Ambayec, Mounicha C.

BSA-1 Block 12 RFBT 3 June 28, 2020

Activity 2 (Midterm)
Question: What are the implied warranties in a contract of sale?

Article 1547 of the New Civil Code states the implied warranties in a contract of
sale but are not exclusive to such. However, these are the most common implied
warranties being applied in actual scenarios namely the 1) implied warranty that the
seller has a right to sell, 2) the implied warranty against eviction, 3) the implied warranty
against non-apparent burden or servitudes, 4) the implied warranty against hidden
defects, 5) implied warranty as to fitness and merchantability and 6) the implied
warranty against redhibitory defects on animals. Although some of these like numbers
2, 3 and 5 are not expressly mentioned in the article but these warranties are
interrelated to each other. For instance, implied warranty against hidden defects
embodies some concepts of warranty against redhibitory defects on animals.
Nevertheless, an in-depth explanation of the three basic implied warranties in a contract
of sale which are implied warranty against eviction, implied warranty against
hidden defects and implied warranty as to fitness and merchantability, including
their subtopics, will be given in the succeeding paragraphs.

First, the implied warranty in case of eviction defines eviction as a judicial

process (meaning that it deals with legal processes facilitated in the judicial court)
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.
Based from this definition, we can identify the elements of a warranty against eviction
which are 1) the vendee is deprived in whole or in part of the thing purchased, 2) the
vendee is deprived by virtue of a final judgment, 3) the judgment is based on a right
prior to the sale or an act imputable to the vendor, 4) the vendor was summoned in the
suit for eviction and made a co-defendant at the instance of the vendee and 5) there is
no waiver on the part of the vendee. Also, in warranty of eviction, disturbance in law is
required and not just trespass in fact. All these circumstances give rise to a warranty
against eviction. To illustrate, here is a situational example:
Jacob sells a 150 sq. meter piece of land to Ruby. Then here comes Alice, a
third party, who files for an action claiming that she owns the piece of land. At the
instance of Ruby, Jacob was summoned to defend his title. Later, the judicial court
renders its final judgment in favor of Alice who has a better right to the land. In this
case, Ruby was evicted, and Jacob will be liable to Ruby for failure to comply with his
warranty of eviction.
In any case, if the vendee opts to renounce his right to warranty against eviction
(or waive the warranty) and eviction shall take place, the vendor shall only pay the value
of the thing sold at the time of eviction. This type of waiver is called consciente which is
voluntarily made by the vendee without the knowledge and assumption of risks of
eviction. On the other hand, if the waiver made by the vendee is with knowledge and
assumption of the risks of eviction, then the vendor is exempted from the obligation to
answer for eviction provided that he did not act in bad faith. This type of waiver is called
intencionada.
Now, the question as to what are the things that the vendee is entitled of upon
the agreement of the warranty comes in. So, the liabilities of the vendor to the vendee in
the absence of a waiver of the warranty depends upon two cases (if the vendor is in
good faith and if the vendor is in bad faith) which are as follows:
Scenario 1: If the vendor is in good faith, then he is liable for the 1) return of the value
which the thing sold had at the time of the eviction, 2) the income or fruits, 3) the costs
of the suit which caused the eviction and 4) the expenses of the contract.
Scenario 2: If the vendor is in bad faith, then he is liable with all the four (4) liabilities
mentioned in scenario 1 plus the damages and interests, and ornamental expenses.
Generally, there are certain grounds to consider as to when should a warranty
against eviction should take place and when it should not. One, if the cause of sale is
non-payment of taxes by the vendor and it was not made known to the vendee before
the sale, then there is breach of warranty against eviction and the vendor is liable for
that. Second is about prescription. When prescription has commenced to run against
the vendor and was already complete before the sale, the vendee can impose warranty
against eviction yet even if the prescription has started before the sale, but has only
reached the limit prescribed by law after the sale then the vendor is not liable for
eviction. However, this rule does not apply if the property is titled or registered.
There are two kinds of eviction: partial and total eviction. For partial eviction, the
remedies available to the vendee are 1) rescission and 2) enforcement of vendor’s
liability for eviction. However, remedy 1 is not available in case of total eviction since
rescission contemplates mutual restitution which means that both parties must be able
to return whatever they received in the contract. In total eviction, the vendee cannot
return the object of the contract of sale.
Second, the implied warranty against hidden defects of or encumbrances upon
the thing sold discusses the responsibilities of the vendor if hidden defects are
uncovered upon the thing sold. In a sale transaction, the seller has the obligation not
only to deliver the thing sold, but also to warrant that the item sold to the buyer is free
from any hidden defects. Providing warranty is a way of protecting the consumers by
ensuring that the products they are buying are really of good quality, and to provide
peace of mind by reducing the perceived risks of buying it. The seller shall be
responsible for warranty against the hidden defects which the thing sold may have,
should the defect render it unfit for its intended use, or if the defect diminishes its fitness
for such use to such an extent that, had the buyer been aware of such defect, he would
have purchased it for a lower price, or not have purchased it at all [Art. 1561, Civil
Code].
 In order for this warranty to take place, the hidden defects being described must
meet four requisites: 1) it must be serious and hidden, 2) it must exist at the time of the
perfection of the contract, 3) it renders the thing unfit for the use for which it is intended
and 4) it must be instituted within the prescriptive period (within 6 months from the
delivery of the thing sold). Also, there must be no stipulation against warranty that has
been agreed by the seller and buyer. All these things make the vendor liable for the
warranty. However, the vendor is not liable for such if there are patent defects or those
which may be visible and those defects which are made known to the vendee before the
purchase. To illustrate, here is a situational example:
Diego sold to Leni a Macbook Laptop. Subsequently after the sale, Leni
discovered that the laptop’s USB port is not functional. She was supposed to install
some important documents in her hard drive but was not able to pursue with it. The
defect of the laptop was hidden and was unknown to Leni until she discovered it upon
inserting her hard drive. In this scenario, Diego is liable for the laptop’s defect even
though he was not aware beforehand, and Leni may opt to enforce rescission of the
contract and a proportionate reduction of the price with damages in either case.
From the example above, it can be drawn that Diego, as the vendor, is liable for
the hidden defect of the laptop although he was ignorant of it. This example can be tied
to a principle called as “Caveat Venditor” or let the seller beware while “Caveat Emptor”
or let the buyer beware for vendees. The two remedies available for the vendee in this
warranty are accion redhibitoria and accion quanti minoris wherein the former results in
the withdrawal of the contract while the latter results to a proportionate reduction of the
price, with damages in either case.
In case of a loss of the thing 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. Otherwise, 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. In case when the thing sold had any
hidden fault at the time of the sale, and subsequently lost by a fortuitous event or
through the fault of the vendee, the vendee may demand of the vendor the price which
he paid, less the value which the thing had when it was lost.
In the next paragraphs, terms like redhibition, redhibitory action, redhibitory vice
or defect will be made mentioned, so it is better to define these three first. Redhibition is
the avoidance of a sale on account of some vice or defect in the thing sold, which
renders its use impossible, or so inconvenient and imperfect that it must be supposed
that the buyer would not have purchased it had he known of the defect. Redhibitory
action is an action instituted to avoid a sale on account of some vice or defect in the
thing sold, which renders its use impossible, or so inconvenient and imperfect that it
must be supposed that the buyer would not have purchased it had he known of the
defect. Lastly, redhibitory vice or defect is a defect (even in the case when professional
inspection has been made) in the article sold against which the seller is bound to
warrant.
For implied warranty against redhibitory defects on animals, the redhibitory
defect of one animal if two or more animals are sold together, whether for a lump sum
or for a separate price for each of them, shall only give rise to its redhibition and not that
of the others except when the vendee would not have purchased the sound animal or
animals without the defective one. This is 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. Moreover, sale of animals suffering from contagious diseases and sale of
unfit animals shall be void. There is no warranty against hidden defects of animals if
they are sold at fairs or at public auctions or of livestock sold as condemned.
The prescriptive period for the redhibitory action to be brought out is within forty
(40) days from the date of their delivery to the vendee. The remedies available to the
vendee in this type of warranty are 1) accion redhibitoria/withdrawal/rescission plus
damages or 2) accion quanti minores or proportionate reduction in the price plus
damages.
As mentioned in the first paragraph, there is also what we call as warranty
against non-apparent burden or servitude. This can be tied up to warranty against
eviction since the object of the contract for these two are land or rental properties;
immovables to be exact or it could also be related to warranty against hidden defects
upon the thing sold. In warranty against non-apparent burden or servitude, there are two
requisites that must be present: 1) the immovable sold should be encumbered with any
non-apparent burden or servitude, not mentioned in the agreement and 2) the nature of
the non-apparent burden or servitude is presumed that the vendee would not have
acquired it had he been aware thereof. The remedies that are available when the
immovable sold is encumbered with non-apparent burden are 1) rescission or 2)
indemnity but there is a prescription period of within one year that the vendee may bring
the action for rescission or sue for damages. If one year has elapsed, he may only
bring an action for damages within an equal period. Servitude or easement is defined as
an encumbrance imposed upon an immovable for the benefit of another immovable
belonging to a different owner.
Lastly, in the implied warranty as to fitness and merchantability, a significant
concept of it that one should understand is the difference between warranty of fitness
and warranty of merchantability. Warranty of fitness is a warranty that the goods are
suitable for the special purpose of the buyer which will not be satisfied by mere fitness
for general purposes. On the other hand, warranty of merchantability is a warranty that
the goods are reasonably fit for the general purpose for which they are sold. As a
general rule, there is no implied warranty as to the quality or fitness for any particular
purpose of goods under a contract of sale, except in the following: 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. Unless there is a stipulation to the contrary, there is no
warranty as to fitness for any particular purpose in a contract of sale of a specified
article under its patent or other trade name. Furthermore, implied warranty or condition
as to the quality or fitness for a particular purpose may be annexed by the usage of
trade.

Sources
Book
Sales, Agency and Bailments (2017 edition) by Atty. Andrix D. Dominggo, CPA, MBA
Handouts
Topic 1 (Nature and Form of Contract) Part 2, Topic 1 (Part 2)- Transcript by Atty. Dente
Online Sources
https://batasnatin.com/law-library/civil-law/sales/2357-implied-warranties.html

https://realestatelawyer.com.ph/warranties-and-formalities-in-a-contract-of-sale/
https://www.alburolaw.com/warranty-hidden-defects#:~:text=The%20seller%20shall%20be
%20responsible,purchased%20it%20for%20a%20lower