Chapter 12: Conditions and Warranties

CONDITIONS

When a condition subject to any obligation is not performed, article 1545 of the
Civil Code grants two alternative remedies. The other party may:

(a) refuse to proceed with the contract; or

(b) he may waive performance of the condition.

In case of failure to comply with the condition, distinction should be made between
(Romero vs CA):

1. Condition imposed on the perfection of the contract: failure of the contract

2. Condition imposed on the performance of an obligation: the injured party
has the option to either refuse to proceed with the sale or to waive the condition
as mandated under Article 1545

In Heirs of Pedro Escanlar vs CA, the Court also clarified the confusion in the concepts
of the validity and enforceability of a contract:

1. Validity – deals with the essential elements of the contract: consent, subject
matter, price (plus terms of payment)
2. Enforceability – deals on when the contract can be enforced as to the obligations
of the parties

Thus, if all elements are present, a valid contract arises and even if parties introduce
various kinds of restrictions or modalities, the lack of which will not affect the validity of
the contract.

CONDITIONS vs WARRANTIES

“Unlike in the non-fulfillment of a warranty which would constitute a breach of

the contract, the non-happening of the condition, although it may extinguish the
obligation upon which it is based, generally does not amount to a breach of the contract
of sale.”

Differences in the legal effects of the non-happening of the condition and non-
fulfillment of the warranty, the following difference also apply:

(a) Condition generally goes into the root of the existence of the obligation, whereas a
warranty goes into the performance of such obligation, and in fact may constitute an
obligation in itself;
(b) Condition must be stipulated by the parties in order to form part of an obligation,
while a warranty may form part of the obligation or contract by provision of law, without
the parties having expressly agreed thereto; and
(c) Condition may attach itself either to the obligations of the seller or of the
buyer; whereas, warranty, whether express or implied, relates to the subject matter
itself or to the obligations of the seller as to the subject matter of the sale.

Power Commercial and Industrial Corp. v. Court of Appeals:

Facts: Sellers allegedly failed to eject the lessees from the lot in question and to
deliver actual and physical possession of the land

Issue: WON such failure can be considered as substantial breach of a condition?

Held: No. First, the alleged “failure” was not stipulated as a condition — whether
resolutory or suspensive — in the contract; and second, its effects and consequences
were not specified either.

If the parties intended to impose on the [sellers] the obligation to eject the tenants from
the lot sold, it should have included in the contract a provision stating the same.

Failure to remove the squatters within the stipulated period gave the other party the
right to either refuse to proceed with the agreement or to waive that condition of
ejectment in consonance with Article 1545 of the Civil Code.

EXPRESS WARRANTIES

Breach of an express warranty makes the seller liable for damages.

Warranty is an affirmation of fact or any promise made by a seller in relation to the

thing sold, and that the decisive test is whether the seller assumes to assert a fact of
which the buyer is ignorant of (Goodyear Philippines, Inc. vs Sy).

Requisites:
(a) It must be an affirmation of fact or any promise by the seller relating to the
subject matter of the sale;
(b) The natural tendency of such affirmation or promise is to induce the buyer to
purchase the thing; and
(c) The buyer purchases the thing relying on such affirmation or promise thereon.

An affirmation of the value of the thing, or any statement purporting to be a statement

of the seller’s opinion only, shall not be construed as a warranty, unless the seller
made such affirmation or statement as an expert and it was relied upon by
the buyer (Art. 1546, NCC).
A mere expression of an opinion does not signify fraud, unless made by an expert and
the other party has relied on the former’s special knowledge (Article 1341, NCC).
“A man who relies upon such an affirmation made by a person whose interest might
so readily prompt him to exaggerate the value of his property does so at his peril, and
must take the consequences of his own imprudence.”