CONDITIONS AND WARRANTIES where all are present, the result is a valid contract.
However, some parties
SECTION 3. - Conditions and Warranties
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 non-performance 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. (n)
NOTE:
Conditions (Art. 1545)
Failure to comply with condition imposed upon perfection of the contract
results in failure of a contract, while the failure to comply with a condition
imposed on the performance of an obligation only gives the other party the
option either to refuse to proceed with sale or waive the condition. √Laforteza
In a “Sale with Assumption of Mortgage,” the assumption of mortgage is a
condition to the seller’s consent so that without approval by the mortgagee,
no sale is perfected. In such case, the seller remains the owner and
mortgagor of the property and retains the right to redeem the foreclosed
property. xRamos v. CA, 279 SCRA 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).
There has arisen here a confusion in the concepts of validity and the efficacy
of a 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 contract and cause of the obligation which is
established. Absent one of the above, no contract can arise. Conversely,
introduce various kinds of restrictions or modalities, the lack 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 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).
The phrase “as is, where is” in sale pertains solely to the physical condition of
the thing sold, not to its legal situation. Assets Privatization Trust v. T.J.
Enterprises, 587 SCRA 481 (2009).
The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale. Assets Privatization Trust v.
T.J. Enterprises, 587 SCRA 481 (2009).
DISTINCTIONS BETWEEN CONDITIONS AND WARRANTIES
Unlike in the non-fulfi llment of a warranty which would constitute a breach of
the 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 contract of sale.
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 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.
On the other hand, if the party has promised that the condition should
happen or be performed, the other party may also treat the non-performance
of the condition as a breach of war-ranty.7 Such stipulation would elevate the
condition to a warranty, and the non-happening of the condition would itself
constitute a breach of such warranty, and would entitle the other party to sue
for damages.
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 apply:
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 (a) Condition generally goes into the root of the existence of the
obligation, whereas a warranty goes into the performance of such
obligation, and in fact may constitute an obligation in itself;
(b) Condition must be stipulated by the parties in order to form part of an
obligation, while a warranty may form part of the obligation or
contract by provision of law, without the parties having expressly
agreed thereto; and
(c) Condition may attach itself either to the obligations of the seller or of
the buyer; whereas, warranty, whether express or implied, relates to
the subject matter itself or to the obligations of the seller as to the
subject matter of the sale.
Power Commercial and Industrial Corp. v. Court of Appeals,
demonstrates the difference in the legal effect between a condition and
a warranty:
The alleged “failure” of [sellers] to eject the lessees from the lot in
question and to deliver actual and physical possession thereof
cannot be considered a substantial breach of a condition for two
reasons: first, such “failure” was not stipulated as a condition —
whether resolutory or suspensive — in the contract; and second, its
effects and consequences were not specified either.
XXX
If the parties intended to impose on the [sellers] the obligation to
eject the tenants from the lot sold, it should have included in the
contract a provision similar to that referred to in Romero vs. Court of
Appeals, where the ejectment of the occupants of the lot sold ... was
the operative act which set into motion the period of [buyer’s]
compliance with his own obligation, i.e., to pay the balance of the
purchase price. Failure to remove the squatters within the stipulated
period gave the other party the right to either refuse to proceed with
the agreement or to waive that condition of ejectment in consonance
with Article 1545 of the Civil Code ...
XXX
As stated, the provision adverted to in the contract pertains to the
usual warranty against eviction, and not to a condition that was not
met. The terms of the contract are so clear as to leave no room for
any other interpretation.
Express Warranties (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 purchase 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. (n)
NOTES:
A warranty is a statement or representation made by the seller of goods,
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 insure that certain facts are or shall be as he then represents
them Ang v. CA, 567 SCRA 53 (2008).
A warranty is an affirmation of fact or any promise made by a vendor in
relation to 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 (2005).
The principle of caveat emptor only requires the purchaser to exercise care
and attention ordinarily exercised by prudent men in like business affairs, and
only applies to defects which are open and patent to the service of one
exercising such care. It can only be applied where it is shown or conceded
that the parties to the contract stand on equal footing and have equal
knowledge or equal means of knowledge and there is no relation of trust or
confidence between them. It does not apply to a representation that amounts
to a warranty by the seller and the situation requires the buyer to rely upon
such promise or affirmation. √Guinhawa v. People, 468 SCRA 278
(2005).167
“The law allows considerable latitude to seller’s statements, or dealer’s talk;
and experience teaches that it is exceedingly risky to accept it at its face
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value. Assertions concerning the property which is the subject of a contract of
sale, or in regard to its qualities and characteristics, are the usual and
ordinary means used by sellers to 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 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 imprudence.”
xSongco v. Sellner, 37 Phil. 254 (1917).
Breach of an express warranty makes the seller liable for damages. The
following requisites must be established in order that there be an express
warranty in sale: (1) the express warranty must be an affirmation of fact or
any promise by the seller relating to the subject matter of the sale; (2) the
natural tendency of such affirmation or promise is to induce the buyer to
purchase the thing; and (3) the buyer purchases the thing relying on such
affirmation or promise thereon. xCarrascoso, Jr. v. CA, 477 SCRA 666
(2005).
Implied Warranties (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. (n)
A. Seller Has Right to Sell
B. Warranty Against Eviction (Arts. 1548-1560)
Seller must be summoned in the suit for eviction at the instance of
the buyer (Art. 1558), and be made a co-defendant (Art. 1559); or
made a third-party defendant. Escaler v. CA, 138 SCRA 1
(1985).168
No Warranty Against Eviction When Execution Sale – In voluntary
sales, 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 execution sale. xSantiago Land Dev. Corp. v.
CA, 276 SCRA 674 (1997). BUT SEE: Art. 1552.
The seller, in declaring that he owned and had clean title to the
vehicle, gave an implied warranty of title, and in pledging that he “will
defend the same from all claims or any claim whatsoever [and] will
save the vendee from any suit by the government of the Republic of
the Philippines,” he gave a warranty against eviction, and the
prescriptive period to file a breach thereof is six months after the
delivery of the vehicle. √Ang v. CA, 567 SCRA 53 (2008).
C. Warranty Against Non-Apparent Servitudes (Arts. 1560)
D. Warranty Against Hidden Defects (Arts. 1561-1580)
The stipulation in a lease with option to purchase (treated as a sale
of movable on installments) that the buyer-lessee “absolutely
releases the lessor from any liability whatsoever as to any and all
matters in relation to warranty in accordance with the provisions
hereinafter stipulated,” was held as an express waiver of warranty
against hidden defect in favor of the seller-lessor which “absolved the
[seller-lessor] from any liability arising from any defect or deficiency
of the machinery they bought.” xFilinvest Credit Corp. v. CA, 178
SCRA 188 (1989).
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 defects are as follows: (a) The defect must be
hidden; (b) The defect must exist at the time the sale was made; (c)
The defect must ordinarily have been excluded from the contract; (d)
The defect, must be important (render the thing unfit or considerably
decreases fitness); (e) The action must be instituted within the
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 statute of limitations. Nutrimix Feeds Corp. v. CA, 441 SCRA 357
(2004).169
Seller’s agent can by agreement be liable for the warranty against
hidden defects. xSchmid and Oberly, Inc. v. RJL Martinez, 166
SCRA 493 (1988).
E. Warranty as to Fitness or Quality of Goods
In order to enforce the implied warranty that the goods are reasonably fit and
suitable to be used for the purpose which both parties contemplated, the
following must be established: (a) that the buyer sustained injury because of
the product; (b) that the injury occurred because the product was defective or
unreasonably unsafe; and finally (c) the defect existed when the product left
the hands of the petitioner. √Nutrimix Feeds Corp. v. CA, 441 SCRA 357
(2004).
A manufacturer or seller of a product cannot be held liable for any damage
allegedly caused by the product in the absence of any proof that the product
in question is 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 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 SCRA 357 (2004).
F. Sale of Goods by Sample
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
The phrase “as is, where is” basis pertains solely to the physical condition of
the 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 physical aspect. Thus, the buyer has no obligation to
shoulder the same. xNDC v. Madrigal Wan Hui Lines Corp., 412 SCRA 375
(2003).
Buyer’s Options in Case of Breach of Warranty (Art. 1599)
The remedy against violation of warranty against hidden defects is either to
withdraw 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. CA, 441 SCRA 357 (2004).