CONDITIONS AND WARRANTIES approval by the courts, affect only the effectivity and not the validity of the
ffect only the effectivity and not the validity of the contract of sale.
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
sellers 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,
where all are present, the result is a valid contract. However, some parties 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-
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-ful 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 ful 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-fulllment of the warranty, the following difference also apply:
(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.
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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: rst, such failure was not stipulated as a
condition whether resolutory or suspensive in the contract; and second, its
effects and consequences were not specied 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 [buyers]
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 sellers statements, or dealers talk; and experience
teaches that it is exceedingly risky to accept it at its face 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;
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 (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 statute of limitations. Nutrimix
Feeds Corp. v. CA, 441 SCRA 357 (2004).169
Sellers 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 sellers
or manufacturers 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).
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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 subjects matters 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).

Buyers 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).