law on sale

ART. 1526. Subject to the provisions of this Title,
notwithstanding that the ownership in the goods may
have passed to the buyer, the unpaid seller of goods,
as such, has:
(1) A lien on the goods or right to retain them for
the price while he is in possession of them;
(2) In case of the insolvency of the buyer, a right
of stopping the goods in transitu after he has parted
with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited
by this Title.
Where the ownership in the goods has not
passed to the buyer, the unpaid seller has, in addition
to his other remedies, a right of withholding delivery
similar to and co-extensive with his rights of lien and
stoppage in transitu where the ownership has passed
to the buyer. (n)

REMEDIES OF AN UNPAID SELLER. [LS
RRW]
 A lien on the goods or right to retain them
for the price while he is in possession of
them(Art. 1527-1529);
 Right of stopping the goods in transitu
after he has parted with the possession of
them(Art. 1530-1532);
 Right of Resale(Art. 1533 & 1535)
 Right to Rescind(Art. 1534)
 Right of withholding the delivery when
ownership has not yet passed to
buyer.(Art. 1536)

ART. 1527. Subject to the provisions of
this Title, the unpaid seller of goods who is in
possession of them is entitled to retain
possession of them until payment or tender of
the price in the following cases, namely:
(1) Where the goods have been sold
without any stipulation as to credit;
(2) Where the goods have been sold on
credit, but the term of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien
notwithstanding that he is in possession of the
goods as agent or bailee for the buyer. (n)

WHEN UNPAID SELLER’S POSSESSORY LIEN
MAY BE EXERCISED. [SEI]
1. Sales without stipulation as to credit.
2. Expiration of term of credit.
3. Insolvency of the buyer.

S sold to B for P10,000 a specific ring. No term of
credit was given.
Supposing he delivered the ring to B, the
latter promised to pay within 3 months. The term
has ended and B failed to pay. What does S
have?
In the above example, supposing S
transferred ownership of the ring to B, but there
was an agreement that S shall continue to
possess the ring as a depository or bailee, can B
compel S to deliver the ring to him (B) because he
is already the owner since there was delivery?

ART. 1528. Where an unpaid seller has made part
delivery of the goods, he may exercise his right of lien
on the remainder, unless such part delivery has been
made under such circumstances as to show an intent to
waive the lien or right of retention. (n)

S sells to B a certain quantity of sugar. It is agreed
that three months credit shall be allowed. The half
portion of the thing was delivered by S to B. And
the remainder portion will be delivered upon full
payment.
In the above example, S may exercise his right of
lien on the remainder portion unless there is
stipulation.

ART. 1529. The unpaid seller of goods loses his lien
thereon:
(1) When he delivers the goods to a carrier or
other bailee for the purpose of transmission to the
buyer without reserving the ownership in the goods or
the right to the possession thereof;
(2) When the buyer or his agent lawfully obtains
possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon,
does not lose his lien by reason only that he has
obtained judgment or decree for the price of the goods.
(n)

WHEN UNPAID SELLER LOSES
POSSESSORY LIEN. [DPW]
1. Delivery to agent or bailee of buyer.
2. Possession by buyer or his agent.
3. Waiver of lien.
*** When unpaid seller becomes judgment creditor
he does not lose his lien.

Illustrative Case:
S, an unpaid seller who possessed the goods
through a warehouseman, delivered to the buyer
a negotiable warehouse receipt. Does the unpaid
seller still have a possessory lien?

ART. 1530. Subject to the provisions of this Title,
when the buyer of goods is or becomes insolvent, the
unpaid seller who has parted with the possession of the
goods has the right of stopping them in transitu, that is
to say, he may resume possession of the goods at any
time while they are in transit, and he will then become
entitled to the same rights in regard to the goods as he
would have had if he had never parted with the
possession. (n)

Requisites for the exercise of right of stoppage
in transitu. The following are the requisites for
the existence of the right:
(1) The seller must be unpaid (Art. 1525.);
(2) The buyer must be insolvent;
(3) The goods must be in transit (Art. 1531.);
(4) The seller must either actually take possession of the
goods sold or give notice of his claim to the carrier or other
person in possession (Art. 1532, par. 1.);
(5) The seller must surrender the negotiable document of
title, if any, issued by the carrier or bailee (Ibid., par. 2.); and
(6) The seller must bear the expenses of delivery of the
goods after the exercise of the right. (Ibid.)

Example
S sold to B 100 cavans of rice to be payable on
January 15, 2016 and to be delivered today by
LBC. B becomes insolvent. What is the remedy of
the unpaid seller?
In the above example, The unpaid seller
have right of stopping the goods in transit , he may
resume possession of the goods at any time while
they are in transit, and he will then become entitled
to the same rights in regard to the goods as he
would have had if he had never parted with the
possession.

ART. 1531. Goods are in transit within the
meaning of the preceding article:
(1) From the time when they are delivered to a
carrier by land, water, or air, or other bailee for the
purpose of transmission to the buyer, until the buyer, or
his agent in that behalf, takes delivery of them from
such carrier or other bailee;
(2) If the goods are rejected by the buyer, and the
carrier or other bailee continues in possession of them,
even if the seller has refused to receive them back;
Goods are no longer in transit within the meaning
of the preceding article:
(1) If the buyer, or his agent in that behalf,
obtains delivery of the goods before their arrival at the
appointed destination;

appointed destination, the carrier or other bailee
acknowledges to the buyer or his agent that he holds
the goods on his behalf and continues in possession of
them as bailee for the buyer or his agent; and it is
immaterial that further destination for the goods may
have been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses
to deliver the goods to the buyer or his agent in that
behalf.
If the goods are delivered to a ship, freight train,
truck, or airplane chartered by the buyer, it is a question
depending on the circumstances of the particular case,
whether they are in the possession of the carrier as
such or as agent of the buyer.
If part delivery of the goods has been made to
the buyer, or his agent in that behalf, the remainder of
the goods may be stopped in transitu, unless such part
delivery has been under such circumstances as to
show an agreement with the buyer to give up

When Goods are in transit
1. after the delivery to a carrier or other bailee and before
the buyer or his agent takes delivery of them
2. if the goods are rejected by the buyer, and the carrier or
other bailee continues in possession of them.
When Goods No longer in Transit (after delivery
to buyer/agent)
1. if the buyer or his agent obtains possession of the goods
at a point before the destination originally fixed.
2. if the carrier or bailee acknowledges to hold the goods on
behalf of the buyer
3. if the carrier or bailee wrongfully refuses to deliver the
goods to the buyer.

In order to terminate the seller’s right to stop, the
carrier must enter into a new relation, distinct from
the original contract of carriage, to hold the goods
for the buyer as his agent not for the purpose of
expediting them to the place of original destination,
pursuant to that contract, but in a new character for
the purpose of custody on the buyer’s account.

right of stoppage in transitu either by obtaining actual
possession of the goods or by giving notice of his claim
to the carrier or other bailee in whose possession the
goods are. Such notice may be given either to the
person in actual possession of the goods or to his
principal. In the latter case, the notice, to be effectual,
must be given at such time and under such
circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the
buyer.
When notice of stoppage in transitu is given by
the seller to the carrier, or other bailee in possession of
the goods, he must redeliver the goods to, or according
to the directions of, the seller. The expenses of such
delivery must be borne by the seller. If, however, a
negotiable document of title representing the goods has
been issued by the carrier or other bailee, he shall not
be obliged to deliver or justified in delivering the goods

WAYS OF EXERCISING THE RIGHT TO
STOP.
1. Taking actual possession of the goods
2. giving notice of his claim to the carrier or bailee.
--Notice to be effectual must be given in such time
and circumstance that the principal by the exercise of
reasonable diligence may prevent a delivery to the buyer.
--Redelivery necessary according to directions of
seller.
--If goods are covered by negotiable document of
title carrier or bailee has no obligation to deliver to seller
unless document is cancelled

ART. 1533. Where the goods are of perishable
nature, or where the seller expressly reserves the right
of resale in case the buyer should make default, or
where the buyer has been in default in the payment of
the price for an unreasonable time, an unpaid seller
having a right of lien or having stopped the goods in
transitu may resell the goods. He shall not thereafter be
liable to the original buyer upon the contract of sale for
any profit made by such resale, but may recover from
the buyer damages for any loss occasioned by the
breach of the contract of sale.
Where a resale is made, as authorized in this
article, the buyer acquires a good title as against the
original buyer.

It is not essential to the validity of a resale that notice
of an intention to resell the goods be given by the seller to
the original buyer. But where the right to resell is not based
on the perishable nature of the goods or upon an express
provision of the contract of sale, the giving or failure to give
such notice shall be relevant in any issue involving the
question whether the buyer had been in default for an
unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice
of the time and place of such resale should be given by the
seller to the original buyer.
The seller is bound to exercise reasonable care and
judgment in making a resale, and subject to this
requirement may make a resale either by public or private
sale. He cannot, however, directly or indirectly buy the
goods. (n)

WHEN RESALE IS ALLOWABLE
Where seller has either a right of lien or a right of stoppage
in transitu and under the following cases: (PRD)
1. Where the goods are perishable in nature
2. Where the right to resell is expressly reserved in
case the buyer should make a default
3. Where the buyer delays in the payment of the
price for an unreasonable time.

Illustrative Case
Seller resold tractor for failure of buyer to take delivery and pay
the price.
Facts: S sold to B a tractor, payable at P5,000.00 upon
delivery and the balance of P7,000.00 within 60 days. B failed to
take delivery of the tractor and pay the purchase price. S was
forced to sell the same to a third person for only P10,000.00.
Issue: Is B liable for the difference of P2,000.00?
Held: Yes. In a contract of sale which is executory as to
both parties, the vendor is entitled to resell the goods if the
purchaser fails to take delivery and pay the purchase price. If he
is obliged to sell for less than the contract price, he holds the
buyer for the difference; if he sells for as much as or more than
the contract price, the breach of contract by the original buyer is
damnum absque injuria. There is no need of an action for
rescission to authorize the vendor, who is still in possession, to
dispose of the property where the buyer fails to pay the price and
take delivery.

ART. 1534. An unpaid seller having the right of
lien or having stopped the goods in transitu, may
rescind the transfer of title and resume the ownership
in the goods, where he expressly reserved the right to
do so in case the buyer should make default, or where
the buyer has been in default in the payment of the
price for an unreasonable time. The seller shall not
thereafter be liable to the buyer upon the contract of
sale, but may recover from the buyer damages for any
loss occasioned by the breach of the contract.
The transfer of title shall not be held to have
been rescinded by an unpaid seller until he has
manifested by notice to the buyer or by some other
overt act an intention to rescind. It is not necessary that
such overt act should be communicated to the buyer,
but the giving or failure to give notice to the buyer of
the intention to rescind shall be relevant in any issue
involving the question whether the buyer had been in
default for an unreasonable time before the right of

Requisites of Recission
1. Seller is unpaid.
2. The buyer is in default in the payment of the price.
3. the seller has a right of lien on the goods.
4. the goods are perishable, or seller reserves the right of
resale, or the buyer has been in default in the payment of
price for an unreasonable time.
5.The title of the goods must have passed to the vendee.
Effect of rescission. — In the case of rescission, the seller
resumes ownership in the goods. While the seller shall not
be liable to the buyer upon the contract of sale, the latter,
however, may be made liable to the seller for damages for
any loss occasioned by the breach of contract.

Illustrative Case:
S sold 100 crates of mangoes to B and
shipped them to a common carrier. The price of the
sale is P10, 000, P100 per crate. The term of the
sale is COD. When the carrier reached the point of
destination, S demanded payment from B, but B
failed to pay. Since B cannot comply with what is
incumbent upon him, S may rescind the contract of
sale by notifying B of his intention to rescind.

ART. 1535. Subject to the provision of this Title,
the unpaid seller’s right of lien or stoppage in transitu is
not affected by any sale, or other disposition of the
goods which the buyer may have made, unless the
seller has assented thereto.
If, however, a negotiable document of title has
been issued for goods, no seller’s lien or right of
stoppage in transitu shall defeat the right of any
purchaser for value in good faith to whom such
document has been negotiated, whether such
negotiation be prior or subsequent to the notification to
the carrier, or other bailee who issued such document,
of the seller’s claim to a lien or right of stoppage in
transitu. (n)

Effect if buyer has already sold sold the goods.
If the buyer sold the goods, the seller’s lien or
stoppage in transitu remains, EXCEPT :
1. When the seller consented the sale.
2. When the goods are covered by a
negotiable document of title which has been
negotiated to a purchaser in good faith and for value.

ART. 1536. The vendor is not bound to
deliver the thing sold in case the vendee should
lose the right to make use of the term as
provided in article 1198. (1467a)

Right to Withhold delivery of thing sold by the vendor in
case the vendee lose the right to make use of the term,
as provided in Art. 1198: (IFIVA)
1. When after the obligation has been contracted
vendee becomes insolvent, unless he gives a guaranty or
security for the price
2. When he does not furnish to the vendor the
guaranties or securities which he has promised
3. When by his own acts he has impaired said
guaranties or securities after their establishment, and when
through fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory
4. When the vendee violates any undertaking, in
consideration of which the vendor agreed to the period
5. When the vendee attempts to abscond

EXAMPLE:
S sold to B a car on credit. S has a right to withhold delivery
in any of the following situations:
(1) B becomes insolvent, unless B gives sufficient
guaranty or security; or
(2) B promised to mortgage his house to secure the
purchase price and he failed to furnish said security as
promised; or
(3) If the payment of the purchase price is secured
by a mortgage on the house of B, but the house was
partially burned because of B’s fault; or was totally
destroyed without B’s fault, unless B gives a new security,
equally satisfactory; or
(4) Where in consideration of the sale on credit, B
obliged himself, say, to repair the piano of S, and B failed to
comply with such undertaking; or
(5) Where B shows an intent not to pay the price
after the car is delivered to him.

ART. 1537. The vendor is bound to deliver the thing sold
and its accessions and accessories in the condition in
which they were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on
which the contract was perfected. (1468a)

EXAMPLE:
S sold his horse to B for P8,000.00. No date or
condition was stipulated for the delivery of the horse. While
still in the possession of S, the horse gave birth to a colt.
Who has a right to the colt?
(1) B is entitled to the colt which was born after the
perfection of the contract. This holds true even if the
delivery is subject to a suspensive period (e.g., next month)
or a suspensive condition (e.g., upon demand) if B has paid
the purchase price.
(2) But S has a right to the colt if it was born before
his obligation to deliver the horse has arisen (Art. 1164.) and
B has not yet paid the purchase price. In this case, upon the
fulfillment of the condition or the arrival of the period, S does
not have to give the colt and B is not obliged to pay legal
interests since the colt and the interests are deemed to
have been mutually compensated.

ART. 1538. In case of loss, deterioration or improvement
of the thing before its delivery, the rules in article 1189
shall be observed, the vendor being considered the
debtor. (n)

Loss, Deterioration or Improvement of Object before its
delivery governed by Article 1189.
1. If the thing is lost w/o the fault of the seller, the
obligation shall be extinguished
2. If the thing is lost through the fault of the seller, he
shall be obliged to pay damages; it is understood that the thing
is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or it
cannot be recovered.
3. When the thing deteriorates w/o the fault of the seller,
the impairment is to be borne by the buyer
4. If it deteriorates through the fault of the seller, the
buyer may choose b/w rescission or fulfilment with indemnity in
either case
5. If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the buyer
6. If it is improved at the expense of the seller, he shall
have no other right than that granted to the usufructuary

EXAMPLE:
S sold to B his car. If before delivery —
(1) the car is lost or destroyed without the fault of S
(assuming S is not guilty of delay and there is no contrary
stipulation that he shall be liable), the obligation to deliver is
extinguished and B shall be obliged to pay the price if he
has not paid the same;
(2) if the loss is through S’s fault, he shall be liable to
pay damages to B;
(3) if the car suffers damages without the fault of S, B
shall have to suffer the impairment;
(4) if the damage was due to S’s fault, B may choose,
between the rescission (cancellation) of the contract with
damages or the delivery of the car also with damages;

(5) if the market value of the car increased, the
increase shall inure to the benefit of B inasmuch as he
suffers the deterioration in case of a fortuitous event;
(6) if S had the car painted and its seat cover
changed at his expense, he shall have the rights of a
usufructuary with respect to the improvements.

ART. 1539. The obligation to deliver the thing sold
includes that of placing in the control of the vendee all
that is mentioned in the contract, in conformity with the
following rules:
If the sale of real estate should be made with a
statement of its area, at the rate of a certain price for a
unit of measure or number, the vendor shall be obliged
to deliver to the vendee, if the latter should demand it,
all that may have been stated in the contract; but,
should this be not possible, the vendee may choose
between a proportional reduction of the price and the
rescission of the contract, provided that, in the latter
case, the lack in the area be not less than one-tenth of
that stated.

The same shall be done, even when the area is the
same, if any part of the immovable is not of the quality
specified in the contract.
The rescission, in this case, shall only take place at
the will of the vendee, when the inferior value of the thing
sold exceeds one-tenth of the price agreed upon.
Nevertheless, if the vendee would not have bought
the immovable had he known of its smaller area or inferior
quality, he may rescind the sale. (1469a)

Sale of real property by unit of measure or number.
(1) Entire area stated in contract must be delivered. — If the
sale of real estate should be made with a statement of its area, at the
rate of a certain price per unit of measure or number, the cause of the
contract with respect to the vendee is the number of such units or, if you
wish, the thing purchased as determined by the stipulated number of
units. The vendor must deliver the entire property agreed upon.
Thus, if the parcel of land is stated in the contract as
having an area of 500 square meters and sold at P1,000.00 per
square meter, the vendor must deliver the entire area as stated.
Furthermore, the immovable must be of the quality specified in the
contract.

(2) Where entire area could not be delivered. — If
all that is included within the stipulated boundaries is not
delivered, then the object of the contract, its cause as far as
the vendee is concerned, is not delivered. Hence, he is
entitled to rescind it. He may, however, enforce the contract
with the corresponding decrease in price.
He may, however, enforce the contract with the
corresponding decrease in price. Thus, if the area of the
land is only 450 square meters, the buyer is liable to pay
only P450,000

ART. 1540. If, in the case of the preceding article, there
is a greater area or number in the immovable than that
stated in the contract, the vendee may accept the area
included in the contract and reject the rest. If he
accepts the whole area, he must pay for the same at the
contract rate. (1470a)

GREATER AREA OR NUMBER (1540)
1. Vendee may accept the area stated in the
contract and reject the excess OR
2. Vendee may accept the whole but must
pay for the same at the contract rate
3. No Right of Rescission since the vendee is
not prejudiced at all.

Illustrative Case:
S sold to B 1000 square meters of land situated in
Pampanga, P100 per unit of measure. S delivered 1, 200
square meters, instead of 1000. What are the rights and
obligations of B?
1.Reject the 200 square meters, and pay P100,000;
or
2. Accept the 1,200 square meters, and pay
P120,000

ART. 1541. The provisions of the two preceding articles
shall apply to judicial sales. (n)

The provisions of Articles 1539 and 1540 are
applicable to both private (voluntary) and judicial sales
when the immovable sold is lacking in area or is of inferior
quality or is greater in area than stated in the contract. The
reason is that the rules they contain are derived from the
very nature of the contract of sale.
The rules, however, may be varied or suppressed by
agreement between the contracting parties.

ART. 1542. In the sale of real estate, made for a
lump sum and not at the rate of a certain sum for a unit
of measure or number, there shall be no increase or
decrease of the price, although there be a greater or
less area or number than that stated in the contract.
The same rule shall be applied when two or more
immovables are sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in
every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall
be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number
specified in the contract; and should he not be able to
do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee
does not accede to the failure to deliver what has been
stipulated. (1471)

Sale of REAL ESTATE by lump sum(1542): There should be
no increase or decrease of the price, although there be a
greater or lesser area or number than that stated in the
contract.
Rule applicable to Sale of two or more immovables for
a single price.
What if the area or number of the immovable is
stated together with its boundaries?
Then the vendor is bound to deliver all that is included
w/in the BOUNDARIES, although the same exceeds the area
or number specified in the contract. The BOUNDARIES prevail
because it contains the real and true area of the land.
What if the vendor cannot deliver all that is included
w/in the designated boundaries? Vendee has the option to:
a. Reduce the price in proportion to the deficiency in the
area OR
b. Rescind the contract for breach of stipulations.

EXAMPLE:
S sold to B a parcel of land for the lump sum (or a
cuerpo cierto) of P300,000.00. The contract states that the
area is 500 square meters. Subsequently, it was
ascertained that the area included within the boundaries is
really 600 square meters.
In this case, S is bound to deliver all the 600 square
meters which are included within said boundaries without
increase in price. If S does not deliver also the extra 100
square meters, B has the right to rescind the contract or pay
a proportionately reduced price, namely: 5/6 of the original
price or P250,000.00.

ART. 1543. The actions arising from articles 1539 and
1542 shall prescribe in six months, counted from the
day of delivery. (1472a)

ART. 1544. If the same thing should have been
sold to different vendees, the ownership shall be
transferred to the person who may have first taken
possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership
shall pertain to the person, who in good faith was first
in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is
good faith. (1473

Requisites for DOUBLE SALE to EXIST (VOCS)
1. Two or more sales transactions must constitute
valid sales
2. Two or more sales transactions must pertain to the
same object or subject matter
3. Two or more buyers at odds over the rightful
ownership of the subject matter must each represent
conflicting interests
4. Two or more buyers must each have brought from
the very same seller

Rules as to preference of ownership in case of
a double sale.
If the same property is sold by the same vendor to
different vendees, the conflicting rights of said vendees shall
be resolved in accordance with the following rules:
(1) If the property sold is movable, the ownership
shall be acquired by the vendee who first takes possession
in good faith.
Example:
S sold to B a cash register. The register, however,
was allowed to remain in the hands of S. Subsequently,
S sold the same register to C who bought it in good
faith and took possession thereof. Under the first
paragraph of Article 1544, C should be considered as
the owner of the property sold

(2) If the property sold is immovable, the ownership shall
belong to:
(a) The vendee who first registers the sale in good
faith in the Registry of Property (Registry of Deeds);
(b) In the absence of registration, the vendee who
first take possession in good faith.; and
(c) In the absence of registration, the vendee who
presents the oldest title (who first bought the property) in
good faith.
Example:
S sold a parcel of land to B. Later, S sold the
same land to C who, in good faith, first registered the
deed of sale. In case of double registration, the title
should remain in the name of the person first securing
registration in good faith.

Example(Cont.)
The ownership belongs to C even if B is in actual
possession of the land. The remedy of B is to sue S for
breach of warranty against eviction.
If C had knowledge of the previous unregistered
sale to B, such knowledge is equivalent to registration.
C is not a buyer in good faith. To be considered a
purchaser in bad faith, it is not required that C had
actual knowledge of the sale to B. It is sufficient that he
has knowledge of facts which should put him upon
inquiry and investigation as to possible defects of title
of S and he fails to make such inquiry and investigation.
If neither sale was registered and C first took
possession of the land, in good faith, the ownership
shall also belong to him.
In the absence of registration and possession by
B and C, the ownership shall pertain to B, his title being

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 fulfilment 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.

A condition, as used in Article 1545, means an
uncertain event or contingency on the happening of
which the obligation (or right) of the contract
depends. In such a case, the obligation of the
contract does not attach until the condition is
performed.

Effect of non-fulfillment of condition.
What are the options of a party to a contract of sale
subject to a condition, when such condition was not fulfilled
by the other party?
a. Refuse to proceed with the contract OR
b. Waive performance of the condition and proceed
with the contract
What if the condition agreed upon is in the nature
of a promise that it should happen? Then the non-
fulfillment of such condition is considered a breach of
warranty.

Examples
B (buyer) entered into a contract with S for the
purchase of certain machinery. The arrival of the goods to
be shipped from Japan is made a condition of the bargain,
there being no promise by S that the goods will arrive. If the
machinery does not arrive, S is not guilty of breach of
contract.
But if S promises or warrants that the machinery will
be shipped or that it was already on its way, the non-arrival
constitutes a breach of contract. B is entitled to claim
damages.

(2) S promised to sell his parcel of land to B,
should S win a case pending in the Supreme Court.
S lost the case. S may either refuse to sell the
parcel of land or he may waive the performance of
the condition and sell the parcel of land.

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 purchases 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)

WARRANTY.
--It is a collateral undertaking in a sale of either real or personal
property, express or implied, that if the property sold does not possess
certain incidents or qualities, the purchaser may either consider the sale
void or claim damages for breach of warranty.
A warranty is a statement or representation made by the seller
of goods, contemporaneously and as a 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.

Express Warranty—any affirmation of fact or any
promise by the seller relating to the thing if the natural
tendency of such affirmation or promise is to induce the
buyer to purchase the same and if the buyer purchases the
thing relying thereon.
Affirmation of the value of the thing or statement of
the seller’s opinion is not warranty, unless the seller made
such affirmation or statement as an expert and it was relied
upon by the buyer.

Example:
S sells to B an automobile for P90,000.00, telling the
latter that it is a 1977 model and that it is worth about
P100,000.00. B sees the automobile and after a test run,
expresses satisfaction over its condition. The automobile is
really of 1976 vintage and is only worth about P80,000.00.
In this case, B has no right of action for breach of
warranty because the inducing cause of the purchase is not
the erroneous statement as to its model and value, but B’s
reliance on its appearance and demonstrated condition. But
the statement that the automobile is in excellent running
condition constitutes a violation of warranty if such is not the
fact.

ART. 1547. In a contract of a 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)

Implied Warranties in Contracts of Sale (1547)
1. Implied warranty as to the right of the seller to sell
at the time when ownership has to pass. (Warranty against
eviction)
2. Implied warranty against hidden defects or faults
or charge or encumbrances unknown to the buyer
3. Implied warranty as to fitness and merchantability
4. Warranty against encumbrances or non-apparent
servitudes (1560)

Cases where implied warranty is not applicable
1. Sale made by a sheriff, auctioneer, mortgagee,
pledge or other person professing to sell by virtue of
authority in fact or law (1547) (The judgment debtor is
responsible here for eviction)
2. Sale under “as is and where is”—this carries no
warranty as to the quality or workable condition of the goods
and the buyer takes them as they are. However, such
condition does not include those that could not be
discovered by a physical examination of the goods sold.
3. Sale of second hand articles does not carry any
warranty as to the condition, adaptation, fitness or suitability
for purposes for which they have been purchased.
4. Sale of property sold at public auction for tax
delinquency. There is no warranty on the part of the State
as to the title of the owner.

SUBSECTION 1.
Warranty in Case of Eviction

ART. 1548. Eviction shall take place whenever by
a final judgment based on a right prior to the sale or an
act imputable to the vendor, the vendee is deprived of
the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even
though nothing has been said in the contract on the
subject.
The contracting parties, however, may increase,
diminish, or suppress this legal obligation of the
vendor.

Essential elements of warranty against eviction.
The essential elements are:
(1) The vendee is deprived in whole or in part of the
thing purchased;
(2) He is so deprived by virtue of a final judgment
(Art. 1557.);
(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
at the instance of the vendee (Art. 1558.); and
(5) There is no waiver on the part of the vendee.

ART. 1549. The vendee need not appeal from the
decision in order that the vendor may become liable for
eviction.

ART. 1550. When adverse possession had been
commenced before the sale but the prescriptive period
is completed after the transfer, the vendor shall not be
liable for eviction. (n)

Effect of Prescription/Adverse Possession (1550)
1. Prescription consummated before sale—Vendee
can claim warranty against eviction (deprivation is based on
right prior to sale)
2. Prescription consummated after sale—Vendee
cannot claim warranty against eviction

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