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Chapter 12

CONDITIONS AND WARRANTIES

Conditions
A condition is a future and an uncertain event
which may or may not happen, upon which
depends the rising or extinction of an
obligation. May be suspensive or resolutory.
The fulfillment of a suspensive condition gives
rise to the birth of the obligation; while the
fulfillment
of
the
resolutory
condition
extinguishes a subsisting obligation.

Distinction between a condition imposed on the


perfection of the contract and a condition
imposed on the performance of an obligation.
The failure to comply with the first results in
the failure of the contract
The failure to comply with the second, i.e.,
where the obligation of the other party to a
contract of sale is subject to any condition
which is not performed, gives the injured party
two alternative remedies: the option to either
refuse to proceed with the sale or to waive the
condition as mandated under Article 1545; and

that the choice is not with the obligor but with


the injured party.
Warranties forms part of the conditions
imposed on the performance of an obligation in
a contract of sale.

Distinctions between Conditions and


Warranties
Warranty is a collateral undertaking in a sale,
express or implied, that if the property sold
does not possess certain incidents or qualities,
the buyer may either consider the sale void or
claim damages for breach of warranty. The
warranty is a contract in which the implied
promise is that the seller will pay damages if
the
property
does
not
possess
the
characteristics warranted, or if the protection is

not furnished, and the consideration for this


promise is the making of the contract of sale.
Non-fulfillment of a warranty constitutes a
breach of the contract, whereas
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.

Where the ownership in the things 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.
Remedy of the buyer in case of failure of the seller to do
his obligation is to either refuse to proceed with the
contract or to waive that condition.
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 warranty because 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 injured party to sue for damages.
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
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
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.

Express Warranties; requisites:


- It must be an affirmation of fact or any
promise by the seller relating to the subject
matter of the sale;
- The natural tendency of such affirmation or
promise is to induce the buyer to purchase
the thing; and
- The buyer purchases the thing relying on
such affirmation or promise thereon
The decisive test is whether the seller assumes
to assert a fact of which the buyer is ignorant
of.

However, an affirmation of the value of the


thing, or any statement purporting to be a
statement of the sellers opinion only, shall not
be construed as a warranty, unless the seller
made such affirmation or statement as an
expert and it was relied upon by the buyer.
Article 1341 provides that a mere expression
of an opinion does not signify fraud, unless
made by an expert and the other party has
relied on the formers special knowledge.

The law allows considerable latitude to sellers


statements, or dealers talk; and experience teaches
that it is exceedingly risky to accept it at its face
value. The Court held that 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, thus if the buyer relies upon such an
affirmation whose interest might so readily prompt
him to exaggerate the value of his property does so
at his peril, and must take the consequences of his
own imprudence.

Implies Warranties; defined


Those which by law constitute part of every contract
of sale, whether or not the parties were aware of
them, and whether or not the parties intended them.
An implied warranty is inherent in a contract of sale. It
is presumed to exist although nothing has been
mentioned about it. It is deemed incorporated in the
contract of sale. However, implied warranties may be
modified or suppressed by agreement of the parties.
Although only a seller is bound by the implied
warranties
of
law,
nevertheless,
by
express
contractual stipulation, an agent of the seller may bind
himself to such warranties.

Relevant Discussions
1.

Warranty that seller has right to sell

There is 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.
There can be no legal waiver of such warranty without changing
the basic nature of the relationship, for the warranty on the part
of the seller that he has the capacity to sell is the essence of
sale; unless, it amounts to clear assumption of risk on the part
of the buyer.
However, this warranty is not applicable to render liable a
sheriff, auctioneer, mortgagee, pledge, 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.

2.

Warranty Against Eviction

There is an implied warranty on the part of the


seller that when the ownership is to pass, the
buyer shall from that time have and enjoy the
legal and peaceful possession of the thing. The
seller shall answer for the eviction even though
nothing has been said in the contract on the
subject.

a. When there is breach of warranty against

eviction
There is a breach of warranty against eviction when
the following conditions are present:
- Purchaser has been deprived of, or evicted from,
the whole or part of the thing sold;
- Eviction is by a final judgment;
- The judgment is in favor of the plaintiff which is
based a right prior to the sale or event after the
sale if the cause of eviction is due to an act or acts
imputable to the seller; and
- Seller has been summoned and made co-defendant
in the suit for eviction at the instance of the buyer.

- Buyer has not waived the sellers warranty against


eviction. (Pineda)
The warranty cannot be enforced until a final judgment has
been rendered. The buyer need not appeal from the
decision in order that the seller may become liable for
eviction. The buyer is not required to resist the action for
eviction taken against him since the warranty is a covenant
on the part of the seller, and by having given the seller
proper notice of the eviction (i.e., by making him a party
to the case) the buyer is deemed to have complied with
what is incumbent upon him, the seller must then take the
lead to resist the claim of the third party on the subject
matter of the sale.

There can be no breach of warranty against eviction if


the buyer was well aware of the presence of other
claimants such as tenants at the time the buyer entered
into the sale transaction.
Breach of warranty against eviction cannot be enforced
against the seller if the buyer merely furnished the seller
a copy of the opposition of the buyer filed in an eviction
suit against him, without going through formally
summoning the seller to be a party to the case. The
notice required by law is not merely giving notice but
that the seller should be made parties to the suit at the
instance of the buyer, either by way of asking that the
seller be made a co-defendant or by the filing of a thirdparty complaint against the seller.

b.

Eviction in part.

Should the buyer lose, by reason of the


eviction, a part of the thing sold of such
importance, in relation to the whole, that the
buyer would not have bought it without said
part, the buyer may demand the rescission of
the contract; but with the obligation to return
the thing in the same condition when it was
acquired, instead of enforcing the liability of
the seller for eviction.
Same rule applies if two or more things have
been jointly sold when it clearly appears that

the buyer would not have purchased one


without the other.
The reason why rescission is available only in
case of partial eviction is because there is still
something left of the property in the hands of
the buyer which can be returned. If the
eviction is total, the buyer cannot return the
property to the vendor because a third
claimant has taken over the whole property
because in rescission, the one demanding it
must be able to return what he received.
Mutual restitution is required.

c.

Particular causes given by law

When adverse possession had been commenced


before the sale but the prescriptive period is
completed after the transfer, the seller shall not be
liable for breach of warranty against eviction.
The property must be susceptible to prescription. If
the thing purchased is not susceptible to prescription
like lands registered under the Real Property
Registration Decree, prescription will not lie. Hence,
the particular cause given by law, such as
prescription, will not be applicable.
If the property is sold due to nonpayment of taxes
which was not made known to the buyer before the
sale, the seller is liable in case of eviction.

d.

Applicability to Judicial Sales.

In case of judicial sales, the judgment debtor is


also responsible for eviction unless it is
otherwise decreed in the judgment. However,
in several cases, it was held that, in execution
sales, the rule of caveat emptor applies; the
sheriff does not warrant the title to the
property sold by him, and it is not incumbent
upon him to place the purchaser in possession
of the property. Such buyer at such sales takes
the property subject to the superior right of
other parties.

Amounts for which Seller is liable in


case of eviction.
e.

Under Article 1555, in case eviction occurs, the buyer shall


have the right to demand of the seller:

- Return of the value which the thing sold had at the time

of the eviction, be it greater or lesser than the price of


the sale;
Income or fruits, if buyer has been ordered to deliver
them to the party who won the suit against him;
Costs of the suit which caused the eviction, and, in a
proper case, those of the suit brought against the seller
for the warranty;
Expenses of the contract, if the buyer has paid them;
Damages and interests and ornamental expenses, if the
sale was made in bad faith.

f.

Waiver of Warranty and Effects thereof

Article 1548 provides that the contracting


parties to a contract of sale may increase,
diminish, or suppress the implied warrant
against eviction. However, the effect of this
waiver depends on the nature of such waiver,
whether it is general or specific waiver, and
whether done in good faith or bad faith on the
part of the seller.

Under Article 1553, if the seller acted in bad


faith then any stipulation exempting the seller
from the obligation to answer for eviction shall
be void.

On the other hand, if the buyer merely


renounces the warranty in general terms,
without knowledge of a particular risk, and
eviction should take place, the seller shall only
pay the value which the thing sold had at the
time of the eviction.

Thus, a general waiver of the warranty does


not create the effect of waiver but merely
limits the liability of the seller to the value of
the thing sold at the time of eviction.
- Here, the buyer makes a waiver of eviction

without knowledge of the risk of eviction or


the details of the cause of eviction. Every
waiver of warranty against eviction is
presumed to be a simple waiver. That the
waiver was merely conscious, that is, the
buyer had waived his right to the warranty
against eviction and its consequences.

Should the buyer have made the waiver with


knowledge of the risks of eviction and assumed
its consequences, the seller shall not be liable.
- Here, there is an intentional and deliberate

waiver. The waiver was not merely conscious


but was full with absolute knowledge of the
risks of eviction.
When the waiver is of a
expected eviction, the waiver
wiping out the warranty as to
but not as to eviction caused
not covered in the waiver.

specific case of
has the effect of
that specific risk,
by other reasons

Even when there is no specific waiver, a buyer


cannot take refuge on the warranty against
eviction when he purchases the land fully
aware of a claim by a third party on the title to
the land and who was in actual possession
thereof; when the buyer cannot show that he
is a buyer in good faith, the buyer is not
entitled to the said warranty.