CONDITION & WARRANTIES

CONDITION & WARRANTIES

A. CONDITION

• When a contract contains a condition, the non-happening of which would not constitute a breach but extinguishes the obligation

• However, if party to the sales contract has promised that the condition should happen or be performed, the non-performance of which may be treated by parties as breach

CONDITION
Purports to existence of obligation

Condition must be stipulated to form part of the obligation

May attach itself to obligation of seller to deliver possession & transfer ownership

WARRANTY
Purports to performance of obligation

Need not be stipulated; may form part of obligation by provision of law

Relates to the subject matter itself or to obligation of the seller as to the subject matter of the sale

B. EXPRESS WARRANTIES ( REQUISITES )

1. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale

2. natural tendency of affirmation or promise is to induce buyer to purchase subject matter

3. buyer purchases the subject matter relying thereon

• when breached, seller is liable for damages

C. IMPLIED WARRANTIES
– deemed included in all contracts of sale whether parties are actually aware or not, whether they were intended or not; by operation of law

1. warranty that seller has a right to sell

• refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition

• not applicable to sheriff, auctioneer, mortgagee, pledgee
2. warranty against eviction

• implied, unless contrary provision appears in contract

• when ownership is transferred, buyer shall enjoy the legal and peaceful possession of the thing

REQUISITES OF BREACH OF WARRANTY AGAINST EVICTION:

1. buyer is evicted in whole or in part from the subject matter of sale

2. there is a final judgement

3. basis of eviction is a right prior to sale or an act imputable to vendor

4. seller has been summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer

• no appeal needed nor a need for buyer to resist eviction for right to accrue; it is enough that the aforementioned requisites are complied with

• warranty cannot be enforced until aforementioned requisites concur

• applies to judicial sale; judgment debtor responsible for eviction unless otherwise decreed in judgment

• vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is completed after transfer

LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole subject matter)

1. value of thing at time of eviction ( be it greater/lesser than price of sale )

2. value of income of fruits

3. costs of suit which caused the eviction

4. expenses of contract if buyer paid for them

5. damages & interests and ornamental expenses if sale was made in bad faith

RIGHTS OF BUYER WHEN DEPRIVED OF ONLY PART OF THE SUBJECT MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART IF NOT IN RELATION FOR THE WHOLE:

1. rescission

2. mutual restitution

3. WARRANTY AGAINST ENCUMBRANCES (non- apparent) requisites:

a. immovable sold is encumbered with non–apparent burden or servitude not mentioned in the agreement

b. nature of non–apparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof

• when breach of warranty exist: buyer may ask for rescission or indemnity

• warranty not applicable when non – apparent burden or servitude is recorded in the Registry of Property – unless there is express warranty that the thing is free from all burdens & encumbrances
4. WARRANTY AGAINST HIDDEN DEFECTS

• SELLER does not warrant patent defect; caveat emptor

• Except when hidden

a. subject matter may be movable or immovable

b. nature of hidden defect is such that it should render the subject matter unfit for the use of which it was intended or should diminish its fitness

c. had the buyer been aware, he would not have acquired it or would have given a lower price

• when defect is visible or even if not visible but buyer is an expert by reason of his trade or profession, seller is not liable

• obligation of seller for breach depends on whether he has knowledge of such defect or not

a. seller is aware – seller should return price & refund expenses of contract with damages

b. seller is not aware - seller should return price and interest & refund expenses ( no damages )

• buyer may elect between withdrawing from contract or demanding proportionate reduction of price with damages in either case

• applicable to judicial sale except that judgment debtor not liable for damages

• action to prescribe 6 months from delivery of subject matter

5. DEFECTS ON ANIMALS

• even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not sufficient to discover it - defect shall be considered as REDHIBITORY

• if vet fails to discover through ignorance or bad faith he is liable for damages

a. sale of animals on teams (2 or more)

• when only one is defective, only one is redhibited & not the others

• exception: when it appears buyer would not have purchased the team without the defective one

• apply to sale of other things

b. sale of animals at fair or public auction

• no warranty against hidden defects

c. sale of animals with contagious disease is void

d. sale of unfit animals

• void if use / service for which they are acquired has been stated in the contract and they are found to be unfit therefor

• prescription of action: 40 days from date of delivery to buyer
• if sale is rescinded, animals to be returned in same condition when they were acquired; buyer shall answer for injury / loss due to his fault

• buyer may elect between withdrawing from sale and demanding proportionate reduction of price with damages in either case

D. SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS

1. Warranty as to fitness & quality;

requisites:

a. buyer makes known to seller the particular purpose for which goods are acquired and it appears that the buyer relied on the seller’s skill or judgment

b. goods are bought by description from seller who deals in goods of that description

• in case of sale of specified article under its patent or trade name, no warranty unless there is a stipulation to the contrary

• measure of damage: difference between value of goods at time of delivery and value they would have had if they had answered to the warranty

2. Sale of Goods by sample

• If seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample

E. EFFECTS OF WAIVER

• Parties may increase or diminish implied warranty against eviction;

but effect depends on good faith or bad faith on the part of the seller.

1. seller in bad faith & there is waiver against eviction – null & void

2. buyer without knowledge of a particular risk, made general renunciation of warranty – not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction)

3. buyer with knowledge of risk of eviction assumed its consequences & made a waiver – vendor not liable (applicable only to waiver of warranty against eviction)

• when goods delivered to buyer, he cannot rescind sale if:

1. he knew of the breach of warranty when he accepted goods without protest

2. he fails to notify seller within reasonable time of election to rescind

3. he fails to return or offer to return goods to seller in substantially as good condition as they were in at time ownership was transferred

4. when goods deteriorated, buyer can still return them in that condition if such is due to breach or warranty




F. BUYER’S OPTION IN CASE OF BREACH OF WARRANTY

1. Accept goods & set up breach of warranty by way of recoupment in diminution or extinction of the price.

2. Accept goods & maintain action against seller for damages

3. Refuse to accept goods & maintain action against seller for damages

4. Rescind contract of sale & refuse to receive goods/return them when already received.