase (treated as a sale of
is:
movable on installments) that the buyer-lessee “absolutely releases the
(1) An implied warranty on the part of the seller that he has a right to sell lessor from any liability whatsoever as to any and all matters in relation to
the thing at the time when the ownership is to pass, and that the buyer shall warranty in accordance with the provisions hereinafter stipulated,” was held
from that time have and enjoy the legal and peaceful possession of the as an express waiver of warranty against hidden defect in favor of the seller-
thing; lessor which “absolved the [seller-lessor] from any liability arising from any
defect or deficiency of the machinery they bought.” xFilinvest Credit Corp.
(2) An implied warranty that the thing shall be free from any hidden faults v. CA, 178 SCRA 188 (1989).
or defects, or any charge or encumbrance not declared or known to the
buyer. A hidden defect is one which is unknown or could not have been known to
the buyer. Under the law, the requisites to recover on account of hidden
This Article shall not, however, be held to render liable a sheriff, defects are as follows: (a) The defect must be hidden; (b) The defect must
auctioneer, mortgagee, pledgee, or other person professing to sell by virtue exist at the time the sale was made; (c) The defect must ordinarily have
of authority in fact or law, for the sale of a thing in which a third person been excluded from the contract; (d) The defect, must be important (render
has a legal or equitable interest. (n) the thing unfit or considerably decreases fitness); (e) The action must be
instituted within the statute of limitations. Nutrimix Feeds Corp. v. CA, 441
A. Seller Has Right to Sell
SCRA 357 (2004).169
B. Warranty Against Eviction (Arts. 1548-1560)
Seller must be summoned in the suit for eviction at the instance of the buyer
Seller’s agent can by agreement be liable for the warranty against hidden
(Art. 1558), and be made a co-defendant (Art. 1559); or made a third-party
defects. xSchmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).
defendant. Escaler v. CA, 138 SCRA 1 (1985).168

No Warranty Against Eviction When Execution Sale – In voluntary sales,

E. Warranty as to Fitness or Quality of Goods
vendor can be expected to defend his title because of his warranty to the
vendees but no such obligation is owed by the owner whose land is sold at In order to enforce the implied warranty that the goods are reasonably fit and suitable
execution sale. xSantiago Land Dev. Corp. v. CA, 276 SCRA 674 (1997). to be used for the purpose which both parties contemplated, the following must be
BUT SEE: Art. 1552. established: (a) that the buyer sustained injury because of the product; (b) that the
The seller, in declaring that he owned and had clean title to the vehicle, injury occurred because the product was defective or unreasonably unsafe; and
gave an implied warranty of title, and in pledging that he “will defend the
3
finally (c) the defect existed when the product left the hands of the petitioner. The phrase “as is, where is” basis pertains solely to the physical condition of the
√Nutrimix Feeds Corp. v. CA, 441 SCRA 357 (2004). thing sold, not to its legal situation. In the case at bar, the US tax liabilities constitute
a potential lien which applies to the subject’s matter’s legal situation, not to its
A manufacturer or seller of a product cannot be held liable for any damage allegedly physical aspect. Thus, the buyer has no obligation to shoulder the same. xNDC v.
caused by the product in the absence of any proof that the product in question is Madrigal Wan Hui Lines Corp., 412 SCRA 375 (2003).
defective, which was present upon the delivery or manufacture of the product; or
when the product left the seller’s or manufacturer’s control; or when the product was Buyer’s Options in Case of Breach of Warranty (Art. 1599)
sold to the purchaser; or the product must have reached the user or consumer without
substantial change in the condition it was sold. √Nutrimix Feeds Corp. v. CA, 441 The remedy against violation of warranty against hidden defects is either to withdraw
SCRA 357 (2004). from the contract (accion redhibitoria) or to demand a proportionate reduction of the
price (accion quanti minoris), with damages in either case. √Nutrimix Feeds Corp. v.
F. Sale of Goods by Sample CA, 441 SCRA 357 (2004).

There is a sale by sample when a small quantity is exhibited by the seller as a fair
specimen of the bulk, which is not present and there is no opportunity to inspect or
examine the same. To constitute a sale by sample, it must appear that the parties
treated the sample as the standard of quality and that they contracted with reference
to the sample with the understanding that the product to be delivered would
correspondent with the sample. In a contract of sale by sample, there is an implied
warranty that the goods shall be free from any defect which is not apparent on
reasonable examination of the sample and which would render the goods
unmerchantable. xMendoza v. David, 441 SCRA 172 (2004).

G. Additional Warranties for Consumer Products (Arts. 68, Consumer Act,

R.A. 7394).

Effects and Prescription of Warranties

A breach in the warranties of the seller entitles the buyer to a proportionate reduction
of the purchase price. PNB v. Mega Prime Realty and Holding Corp., 567 SCRA 633
(2008).

The prescriptive period for instituting actions based on a breach of express warranty
is that specified in the contract, and in the absence of such period, the general rule on
rescission of contract, which is four years, while for actions based on breach of
implied warranty, the prescriptive period is six months from the date of the delivery
of the thing sold. Ang v. CA, 567 SCRA 53 (2008).

Effects of Waivers
4