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C. DELIVERY OF FRUITS AND ACCESSORIES
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.
Condition of the thing - It is the seller’s duty to deliver the thing sold in a condition
suitable for its enjoyment by the buyer for the purposes contemplated.
When vendee entitled - from the time the obligation to deliver it arises (Art. 1164.) The
obligation to deliver arises upon the perfection of the contract of sale. (see Art. 1475.)
When vendee not entitled
a. When the rule provided in Article 1537 (par. 2.) is modified by agreement of the
parties, their agreement shall, of course, govern;
b. If the vendee rescinds the contract of sale instead of exacting the fulfillment
thereof, he is entitled only to damages like interest, attorney’s fees and costs but he
may not also claim the fruits of the thing sold.
c. In a contract of promise to sell, the vendee is not entitled to the fruits. The only
right of the contracting parties is to reciprocally demand the fulfillment of the
contract. Prior to the sale and conveyance of the subject matter of the contract, the
promisee or would-be vendee acquires no right to the fruits thereof.
D. PAYMENT OF EXPENSES FOR EXECUTION AND REGISTRATION
1487 The expenses for the execution and registration of the sale shall be
borne by the vendor, unless there is a stipulation to the contrary.
The vendor has the duty to pay not only the expenses for the execution of the sale but
also for the registration of the same in the absence of any agreement between the
parties to the contrary.
E. CONDITION AND WARRANTIES
1. Condition; concept
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 nonperformance 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.
Condition - 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
In the context of a perfected contract of sale, pertains, in reality, to the compliance by
one party of an undertaking, the fulfillment of which would beckon, in turn, the
demandability of the reciprocal prestation of the other party.
The term is not used in the sense of a “promise” with the possible exception of the
buyer’s promise to accept and pay for the thing sold which is conditioned on the seller’s
performance of his promise to deliver the thing as described and warranted.
If the obligation1 of either party is subject to any condition and such condition is not
fulfilled, such party may either:
a. refuse to proceed with the contract; or
b. proceed with the contract, waiving the performance of the condition.
If the condition is in the nature of a promise that it should happen, the non-
performance of such condition may be treated by the other party as a breach of
warranty.
Palanca v. Dir of Lands
FACTS: Carlos Palanca is the applicant for the registration of the parcel of land marked lot
No. 2 described in the plan accompanying his application. Roman Santos opposes the
registration of the eastern portion of this lot which is more fully described in this written
opposition. The trial court dis missed the opposition and ordered the registration of the
entire lot No. 2 in favor of the applicant. Lot No. 2 together with lot No. 1, which is the
subject of another proceeding, form one piece of land, lot No. 1 being located within the
Province of Pampanga and lot No. 2 in the Province of Bulacan. SALE. The sisters Irene
Mojica and Consuelo Mojica sold the hacienda composed of these two lots to Felipe
Buncamino Suntay and in December of the same year said Suntay sold the same lands to
Carlos Palanca. In the description of this hacienda in the document of sale to Suntay the
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portion claimed by Roman Santos appears to have been excluded. In January, 1918, Irene
and Consuelo Mojica sold to the opponent Roman Santos the said portion that had been
excluded. The deeds of sale of Felipe Buencamino Suntay (Exhibit C) and of the applicant
Carlos Palanca (Exhibit B) were recorded in the registry on January 26, 1918, and the
document of sale to Santos was also recorded on August 6, 1918 (Exhibit 3).
ISSUE: Whether or not Palanca has the possession of the Land.
HELD: The preference, therefore, as between these two sales must be adjudged to Palanca
in accordance with said article 1473 of the Civil Code, on account of priority of possession.
Palanca had possession of the land as a lessee before the land was sold and after the
consummation of the sale he continued in such possession uninterruptedly, not as lessee,
but, as owner of the property. In accordance with article 1473 of the Civil Code the sale that
was first recorded must be given preference. Although the sale to Suntay and the sale by
the latter to Palanca wre recorded, it must be deemed that no record was made as to the
portion of land in question. For the purposes of articles 1473, the record in the registry is
tantamount to a notice of the fact of the existence of the contract. But, as in the deeds
containing these contracts the portions of land under discussion does not appear, the
registration of the documents cannot be considered as a notice of the sale of the said
portion. When Santos recorded his sale he knew that Palanca was claiming the land in
question by virtue of a former purchase. consequently the record made by Santos was not
in good faith and he cannot base his preference of title thereon. The record to which article
1473 of the Civil Code refers is that made in good faith, for the law will not protect anything
done in bad faith.
2. Warranty
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
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expert and it was relied upon by the buyer
Warranty - 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
Kinds of warranty
a. Express warranty
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
any affirmation of fact or any promise by the seller relating to the thing, the natural
tendency of which is to induce the buyer to purchase the thing and the buyer thus
induced, does purchase the same.
b. Implied warranty
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.
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is that which the law derives by implication or inference from the nature of the
transaction or the relative situation or circumstances of the parties irrespective of any
intention of the seller to create it.
Sigaya v. Mayuga
FACTS: A parcel of land owned by Dionisia Alorsabes was sold to Juanito Fuentes while the
remainder was inherited by her children. Each of the heirs sold their share of portions to
the the respondents. However, a document entitled Extra-Judicial Partition with Deed of
Sale was uncovered wherein the heirs of Dionisia purportedly sold their shares in favor of
Teodulfo Sigaya through a Deed of Sale. Later on, the petitioners filed a case for recovery of
possession against the respondents arguing that they have the right of ownership and
possession over the property. The respondents answered that the Deed of Sale in favor of
Teodulfo was null and void as it is based on a fictitious extra-judicial settlement considering
that two of the heirs were illiterate. Hence, they were fraudulently made to sign as
vendees. The Regional Trial Court ruled in favor of the respondents believing that the
evidence of actual occupation and possession of the respondents had been satisfactorily
proven. The Court of Appeals affirmed the decision of RTC. In appealing to the Supreme
Court, the petitioners aver that Teodulfo purchased the property from Francisco, one of the
heirs, who was in possession of an OCT of the property named after Dionisia. Relying on the
instrument and after inspecting the land and seeing nobody occupied the same, Teodulfo
bought the land and had the title subsequently issued in his name. In this manner, Teodulfo
was an innocent purchaser in good faith and also a victim of misrepresentation.
ISSUE: Whether or not a person dealing with a registered land can safely rely on the
correctness of the Certificate of Title issued.
HELD: The Court ruled against the petitioners. According to the Court, although general rule
provides that every person dealing with registered land may safely rely on the correctness
of the certificate of title, the rule shall not apply when the party has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to make such inquiry
or when the purchaser has knowledge of defect or lack of title in his vendor or of sufficient
facts to induce a reasonably prudent man to inquire into the status of the title of the
property. In the present case, it shows that the respondents had actual possession of the
portions of land conveyed to them the heirs of Dionisia. A witness for the respondents
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testified that he even accompanied Francisco and Teodulfo to the different houses of the
respondent as Teodulfo was going to buy the property from Francisco. Seeing that there
were occupants in the property, by itself, the Court cannot sustain good faith claimed by
the petitioners.
1) Warranty on seller’s title; liabiliity in case of eviction
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.
Eviction may be defined as the judicial process, whereby the vendee is deprived of the
whole or part of the thing purchased by virtue of a final judgment based on a right prior
to the sale or an act imputable to the vendor.
Essential elements of warranty against eviction
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.
Mere trespass in fact does not give rise to the application of the doctrine of eviction.
(see Art. 1590.) In such case, the vendee has a direct action against the trespasser in the
same way as the lessee has such right
The disturbance referred to in the case of eviction is a disturbance in law which requires
that a person go to the courts of justice claiming the thing sold, or part thereof, and
invoking reasons
Warranty is not an essential element of a contract of sale and may, therefore, be
increased, diminished, or suppressed by agreement of the parties
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1549 The vendee need not appeal from the decision in order that the
vendor may become liable
for eviction.
The vendee’s right against the vendor is not lost because he, the vendee, did not
appeal. With a judgment becoming final whatever be the cause of finality, the
requirement of the law is deemed satisfied.
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.
By prescription, one acquires ownership and other real rights through the lapse of time
in the manner and under the conditions prescribed by law. In the same way, rights and
actions are lost by prescription
Completed before sale. — The vendee may lose the thing purchased to a third person
who has acquired title thereto by prescription. When prescription has commenced to
run against the vendor and was already complete before the sale, the vendee can
enforce the warranty against eviction. In this case, the deprivation is based on a right
prior to the sale and an act imputable to the vendor.
Completed after sale. — Even if prescription has started before the sale but has reached
the limit prescribed by law after the sale, the vendor is not liable for eviction. The
reason is that the vendee could easily interrupt the running of the prescriptive period
by bringing the necessary action.
If the property sold, however, is land registered under the Torrens system, Article 1550
will have no application. Under the Torrens system, ownership of land is not subject to
prescription.
1551 If the property is sold for nonpayment of taxes due and not made
known to the vendee before the sale, the vendor is liable for
eviction
1552 The judgment debtor is also responsible for eviction in judicial
sales, unless it is otherwise decreed in the judgment
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The judgment debtor is responsible for eviction (Art. 1552.) and hidden defects (Art.
1570.) even in judicial sales, unless otherwise decreed in the judgment.
1553 Any stipulation exempting the vendor from the obligation to
answer for eviction shall be void,
if he acted in bad faith
Effect of vendor’s bad faith. — The vendor’s bad faith under Article 1553 consists in his
knowing beforehand at the time of the sale, of the presence of the fact giving rise to
eviction, and its possible consequence. Thus, if the vendor after selling his property to
another, sold it again to another purchaser, he cannot even by stipulation, be exempt
from warranty against eviction, because he acted in bad faith.
Effect of vendee’s bad faith. — It is a requisite, however, that the vendee is not himself
guilty of bad faith in the execution of the sale. If he knew the defect of title at the time
of sale, or had knowledge of the facts which should have put him upon inquiry and
investigation as might be necessary to acquaint him with the defects of the title of the
vendor, he cannot claim that the vendor has warranted his legal and peaceful
possession of the property sold on the theory that he proceeded with the sale with the
assumption of the danger of eviction. He is not, therefore, entitled to the warranty
against eviction, nor is he entitled to recover damages.
1554 If the vendee has renounced the right to warranty in case of
eviction, and eviction should take place, the vendor shall only pay
the value which the thing sold had at the time of the eviction.
Should the vendee have made the waiver with knowledge of the
risks of eviction and assumed its consequences, the vendor shall
not be liable
Kinds of waiver of eviction
1. Consciente, that is, the waiver is voluntarily made by the vendee without the
knowledge and assumption of the risks of eviction; and
2. Intencionada, that is, the waiver is made by the vendee with knowledge of the risks
of eviction and assumption of its consequences.
Effect of waiver of the vendee
1. If the waiver was only conscious, the vendor shall pay only the value which the
thing sold had at the time of eviction. This is a case of solutio indebiti. The sole
effect of a waiver unaccompanied by the knowledge and assumption of the danger
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of eviction is to deprive the purchaser of the benefits mentioned in Nos. 2, 3, 4, and
5 of Article 1555.
2. In the second kind of waiver, the vendor is exempted from the obligation to answer
for eviction, provided he did not act in bad faith.
1555 When the warranty has been agreed upon or nothing has been
stipulated on this point, in case eviction occurs, the vendee shall
have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time of
the eviction, be it greater or less than the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them to
the party who won the suit against him;
(3) The costs of the suit which caused the eviction, and, in a
proper case, those of the suit brought against the vendor for the
warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the
sale was made in bad faith.
Rights and liabilities in case eviction occurs.
1. Return of value of thing. — If at the time of the eviction the value of the property is
really more or less than its value at the time of the sale, by reason of improvements
or deterioration, it is but just that the vendor should pay the excess or not suffer
the damage. All kinds of improvements whether useful or necessary or even
recreational expense voluntarily incurred by the vendee or caused by nature or
insofar as they may affect the value of property, are taken into account in
determining the increase in value. Note that the law does not speak of interest.
Undoubtedly, the law had intended that the interest on the price shall be set off
against the fruits received by the vendee from the thing while in his possession
2. Income or fruits of thing. — The vendee is liable to the party who won the suit
against him for the income or fruits received only if so decreed by the court. The
obvious inference from this provision is that to the vendee belongs the use, free of
any liability, of the subject matter of the sale. And this benefit is not by any means
gratuitous. It is offset by the use without interest of the money of the vendee by
the vendor.
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3. Costs of the suit. — The vendee is also entitled to recover the expense of litigation
(see Rules of Court, Rule 142, Sec. 1.) resulting in eviction, including the costs of the
action brought against the vendor to enforce his warranty. “Costs of the suit”
mentioned in No. (3) does not include travelling expenses incurred by the vendee in
defending himself in the action
4. Expenses of the contract. — In the absence of any stipulation to the contrary, the
expenses in the execution and registration of the sale are borne by the vendor.
However, if the vendee should have paid for such expenses, he shall have the right
to demand the same from the vendor.
5. Damages and interests. — The right of the vendee to demand “damages and
interests and ornamental expenses” is qualified by the condition that the sale was
made in bad faith. If good faith is presumed, the vendee is not entitled to recover
damages unless bad faith on the part of the vendor is shown in making the sale. The
word “interests” does not cover interest on the purchase price as in lieu thereof the
vendee is entitled to the fruits of the thing, and in cases he has been ordered by a
court to deliver the fruits to the successful party, the vendor must indemnify him.
Where a warranty against eviction was expressly agreed upon in a contract of sale and
the vendee sold the same land to another expressly assigning to him the right to
warranty, the second purchaser has a right of action against the first vendor to make
good the warranty against eviction.
1556 Should the vendee lose, by reason of the eviction, a part of the thing
sold of such importance, in relation to the whole, that he would not
have bought it without said part, he may demand the rescission of
the contract; but with the obligation to return the thing without
other encumbrances that those which it had when he acquired it.
He may exercise this right of action, instead of enforcing the
vendor's liability for eviction.
The same rule shall be observed when two or more things have
been jointly sold for a lump sum, or for a separate price for each of
them, if it should clearly appear that the vendee would not have
purchased one without the other
Partial eviction - the vendee has the option either to enforce the vendor’s liability for
eviction (Art. 1555.) or to demand rescission of the contract.
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Applicable if:
1. When the vendee is deprived of a part of the thing sold if such part is of such
importance to the whole that he would not have bought the thing without said part
(par. 1.); or
2. When two or more things are jointly sold whether for a lump sum or for a separate
price for each, and the vendee would not have purchased one without the other.
(par. 2.)
In case the vendee is totally evicted from the thing sold, he cannot avail of the remedy
of rescission, because this remedy contemplates that the one demanding it is able to
return whatever he has received under the contract. (Art. 1385.) This is not so when the
vendee loses only a part of the thing sold because there still remains a portion of the
thing.
1557 The warranty cannot be enforced until a final judgment has been
rendered, whereby the
vendee loses the thing acquired or a part thereof.
two of the essential elements for the enforcement of warranty in case of eviction,
namely:
1. deprivation of the whole or of a part of the thing sold; and
2. existence of a final judgment.
1558 The vendor shall not be obliged to make good the proper warranty,
unless he is summoned in the suit for eviction at the instance of the
vendee
Another essential requisite before a vendor may be legally liable for eviction is that, he
should be summoned in the suit for eviction at the instance of the vendee
1559 The defendant vendee shall ask, within the time fixed in the Rules of
1561
Court for answering the complaint, that the vendor be made a co-
defendant
2) Warranty against hidden defects of, or encumbrances upon the thing sold; vendor’s
responsibility in case of breach
1560 If the immovable sold should be encumbered with any non-
apparent burden or servitude, not mentioned in the agreement, of
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such a nature that it must be presumed that the vendee would not
have acquired it had he been aware thereof, he may ask for the
rescission of the contract, unless he should prefer the appropriate
indemnity. Neither right can be exercised if the non-apparent
burden or servitude is recorded in the Registry of Property, unless
there is an express warranty that the thing is free from all burdens
and encumbrances.
Within one year, to be computed from the execution of the deed,
the vendee may bring the action for rescission, or sue for damages.
One year having elapsed, he may only bring an action for damages
within an equal period, to be counted from the date on which he
discovered the burden or servitude
Right of vendee. — Although the vendee is not deprived of the thing sold, totally or
partially, the vendee may still rescind the contract or ask for indemnity, if the thing sold
should be encumbered with any non-apparent burden or servitude, not mentioned in
the agreement of such a nature that the vendee would not have acquired it had he
been aware thereof.
When right cannot be exercised:
1. If the burden or servitude is apparent, that is, “made known and is continually kept
in view by external signs that reveal the use and enjoyment of the same’’
2. If the non-apparent burden or servitude is registered; and
3. If the vendee had knowledge of the encumbrance, whether it is registered or not
When action must be brought. — The action for rescission or damages must be brought
within one year from the execution of the deed of sale. If the period has already
elapsed, the vendee may only bring an action for damages within one year from the
date of the discovery of the non-apparent burden or servitude.
The vendor shall be responsible for warranty against the hidden
defects which the thing sold may have, should they render it unfit
for the use for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a
lower price for it; but said vendor shall not be answerable for patent
defects or those which may be visible, or for those which are not
visible if the vendee is an expert who, by reason of his trade or
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profession, should have known them
Redhibition is the avoidance of a sale on account of some vice or defect in the thing
sold, which renders its use impossible, or so inconvenient and imperfect that it must be
supposed that the buyer would not have purchased it had he known of the vice
Redhibitory action is an action instituted to avoid a sale on account of some vice or
defect in the thing sold which renders its use impossible, or so inconvenient and
imperfect that it must be supposed that the buyer would not have purchased it had he
known of the vice.
Redhibitory vice or defect is a defect in the article sold against which defect the seller is
bound to warrant.
Requisites for warranty against hidden defects
1. The defect must be important or serious;
2. It must be hidden;
3. It must exist at the time of the sale;
4. The vendee must give notice of the defect to the vendor within a reasonable time
(Art. 1586.);
5. The action for rescission or reduction of the price must be brought within the
proper period — 6 months from the delivery of the thing sold (Art. 1571.) or within
40 days from the date of the delivery in case of animals (Art. 1577, par. 1.); and
6. There must be no waiver of warranty on the part of the vendee.
When defect is important
1. it renders the thing sold unfit for the use for which it is intended; or
2. if it diminishes its fitness for such use to such an extent that the vendee would not
have acquired it had he been aware thereof or would have given a lower price for
it
when defect is hidden - if it was not known and could not have been known to the
vendee.
1566 The vendor is responsible to the vendee for any hidden faults or
defects in the thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated,
and the vendor was not aware of the hidden faults or defects in the
thing sold
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Effect of ignorance of vendor. — The ignorance of the vendor does not relieve him
from liability to the vendee for any hidden faults or defects in the thing sold. In other
words, good faith cannot be availed of as a defense by the vendor.
Exception. — The parties, however, may provide otherwise in their contract provided
the vendor acted in good faith, that is, he was unaware of the existence of the hidden
fault or defect
Where vendee aware of the defect. — If the vendee is awareof the defect in the thing
he buys or lack of title in the vendor, he cannot later complain thereof. He is deemed
to have wilfully and voluntarily assumed the risk attendant to the sale.
Doctrine of caveat emptor - let the buyer beware
Yap Kim Chuan v. Tiaoqui
FACTS: Plaintiff Yap Kim Chuan leased the building owned by defendant Alfonso Tiaoqui. On
April 14, 1913, because of the leaks in the roof of the storeroom of said building, some of
the plaintiff’s merchandise stored in the said storeroom became wet and damaged as to
cause him a loss amounting to P 1, 169. Subsequent to this occurrence, a list of the
damaged goods was made out where the defendant allegedly authorized the plaintiff to sell
the damaged goods at any price and promised to pay the difference between the selling
price and the regular price of the articles in good condition. Plaintiff accordingly disposed of
all the damaged goods and, notwithstanding the repeated demands made upon him to pay
the amount of loss, the defendant refused to pay. Judgment is prayed against the
defendant sentencing him to pay to the plaintiff the sum of P1, 169. The defendant filed his
answer and denied, among others, that he promised to make good to the plaintiff any loss
sustained, because the defendant⠀™s intervention was not a tacit acceptance of any
liability but was merely to determine the cause and the manner in which the water got into
the building. The court rendered judgment sentencing the defendant to pay the plaintiff the
sum of P 1,019 with legal interest.
ISSUE: Whether the owner of the tenement is responsible for the deterioration of the cloth
and other goods as a result of the torrential and extraordinary rain which fell upon the city.
HELD: The Court held in the negative. Article 1553 of the Civil Code (1653, NCC) declares
that the provisions relating to warranty contained in the title of purchase and sale are
applicable to leases. In connection with a lease, warranty is the obligation to repair or
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correct the error under which the lessee took over the property leased, but when the law
declares that the lessor must warrant the thing leased, it is not to be understood that he
must also indemnify the lessee. Liability for the warranty is not equivalent to liability in
damages, as the latter is an obligation distinct from the former. Hence, while the lessor is
obligated to warranty the thing leased, he is only liable for an indemnity for damages in
addition to the warranty when he knew of the defects in the thing leased and had not
revealed them to the lessee, a procedure which induces the presumption that he acted with
fraud and in bad faith. However, the plaintiffs have set up a direct claim for indemnity for
losses and damages from the lessor and yet continued to occupy the property without
having sought rescission of the contract; therefore, they were not entitled to claim for
losses and damages because they in fact waived the indemnity. In addition, according to
established jurisprudence, indemnity for losses and damages cannot be claimed when they
are caused by a fortuitous event. As held by the Court, the occurrence was undoubtedly
due to force majeure (Article 1174) and that being a fortuitous event which could not have
been foreseen by the owner or the plaintiff-tenants, the owner cannot be liable for the
indemnity. Also, it has not been duly proven in the case that the defendant Tiaoqui agreed
to pay the amount of the losses and damages sustained by the plaintiffs, for the
declarations of the latter do not constitute sufficient proof to offset the positive denial of
the former. Therefore, judgment appealed from is REVERSED and the defendant Tiaoqui is
ABSOLVED from the payment of indemnity for losses and damages to the plaintiffs.
3) Quality or fitness of goods
1562 In a sale of goods, there is an implied warranty or condition as to
the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to
the seller the particular purpose for which the goods are acquired,
and it appears that the buyer relies on the seller's skill or judgment
(whether he be the grower or manufacturer or not), there is an
implied warranty that the goods shall be reasonably fit for such
purpose;
(2) Where the goods are brought by description from a seller who
deals in goods of that description (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods
shall be of merchantable quality.
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Quality of goods includes their state or condition
a) Merchantability v. Fitness
A warranty of merchantability is a warranty that goods are reasonably fit for the
general purpose for which they are sold. On the other hand, a warranty of fitness is a
warranty that the goods are suitable for the special purpose of the buyer which will not
be satisfied by mere fitness for general purposes.
Moles v. IAC
FACTS: Moles needed a Linotype printing machine for his printing business and applied for
an industrial loan with DBO for the purchase Petitioner went to Iloilo to inspect 2 machines
offered for sale by Mariano Diolosa ( owner of publishing house) was informed that the
same were secondhand but functional. Private respondent issued a certification wherein he
warranted that the machines sold was in A1 condition together with other express
warranties Gil Legaspina, an express witness declared that he found substantial defects
Sometime between April and May, 1977, the machine was delivered to petitioner's
publishing house August 29, 1977, private respondent issued a certification wherein he
warranted that the machine sold was in A-1 condition, together with other express
warranties On November 29, 1977, petitioner wrote private respondent that the machine
was not functioning properly as it needed a new distributor bar. On February 18, 1978, not
having received from private respondent the action requested in his preceding letter as
herein before stated
ISSUE: Whether or not there is an implied warranty on secondhand articles
HELD: It is generally held that in the sale of a designated and specific article sold as
secondhand, there is no implied warranty as to its quality or fitness for the purpose
intended, at least where it is subject to inspection at the time of the sale. A redhibitory
defect must be an imperfection or defect of such nature as to engender a certain degree of
importance. An imperfection or defect of little consequence does not come within the
category of being redhibitory. The factual finding, therefore, of the trial court that the
machine is not reasonably fit for the particular purpose for which it was intended must be
upheld, there being ample evidence to sustain the same. Article 1571 of the Civil Code
provides for a prescriptive period of six months for a redhibitory action a cursory reading of
the ten preceding articles to which it refers will reveal that said rule may be applied only in
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case of implied warranties. The present case involves one with and express warranty.
Consequently, the general rule on rescission of contract, which is four years
b) Rule in case of patent or trade
1563 In the case of contract of sale of a specified article under its patent
or other trade name, there is no warranty as to its fitness for any
particular purpose, unless there is a stipulation to the contrary
the buyer makes known to the seller the particular purpose for which the goods are
desired
c) effect of usage of trade
1564 An implied warranty or condition as to the quality or fitness for a
particular purpose may be annexed by the usage of trade.
d) Rule in case of good sold by sample
1565 In the case of a contract of sale by sample if the seller is a dealer in
goods of that kind, there is an implied warranty that the goods shall
be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the
sample.
Where sample not merchantable. — As a general rule, all the buyer is entitled to, in
case of a sale or contract to sell by sample, is that the goods be like the sample, so he
has no right to have the goods merchantable if the sample which he has inspected is
not
Where sample subject to latent defect. — Where the defect in the goods is of such a
character that inspection will not reveal it, so in the case of a sale by sample, if the
sample is subject to a latent defect, and the buyer reasonably relies on the seller’s skill
or judgment, the buyer is entitled not simply to goods like the sample, but to goods like
those which the sample seems to represent, that is, merchantable goods of that kind
and character
4) Alternative remedies of buyer to enforce the warranties; prescriptive period
Alternative remedies of buyer to enforce warranty (see 1561 and 1562)
Prescriptive period
1567 In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the
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vendee may elect between withdrawing from the contract and
demanding a proportionate reduction of the price, with damages in
either case
1571 Actions arising from the provisions of the preceding ten articles shall
be barred after six months, from the delivery of the thing sold.
5) Loss of thing sold due to hidden defects
1568 If the thing sold should be lost in consequence of the hidden faults,
and the vendor was aware of them, he shall bear the loss, and shall
be obliged to return the price and refund the expenses of the
contract, with damages. If he was not aware of them, he shall only
return the price and interest thereon, and reimburse the expenses
of the contract which the vendee might have paid.
1569 If the thing sold had any hidden fault at the time of the sale, and
should thereafter be lost by a fortuitous event or through the fault
of the vendee, the latter may demand of the vendor the price which
he paid, less the value which the thing had when it was lost.
Effect of loss of thing sold on hidden defect
1. Vendor aware of hidden defects. — he shall bear the loss because he acted in bad
faith. In such case, the vendee has the right to recover:
(a) the price paid;
(b) the expenses of the contract; and
(c) damages.
2. Vendor not aware of hidden defects. —he shall be obliged only to return:
(a) the price paid
(b) interest thereon; and
(c) expenses of the contract if paid by the vendee. He is not made liable for
damages because he is not guilty of bad faith.
If the thing sold had no hidden defects, its loss through a fortuitous event or through
the fault of the vendee is, of course, to be borne by the vendee. However, the vendor is
obliged to return the price paid less the value of the thing at the time of its loss in case
where hidden defects existed. In other words, under Article 1569, the vendor is still
made liable on his warranty.
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The difference between the price paid for the thing and the value at the time of the
loss, represents the damage suffered by the vendee and is at the same time the amount
with which the vendor enriched himself at the expense of the vendee.
If the vendor acted in bad faith, he shall also be liable for damages.
6) Applicability of warranty on judicial sales
1570 The preceding articles of this Subsection shall be applicable to
judicial sales, except that the judgment debtor shall not be liable for
damages.
Warranty in judicial sales:
1. As to judgment debtor. — In a judicial sale, it is not really the sheriff who sells but
the judgment debtor. Hence, the provisions regarding warranty are also applicable
to judicial sales
2. As to government. — In judicial sales, the principle of caveat emptor applies,
according to which the purchaser acquires by his purchase no higher or better title
or right than that of the judgment debtor. If the latter has no right, interest, or lien
in and to the property sold, the purchaser acquires none
Right of purchaser in judicial sales
1. The purchaser of property on sale under execution and levy takes as assignee only.
2. Where a judicial sale is voided or set aside without fault of the purchaser, the latter
is entitled to reimbursement of the purchase money paid by him subject to set-off
for benefits enjoyed while he had possession of the property.
7) Prescriptive period
1571 Actions arising from the provisions of the preceding ten articles shall
be barred after six months, from the delivery of the thing sold
The action for rescission of the contract or reduction of the purchase price (Art. 1567.)
prescribes six months from the date of delivery of the thing sold. Outside this period
the action is barred.
With respect to an express warranty, in accordance with the general rule on rescission
of contract, the prescriptive period which is four (4) years, shall apply
8) Rule on sale of animals
1572 If two or more animals are sold together, whether for a lump sum or
for a separate price for each of them, the redhibitory defect of one
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shall only give rise to its redhibition, and not that of the others;
unless it should appear that the vendee would not have purchased
the sound animal or animals without the defective one.
The latter case shall be presumed when a team, yoke pair, or set is
bought, even if a separate price has been fixed for each one of the
animals composing the same.
When two or more animals have been sold at the same time and the redhibitory defect
(Art. 1576.) is in one, or some of them but not in all, the general rule is that the
redhibition will not affect the others without it. It is immaterial whether the price has
been fixed for a lump sum for all the animals or for a separate price for each.
The exception is when it can be shown by the vendee that he would not have
purchased the sound ones without those which are defective.
1573 The provisions of the preceding article with respect to the sale of
animals shall in like manner be applicable to the sale of other things
one or more of them but not all have hidden defects.
1574 There is no warranty against hidden defects of animals sold at fairs
or at public auctions, or of livestock sold as condemned
based on the assumption that the defects must have been clearly known to the buyer
Such animals are bought not because of their quality or capacity for work.
1575 The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service
for which they are acquired has been stated in the contract, and
they are found to be unfit therefor
The article declares the class of animals which cannot be the object of commerce —
animals suffering from contagious diseases and those found unfit for the use or service
stated. The sale of such animals is void as against public interest and not merely subject
to rescission or reduction of the price
1576 If the hidden defect of animals, even in case a professional
inspection has been made, should
be of such a nature that expert knowledge is not sufficient to
discover it, the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith, should fail to
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discover or disclose it, he shall be liable for damages
To be considered redhibitory, the defect must not only be hidden. It must be of such a
nature that expert knowledge is not sufficient to discover it. However, if the
veterinarian failed to discover it through his ignorance, or failed to disclose it to the
vendee through bad faith, he shall be liable for damages. The responsibility is his and
not the vendor’s.
1577 The redhibitory action, based on the faults or defects of animals,
must be brought within forty days from the date of their delivery to
the vendee.
This action can only be exercised with respect to faults and defects
which are determined by law or by
local customs.
The redhibitory action based on the faults of animals shall be barred unless brought
within forty days from the date of their delivery to the vendee.
Redhibitory defects in the sale of animals are only those determined by law or by local
customs
1578 If the animal should die within three days after its purchase, the
vendor shall be liable if the disease which caused the death existed
at time of the contract
If the death occurs after three days or the defect is patent or visible, he is not liable. If
the loss is caused by a fortuitous event or by the fault of the vendee, and the animal
has vices, Article 1569 should be applied
1579 If the sale be rescinded, the animal shall be returned in the
condition in which it was sold and delivered, the vendee being
answerable for any injury due to his negligence, and not arising from
redhibitory fault or defect.
1580 In the sale of animals with redhibitory defects, the vendee shall also
enjoy the right mentioned in article 1567; but he must make use
thereof
within the same period which he has been fixed for the exercise of
the redhibitory action.
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The vendee has the same right to bring at his option, either a redhibitory action or an
action quanti minoris. The action must be brought within forty days from the date of
the delivery of the animals to the vendee
1581 The form of sale of large cattle shall be governed by special laws
The special law governing the sale of large cattle is Act No. 4117, now found in Sections
511 to 536 of the Revised Administrative Code, as amended, providing for the
registration, branding, conveyance, and slaughter of large cattle. The sale must appear
in a public document
I. DOCUMENTS OF TITLE
A. CONCEPT AND FUNCTIONS
Document of title to goods. — Includes any bill of lading, dock warrant, “quedan,” or
warehouse receipt or order for the delivery of goods, or any other document used in
the ordinary course of business in the sale or transfer of goods, as proof of the
possession or control of the goods, or authorizing or purporting to authorize the
possessor of the document to transfer or receive, either by indorsement or by delivery,
goods represented by such document.
Goods. — Included all chattels personal but not things in action or money of legal
tender in the Philippines. The term includes growing fruits or crops.
Order. — Relating to documents of title means an order by indorsement on the
documents
FUNCTIONS
1. Receipts of, or orders upon, a bailee of goods represented. — Documents of title
refer to goods and not to money. They all have this in common: that they are
receipts of a bailee, or orders upon a bailee. A different name is given in popular
speech to the document when it is issued by a carrier and when it is issued by a
warehouseman, but in substance the nature of the document is the same in both
cases
2. Evidence of transfer of title and possession of the goods and contract between the
parties. — A document of title is symbol of the goods covered by it, serving as
evidence of (a) transfer of title and (b) transfer of possession. It also serves as an
evidence of the (c) contract between the parties who are bound by its terms. So far
as concerns the transfer of property between the parties, their intention would be
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effectual without the document, but where third parties’ rights are involved, the
form of the document (i.e., negotiable or non-negotiable) becomes important
B. COMMON FORMS OF DOCUMENTS OF TITLE
1. Bill of lading. — It is a contract and a receipt for the transport of goods and their
delivery to the person named therein, to order, or to bearer. It usually involves three
persons — the carrier, the shipper, and the consignee. The shipper and the consignee
may be one and the same person. Its acceptance generally constitutes the contract of
carriage even though not signed. Such instrument may be called a shipping receipt, a
forwarder’s receipt, or receipt for transportation. The designation, however, is
immaterial
2. Dock warrant. — It is an instrument given by dock owners to an importer of goods
warehoused on the dock as a recognition of the importer’s title to the said goods, upon
production of the bill of lading.
3. Warehouse receipt. — a contract or receipt for goods deposited with a warehouseman
containing the latter’s undertaking to hold and deliver the said goods to a specified
person, to order, or to bearer
4. Quedan is a warehouse receipt usually for sugar received by a warehouseman.
C. CLASSES OF DOCUMENTS OF TITLE
1. Negotiable documents of title
Negotiable documents of title or those by the terms of which the bailee undertakes to
deliver the goods to the bearer and those by the terms of which the bailee undertakes
to deliver the goods to the order of a specified person
1508 A negotiable document of title may be negotiated by delivery:
(1) Where by the terms of the document the carrier, warehouseman
or other bailee issuing the same undertakes to deliver the goods to
the bearer; or
(2) Where by the terms of the document the carrier, warehouseman
or other bailee issuing the same undertakes to deliver the goods to
the order of a specified person, and such person or a subsequent
endorsee of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are
deliverable to bearer or where a negotiable document of title has
been indorsed in blank or to bearer, any holder may indorse the
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same to himself or to any specified person, and in such case the
document shall thereafter be negotiated only by the endorsement
of such endorsee.
A negotiable document of title is negotiable by delivery if the goods are deliverable to
the bearer, or when it is indorsed in blank or to the bearer by the person to whose
order the goods are deliverable or by a subsequent indorsee.
An indorsement is in blank when the holder merely signs his name at the back of the
receipt without specifying to whom the goods are to be delivered.
If the document is specially indorsed, it becomes an order document of title and
negotiation can only be effected by the indorsement of the indorsee.
A special indorsement specifies the person to whom or to whose order the goods are to
be delivered.
1509 A negotiable document of title may be negotiated by the
endorsement of the person to whose order the goods are by the
terms of the document deliverable. Such endorsement may be in
blank, to bearer or to a specified person. If indorsed to a specified
person, it may be again negotiated by the endorsement of such
person in blank, to bearer or to another specified person.
Subsequent negotiations may be made in like manner.
If indorsed in blank or to bearer, the document becomes negotiable by delivery.
If indorsed to a specified person, it may be again negotiated by the indorsement of such
person in blank, to bearer, or to another specified person. Delivery alone is not
sufficient.
A party is liable only as guarantor and not as indorser if his indorsement is made for the
purpose of identification only.
1510 If a document of title which contains an undertaking by a carrier,
warehouseman or other bailee to deliver the goods to bearer, to a
specified person or order of a specified person or which contains
words of like import, has placed upon it the words "not negotiable,"
"non-negotiable" or the like, such document may nevertheless be
negotiated by the holder and is a negotiable document of title
within the meaning of this Title. But nothing in this Title contained
shall be construed as limiting or defining the effect upon the
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obligations of the carrier, warehouseman, or other bailee issuing a
document of title or placing thereon the words "not negotiable,"
"non-negotiable," or the like.
the words “not negotiable,” “non-negotiable” and the like when placed upon a
document of title in which the goods are to be delivered to “order” or to “bearer” have
no effect and the document continues to be negotiable.
Under the Warehouse Receipts Law, any provision inserted in a negotiable receipt that
it is non-negotiable is declared void
When the document of title is to order, the bailee is obliged to take it up before
delivering the goods. Accordingly, he is liable to the holder of an order document if the
goods are delivered to the consignee without surrender of the document even though
the latter was marked “not negotiable.”
1511 A document of title which is not in such form that it can be
negotiated by delivery may be transferred
by the holder by delivery to a purchaser or donee. A non-negotiable
document cannot be negotiated and the indorsement of such a
document gives the transferee no additional righ
A non-negotiable document of title cannot be negotiated. Nevertheless, it can be
transferred or assigned by delivery. In such a case, the transferee or assignee acquires
only the rights stated in Article 1514. Even if the document is indorsed, the transferee
acquires no additional right.
a. How negotiation is made (see 1508)
b. Who may negotiate
1512 A negotiable document of title may be negotiated:
(1) By the owner therefor; or
(2) By any person to whom the possession or custody of the
document has been entrusted by the owner, if, by the terms of the
document the bailee issuing the document undertakes to deliver the
goods to the order of the person to whom the possession or custody
of the document has been entrusted, or if at the time of such
entrusting the document is in such form that it may be negotiated
by delivery.
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if the owner of the goods permits another to have the possession or custody of
negotiable receipts running to the order of the latter or to bearer, it is a representation
of title upon which bona fide purchasers for virtue are entitled to rely despite breaches
of trust or violations of agreement on the part of the apparent owner.
As between two innocent persons, the loss must fall upon him whose misplaced
confidence made the loss possible.
c. Rights of a person whom document has been negotiated
1513 A person to whom a negotiable document of title has been duly
negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document
to him had or had ability to convey to a purchaser in good faith for
value and also such title to the goods as the person to whose order
the goods were to be delivered by the terms of the document had
or had ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold
possession of the goods for him according to the terms of the
document as fully as if such bailee had contracted directly with him
Rights:
1. The title of the person negotiating the document, over the goods covered by the
document;
2. The title of the person (depositor or owner) to whose order by the terms of the
document the goods were to be delivered, over such goods; and
3. The direct obligation of the bailee (warehouseman or carrier) to hold possession of
the goods for him, as if the bailee had contracted directly with him.
1519 If goods are delivered to a bailee by the owner or by a person whose
act in conveying the title to them to a purchaser in good faith for
value would bind the owner and a negotiable document of title is
issued for them they cannot thereafter, while in possession of such
bailee, be attached by garnishment or otherwise or be levied under
an execution unless the document be first surrendered to the bailee
or its negotiation enjoined. The bailee shall in no case be compelled
to deliver up the actual possession of the goods until the document
is surrendered to him or impounded by the court.
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While in the possession of such bailee, the goods cannot be attached or levied under an
execution unless the document be first surrendered, or its negotiation prohibited by
the court.
The bailee cannot be compelled to deliver up the possession of the goods until the
document is surrendered to him or impounded by the court
The provisions of Article 1519 do not apply if the person depositing is not the owner of
the goods (like a thief) or one who has no right to convey title to the goods binding
upon the owner. Neither does it apply to actions for recovery or manual delivery of
goods by the real owner nor to cases where the attachment is made before the
issuance of the negotiable document of title.
d. Transfer of order document without indorsement
1515 Where a negotiable document of title is transferred for value by
delivery, and the endorsement of the transferor is essential for
negotiation, the transferee acquires a right against the transferor to
compel him to endorse the document unless a contrary intention
appears. The negotiation shall take effect as of the time when the
endorsement is actually made.
rights of a person to whom an order document of title, which may not properly be
negotiated by mere delivery, has been delivered, without indorsement
a. The right to the goods as against the transferor (Art. 1514.); and
b. The right to compel the transferor to indorse the indorsement. (see Art. 1357.)
If the intention of the parties is that the document should be merely transferred, the
transferee has no right to require the transferor to indorse the document.
2. Indorser not a guarantor
1517 The endorsement of a document of title shall not make the
endorser liable for any failure on the part of the bailee who issued
the document or previous endorsers thereof to fulfill their
respective obligations.
purchaser for value in good faith without notice - the negotiation shall take effect as of
the time when the indorsement is actually made, not at the time the document is
delivered. So, if by that time the purchaser already had notice that the title of the seller
was defective, he cannot be considered a purchaser in good faith though he had no
such notice when he bought the document.
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3. Negotiation not impaired by fraud, mistake, etc
1518 The validity of the negotiation of a negotiable document of title is
not impaired by the fact that the negotiation was a breach of duty
on the part of the person making the negotiation, or by the fact that
the owner of the document was deprived of the possession of the
same by loss, theft, fraud, accident, mistake, duress, or conversion,
if the person to whom the document was negotiated or a person to
whom the document was subsequently negotiated paid value
therefor in good faith without notice of the breach of duty, or loss,
theft, fraud, accident, mistake, duress or conversion.
it may be negotiated even by a thief or finder and the holder thereof would acquire a
good title thereto if he paid value therefor in good faith without notice of the seller’s
defect of title.
4. Non-negotiable document of title
1510 If a document of title which contains an undertaking by a carrier,
warehouseman or other bailee to deliver the goods to bearer, to a
specified person or order of a specified person or which contains
words of like import, has placed upon it the words "not negotiable,"
"non-negotiable" or the like, such document may nevertheless be
negotiated by the holder and is a negotiable document of title
within the meaning of this Title. But nothing in this Title contained
shall be construed as limiting or defining the effect upon the
obligations of the carrier, warehouseman, or other bailee issuing a
document of title or placing thereon the words "not negotiable,"
"non-negotiable," or the like.
Under Article 1510, the words “not negotiable,” “non-negotiable” and the like when
placed upon a document of title in which the goods are to be delivered to “order” or to
“bearer” have no effect and the document continues to be negotiable.
Rights of a person to whom document has been transferred
1514 A person to whom a document of title has been transferred, but not
negotiated, acquires thereby, as against the transferor, the title to
the goods, subject to the terms of any agreement with the
transferor.
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If the document is non-negotiable, such person also acquires the
right to notify the bailee who issued the document of the transfer
thereof, and thereby to acquire the direct obligation of such bailee
to hold possession of the goods for him according to the terms of
the document.
Prior to the notification to such bailee by the transferor or
transferee of a non-negotiable document of title, the title of the
transferee to the goods and the right to acquire the obligation of
such bailee may be defeated by the levy of an attachment of
execution upon the goods by a creditor of the transferor, or by a
notification to such bailee by the transferor or a subsequent
purchaser from the transfer of a subsequent sale of the goods by
the transferor.
Rights of person to whom document has been transferred
a. The title to the goods as against the transferor;
b. The right to notify the bailee of the transfer thereof; and
c. The right, thereafter, to acquire the obligation of the bailee to hold the goods for
him
5. Warranties of a person negotiating or transferring document
1516 A person who for value negotiates or transfers a document of title
by endorsement or delivery, including one who assigns for value a
claim secured by a document of title unless a contrary intention
appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the validity
or worth of the document; and
(4) That he has a right to transfer the title to the goods and that the
goods are merchantable or fit for a particular purpose, whenever
such warranties would have been implied if the contract of the
parties had been to transfer without a document of title the goods
represented thereby.
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the person negotiating or transferring a document could be held liable as when, for
example, the document was a forgery, or he had stolen it, or he had knowledge that the
document was invalid for want of consideration, or that the goods had been damaged.
II. RIGHTS AND OBLIGATION OF THE VENDEE
a. Principal obligation of the vendee
1582 The vendee is bound to accept delivery and to pay the price of the
thing sold at the time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment
must be made at the time and place of the delivery of the thing sold
The principal obligations of the vendee are:
1. to accept delivery; of the thing sold; and
2. to pay the price1 of the thing sold at the time and place stipulated in the contract;
and
3. to bear the expenses for the execution and registration of the sale and putting the
goods in a deliverable state, if such is the stipulation.
1. No obligation to accept the delivery by installment
1583 Unless otherwise agreed, the buyer of goods is not bound to accept
delivery thereof by installments.
Where there is a contract of sale of goods to be delivered by stated
installments, which are to be separately paid for, and the seller
makes defective deliveries in respect of one or more instalments, or
the buyer neglects or refuses without just cause to take delivery of
or pay for one more instalments, it depends in each case on the
terms of the contract and the circumstances of the case, whether
the breach of contract is so material as to justify the injured party in
refusing to proceed further and suing for damages for breach of the
entire contract, or whether the breach is severable, giving rise to a
claim for compensation but not to a right to treat the whole
contract as broken.
General rule. — In an ordinary contract for the sale of goods, the buyer is not bound to
receive delivery of the goods in installments. He is entitled to delivery of all the goods
at the same time and, it may be added, is bound to receive delivery of all at the same
time
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Where separate price has been fixed for each installment. — Where the contract
provides for the delivery of goods by installments and a separate price has been agreed
upon for each installment, it depends in each case on the terms of the contract and the
circumstances of the case whether the breach thereof is severable or not
a. Where breach affects whole contract. — If the seller makes defective, partial or
incomplete deliveries or the buyer wrongfully neglects or refuses to accept delivery
or fails to pay any installment, the injured party may sue for damages for breach of
the entire contract if the breach is so material (e.g., breach of one installment
prevents the further performance of the contract) as to affect the contract as a
whole.
b. Where breach severable. — Where the breach is severable, it will merely give rise
to a claim for compensation for the particular breach but not a right to treat the
whole contract as broken.
2. Modes of manifesting acceptance
1585 The buyer is deemed to have accepted the goods when he intimates
to the seller that he has accepted them, or when the goods have
been delivered to him, and he does any act in relation to them
which is inconsistent with the ownership of the seller, or when, after
the lapse of a reasonable time, he retains the goods without
intimating to the seller that he has rejected them.
Express acceptance takes place when the buyer, after delivery of the goods, intimates
to the seller, verbally or in writing, that he has accepted them.
Implied acceptance takes place:
a. when the buyer, after delivery of goods, does any act inconsistent with the seller’s
ownership, as when he sells or attempts to sell the goods, or he use or makes
alteration in them in a manner proper only for an owner; or
b. when the buyer, after the lapse of a reasonable time, retains the goods without
intimating his rejection. Thus, the failure of the buyer to interpose any objection to
the invoices issued to it, to evidence delivery of the materials ordered as per
agreement with the seller and which contained the conditions in question, should
be deemed as an implied acceptance by the buyer of the said conditions
3. effect of wrongful refusal to accept
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1588 If there is no stipulation as specified in the first paragraph of article
1523, when the buyer's refusal to accept the goods is without just
cause, the title thereto passes to him from the moment they are
placed at his disposal
As a general rule, the delivery of the goods to a carrier is deemed to be a delivery of the
goods to the buyer.
This is true even if the buyer refuses to accept the goods in case his refusal is without
just cause. The title passes to the buyer and, therefore, the risk of loss is borne by him
(Art. 1504.) from the moment they are placed at his disposal.
4. Liability for interest
1589 The vendee shall owe interest for the period between the delivery
of the thing and the payment of the price, in the following three
cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial
demand for the payment of the price.
Interest expressly stipulated. — In such case, the rate stipulated governs. The
stipulation of the parties to pay interest may be oral. If the parties failed to fix the rate,
then the legal rate of interest shall be due
Fruits or income received by vendee from thing sold. — Under No. 2, two conditions
must exist: (a) that the thing sold has been delivered, and (b) that it produces fruits or
income. If the vendee would not be bound to pay interest for the use of the money,
which he should have paid, the principle of bilaterality which characterizes a contract of
sale would no longer exist.
Vendee guilty of default. — If the vendee incurs delay in the payment of the agreed
price (see Art. 1169.), the interest is due from the time of judicial or extrajudicial
demand by the vendor for the payment of the price.
5. Payment of the purchase price
1524 The vendor shall not be bound to deliver the thing sold, if the
vendee has not paid him the price, or if no period for the payment
has been fixed in the contract
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As a general rule, the obligation to deliver the thing subject matter of a contract arises
from the moment of its perfection and from that time the obligation may be enforced.
(see Art. 1315.) But the contract of purchase and sale is bilateral and from it arises not
only the obligation to deliver the thing but also that of paying the price. The obligations
are reciprocal.
exception: the rule is that the thing shall not be delivered unless the price be paid; and
the exception is that the thing must be delivered though the price be not first paid, if
time for such payment has been fixed in the contract.
Bricktown Devt Corp v. Amor Tierra Devt Corp
FACTS: Bricktown Development Corporation, represented by its President and co-petitioner
Mariano Z. Velarde, executed two Contracts to Sell in favor of Amor Tierra Development
Corporation, represented in these acts by its Vice-President, Moises G. Petilla, covering a
total of 96 residential lots at the Multinational Village Subdivision, La Huerta, Parañaque,
Metro Manila. The total price of P21,639,875.00 was stipulated to be paid by private
respondent in such amounts and maturity dates, as follows: P2,200,000.00 on 31 March
1981; P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31 December 1981; and the
balance of P11,500,000.00 to be paid by means of an assumption by private respondent of
petitioner corporation's mortgage liability to the Philippine Savings Bank or, alternately, to
be made payable in cash. On date, March 31, 1981, the parties executed a Supplemental
Agreement, providing that private respondent would additionally pay to petitioner
corporation the amounts of P55,364.68, or 21% interest on the balance of down payment
for the period from 31 March to 30 June 1981, and of P390,369.37 representing interest
paid by petitioner corporation to the Philippine Savings Bank in updating the bank loan for
the period from 01 February to 31 March 1981. Private respondent was only able to pay
petitioner corporation the sum of P1,334,443.21. However, the parties continued to
negotiate for a possible modification of their agreement, but nothing conclusive happened.
And on October 12, 1981, petitioner’s counsel sent private respondent a “Notice of
Cancellation of Contract” because of the latter’s failure to pay the agreed amount. Several
months later, private respondent’s counsel, demanded the refund of private respondent's
various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with
interest within fifteen days from receipt of said letter, or, in lieu of a cash payment, to
assign to private respondent an equivalent number of unencumbered lots at the same price
SALESC678 | LDCS
fixed in the contracts. When the demand was not heeded, Amor Tierra filed an action with
the court a quo which rendered a decion in its favor. The decision of the lower court was
affirmed in toto by the Court of Appeals. Hence, this petition.
ISSUE: Whether or not the contract was properly rescinded. Whether or not Bricktown
properly forfeited the payments of Amor Tierra.
RULING: The contract between Bricktown and Amor Tierra was validly rescinded because of
the failure of the latter to pay the agreed amounts stipulated in the contract on the proper
date even after the sixty-days grace period. Furthermore, the records showed that private
respondent corporation paid less than the amount agreed upon. The Supreme Court also
added that such cancellation must be respected. It may also be noteworthy to add that in a
contract to sell, the non-payment of the purchase price can prevent the obligation to
convey title from acquiring any obligatory force. On the second issue, the Supreme Court
ruled that since the private respondent did not actually possessed the property under the
contract, the petitioner is then ordered to return to private respondent the amount
remitted. However, to adjudge any interest payment by petitioners on the amount to be
thus refunded, private respondent should not be allowed to totally free itself from its own
breach.
6. Rights of the vendee
1. Toexamine the goods before delivery
1584 Where goods are delivered to the buyer, which he has not
previously examined, he is not deemed to have accepted them
unless and until he has had a reasonable opportunity of examining
them for the purpose of ascertaining whether they are in conformity
with the contract if there is no stipulation to the contrary.
Unless otherwise agreed, when the seller tenders delivery of goods
to the buyer, he is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose of
ascertaining whether they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance
with an order from or agreement with the buyer, upon the terms
that the goods shall not be delivered by the carrier to the buyer
until he has paid the price, whether such terms are indicated by
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marking the goods with the words "collect on delivery," or
otherwise, the buyer is not entitled to examine the goods before the
payment of the price, in the absence of agreement or usage of trade
permitting such examination.
Actual delivery contemplated. — the ownership of the goods shall be transferred only
upon actual delivery subject to a reasonable opportunity of examining them to
determine if they are in conformity with the contract
Goods delivered C.O.D./not C.O.D. - delivery of the goods to a carrier for the purpose
of transmission to the buyer is deemed to be delivery to the buyer
a. Although title passes to the buyer by the mere delivery to the carrier, the buyer
unless the goods are sent C.O.D. which is the normal procedure in importations, has
the right to examine the goods before paying. In this case, the right to examine the
goods is a condition precedent to paying the price after ownership has passed.
b. It should be noted that even in a C.O.D. sale, the buyer is allowed to examine the
goods before payment of the price should it have been so agreed upon or if it is
permitted by usage.
Right of examination not absolute. —the seller is bound to afford the buyer a
reasonable opportunity of examining the goods only “on request.” (par. 2.) If the seller
refused to allow opportunity for the inspection, the buyer may rescind the contract and
recover the price or any part of it that he has paid.
Right to be exercised within reasonable time. — such opportunity to examine should be
availed of within a reasonable time in order that the seller may not suffer undue delay
or prejudice.
Waiver of right to examine before payment. — The right of inspection may, of course,
be given up by the buyer by stipulation. need not be in express terms.
2. Acceptance not a bar for damages
1586 In the absence of express or implied agreement of the parties,
acceptance of the goods by the buyer shall not discharge the seller
from liability in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if, after acceptance
of the goods, the buyer fails to give notice to the seller of the breach
in any promise of warranty within a reasonable time after the buyer
knows, or ought to know of such breach, the seller shall not be
SALESC678 | LDCS
liable therefor
unless otherwise agreed, acceptance of the goods by the buyer (Art. 1585.) does not
discharge the seller from liability in damages or other legal remedy (like rescission) for
breach of any promise (Art. 1546.) or warranty.
Notice to seller of breach of promise or warranty
a. Necessity. — Article 1586 requires the buyer, in order tohold the seller liable for
breach of promise or warranty, to give notice to the seller of any such breach
within a reasonable time.
b. Purpose. — The purpose is to protect the seller against belated claims which
prevent him from making prompt investigation to determine the cause and extent
of his liability and also to enable him to take any other immediate steps that his
interest may require.
3. No obligation to return goods wrongfully delivered
1587 Unless otherwise agreed, where goods are delivered to the buyer,
and he refuses to accept
them, having the right so to do, he is not bound to return them to
the seller, but it is sufficient if he notifies the seller that he refuses
to accept them. If he voluntarily constitutes himself a depositary
thereof, he shall be liable as such.
Duty of buyer to take care of goods without obligation to return. — If the goods have
been sent to the buyer and he rightfully refuses to accept them, as in the case where
the goods are of not the kind and quality agreed upon, he is in the position of a bailee
who has had goods thrust upon him without his assent
Duty of seller to take delivery of goods. — After notice that the goods have not been
and will not be accepted, the seller must have the burden of taking delivery of said
goods.
Seller’s risk of loss of goods. — While the goods remain in the buyer’s possession under
these circumstances, they are, of course, at the seller’s risk. But the buyer is not
deemed and is not liable as a depositary, unless he voluntarily constitutes himself as
such.
Right of buyer to resell goods. — Should the seller, when notified to take delivery of the
goods fails to do so, the buyer may resell the goods.
4. Right to suspension of payment of price
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1590 Should the vendee be disturbed in the possession or ownership of
the thing acquired, or should he have reasonable grounds to fear
such disturbance, by a vindicatory action or a foreclosure of
mortgage, he may suspend the payment of the price until the
vendor has caused the disturbance or danger to cease, unless the
latter gives security for the
return of the price in a proper case, or it has been stipulated that,
notwithstanding any such contingency, the vendee shall be bound
to make the payment.
A mere act of trespass shall not authorize the suspension of the
payment of the price.
When vendee has right. — The vendee, under this article, may suspend the payment of
the price in two cases only:
a. if he is disturbed in the possession or ownership of the thing bought; or
b. if he has a well-grounded fear that his possession or ownership would be disturbed
by a vindicatory action or foreclosure of mortgage
When vendee has no right. — In the following cases, the vendee cannot suspend the
payment of the price even if there is disturbance in his possession or ownership of the
thing sold:
a. if the vendor gives security for the return of the price in a proper case;
b. if it has been stipulated that notwithstanding any such contingency, the vendee
must make payment (see Art. 1548, par. 3.);
c. if the vendor has caused the disturbance or danger to
d. if the disturbance is a mere act of trespass; and
e. if the vendee has fully paid the price
the vendee has no cause of action for rescission before final judgment the reason being
that otherwise, the vendor might become the victim of machinations between the
vendee and the third person.
5. When recission of sale or real property may be made
1591 Should the vendor have reasonable grounds to fear the loss of
immovable property sold and its price, he may immediately sue for
the rescission of the sale.
Should such ground not exist, the provisions of article 1191 shall be
observed
SALESC678 | LDCS
This article refers only to a sale of immovable or real property where the vendor has
good reasons to fear the loss of the property and its price. It contemplates a situation
where there has been a delivery of the immovable property but the vendee has not yet
paid the price.
applicable to both cash sales and to sales in installments as it does not distinguish
between one and the other.
1592 In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon
the rescission of the contract shall of right take place, the vendee
may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him
either judicially or by a notarial act. After the demand, the court
may not grant him a new term.
As a general rule, the vendor may sue for rescission of the contract should the vendee
fail to pay the agreed price. (Art. 1191.) The sale of real property, however, is subject to
the stipulations agreed upon by the parties and to the provisions of Article 1592 which
speaks of non-payment of the purchase price as a resolutory condition.
Before a demand for rescission of the contract (for non-payment of the price) has been
made by the vendor, either judicially or by a notarial act, the vendee may still pay the
price even after the expiration of the stipulated period for payment and
notwithstanding a stipulation that failure to pay the price on the stipulated date ipso
facto resolves the sale.
In a contract of sale, the remedy of the unpaid seller is either specific performance or
rescission with the right to claim damages in either case.
Court may grant vendee a new term. — The right to rescind is not absolute and the
court may extend the period for payment.
Vendor may waive his right. — The right of “automatic rescission” (subject to Article
1592 when applicable) stipulated in a contract of sale is subject to waiver
Written notice of cancellation must be given. — While judicia laction for the rescission
of contract is not necessary where the contract provides that it may be cancelled for
violation of its terms and conditions, there must be at least a written notice sent to the
defaulter informing him of the rescission
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 SALESC678 | LDCS

Breach must be substantial. — The general rule is that rescission of a contract will not
be permitted for a slight or causal breach but only for such substantial and fundamental
breach as would defeat the very object of the parties
When 1592 is not applicable
a. Sale on installment of real estate
b. Contract to sell/conditional sale of real estate.
6. Recission in case of sale of movable thing

1593 With respect to movable property, the rescission of the sale shall of
right take place in the interest of the vendor, if the vendee, upon
the expiration of the period fixed for the delivery of the thing,
should not have appeared to receive it, or, having appeared, he
should not have tendered the price at the same time, unless a
longer period has been stipulated for its payment.
In the case of personal property (which has not yet been delivered to the vendee), the
vendor can rescind the contract, as a matter of right, if the vendee, without any valid
cause, does not (1) accept delivery or (2) pay the price unless a credit period for its
payment has been stipulated.
The reason for the difference is that personal properties are not capable of maintaining
a stable price in the market. Their prices are so changeable that any delay in their
disposal might cause the vendor a great prejudice
This is not true in the case of real property which has more or less stable price in the
market and the delay that might result from the requirement imposed on the vendor to
demand rescission before being entitled to rescind the contract will not in any way
prove detrimental to the interest of the vendor

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