UNIVERSITY OF SAN JOSE RECOLETOS

SCHOOL OF LAW
Cebu City

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Recovery of Damages for Breach of Contract

POSITION PAPER

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7013
LAW ON SALES

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Submitted by:

GROUP 4

Herrero, Mary Grace T.

Jonson, Christine T.
Rizon, Louray Maria L.
Pepito, Arvie
Salang, Donald

Submitted to:

Atty. Ron Staphane Maylon

Submitted on:
December 9, 2020
 Republic of the Philippines
Metropolitan Trial Court
7th Judicial Region
Branch 22
Cebu City

JUAN D. TAMAD,
Complainant, Civil Case no. 2020-20-539
For: Recovery of damages for breach of contract
-versus-

SHOPZADA and HAHAHA ONLINE STORE,

Respondents.

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COMPLAINT

The complainant through counsels and unto this Honorable Court, most
respectfully avers that:

PREFATORY STATEMENT

(1) The Complainant in this case is JUAN D. TAMAD, Filipino, of legal age,
with post office address at 89 Camansi St., Mambaling, Cebu City,
Philippines where he could be served with summons and other legal
processes of this Honorable Court.

(2) The Respondents are HaHaHa Online Shop, a business duly registered
before the DTI under Mr. Marvin D. Mangingilad, who is of legal age,
Taiwanese, married to a Filipina and residing at 11th floor., AppleOne-
Equicom Tower, Mindanao Ave., Cebu Business Park, 6000 Cebu City,
where the said establishment and representative could be serve with
summons and other legal processes of this Honorable Court, and

(3) Shopzada, Inc., a corporation duly organized, registered and existing

under and by virtue of the laws of the Republic of the Philippines
represented by Scooter Braun of legal age, Single, Filipino citizen and
 the duly elected President of Shopzada, Inc. having a principal place of
business at 14/F, E-Bloc 2 Bldg, W Geonzon St., 6000 Cebu City where
the said establishment and representative could be served with
summons and other legal processes of this Honorable Court.

STATEMENT OF FACTS

(4) Juan D. Tamad, plaintiff, is a hardworking Filipino security guard currently

assigned at Marina Malls in Lapu-Lapu City.

(5) On 03 November 2020, the security agency of the plaintiff announced the
Annual Dress-Up Christmas Party on 30 November 2020 (Monday)
inviting all employees to attend. All participants were encouraged to wear
their best costume and to showcase their creativity.

(6) To his excitement, Mr. Tamad rushed to purchase the necessary attire.
This coincides with the upcoming Shopzada 11.11 online sale which
offers great discounts to online shoppers. With this, Mr. Tamad took
advantage of the sale and added to cart the items he needed. The order
consists of one yellow Hoodie Jacket with a Cash on Delivery payment
scheme and one Airpods Pro paid via online money transfer, image of
both attached as Annex A and Annex B, respectively.

(7) On 28 November 2020, all of Mr. Tamad’s online orders were delivered.
However, he refused to accept the Hoodie Jacket for the reason that the
size (XXL) does not fit his actual size. With regard to the Airpods Pro, it
was found to be fake when Power Mac store refused to acknowledge the
product for their AppleCare Extended Warranty Service. In the case of
the second item, Mr. Tamad has to accept since the verification of the
product’s authenticity was done later.

ISSUES

a. Whether the defendant ShopZada and HaHaHa Online Store

committed a breach in the contract of sale with Juan D. Tamad?

b. Whether the defendants are liable to Juan D. Tamad? If so, what

are these liabilities/responsibilities? On the other hand, what are
 the responsibilities of Juan D. Tamad before making an online
purchase?

c. What are the respective rights and obligations of the following

parties:
i. Shopzada to Juan D. Tamad
ii. HaHaHa Online Store to Juan D. Tamad
iii. Juan D. Tamad to ShopZada
iv. Juan D. Tamad to HaHaHa Online Store

POSITION

COMPLAINANT, by the undersigned counsels and unto this Honorable

Court, most respectfully submits this position paper and avers the
following to wit:

A. BREACH OF CONTRACT OF SALES

(8) THAT, the law on sales under article 1547 provides that a warranty is
deemed included in all contracts of sale by operation of law. Thus, the
buyer is protected in cases where the object of the contract delivered
is different in quality and in form from that which is stated or promised
upon the perfection of the sale.

(9) THAT, Article 1562 of the same law provides that in a sale of goods,
there is an implied warranty or condition as to the quality or fitness of
the goods:

… (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.

(10) THAT, As provided under the law Merchantability requires an identity

between what is described in the contract and what is tendered, in the
sense that the latter is of such quality to have some value. Thus, in
case of infringement of trademarks such will render the product
unsalable.

(11) THAT Section 50 of the Consumer Act of the Philippines provides for
the prohibition against deceptive sales acts or practices which includes
but not limited to:
 b. A consumer product or service is of a particular standard, quality,
grade, style, or model when in fact it is not.
c. A consumer product is new, original, or unused, when in fact, it is in
a deteriorated, altered, reconditioned, reclaimed, or second-hand
state.

(12) THAT, in this case, with the belief that the Airpods Pro sold is authentic
and original, Mr. Tamad purchased it. It is clear based on the
description of the product that highlighted the word “ORIGINAL” which
caused Mr. Tamad to believe that the product is in fact authentic which
made him decide to purchase the same. Had it been found that it was
a first-class imitation, Mr. Tamad would not have purchased it.

(13) Furthermore, giving the benefit of the doubt that HaHaHa Online is not
aware that he is selling a counterfeit, he may still be held liable under
ART. 1566 of the Law on Sale providing that the vendor is responsible
to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof.

(14) THAT, the ignorance of the vendor does not relieve him from liability
to the vendee for any hidden faults or defects in the thing sold. (see
Bryan vs. Hankins, 44 Phil. 87 [1922].) In other words, good faith
cannot be availed of as a defense by the vendor.

(15) THAT, Shopzada is liable to Mr. Tamad in the sale of the AirPods Pro
on the basis of the concept of contributory infringement.

(16) THAT, this law suggests that a party, who directly contributes to
another’s infringement, should also be held liable. Section 22 of the
amendatory law of the Intellectual Property Code of the Philippines
provides that, to be liable for contributory infringement, one must: (1)
benefit from the infringing activity; (2) have been given notice of the
infringing activity and a grace period to act on the same; and (3) have
the right and ability to control the activities of the person committing
the infringement.

(17) THAT, Shopzada being an online selling platform has the

responsibility to ensure that the online sellers utilizing the platform
abides by the rules and regulations set by the company. Thus, inaction
in the part of Shopzada constitutes an act of omission.
 B. RIGHTS AND REMEDIES OF MR. TAMAD

Against Shopzada

(18) THAT, upon the refusal of Mr. Tamad Under Article 1599 of the New
Civil Code, where there is a breach of warranty by the seller, the buyer
may, at his election:
…(3) Refuse to accept the goods, and maintain an action against
the seller for damages for the breach of warranty;
…(4) Rescind the contract of sale and refuse to receive the
goods or if the goods have already been received, return them or
offer to return them to the seller and recover the price or any part
thereof which has been paid.

Against HaHaHa Online Store

(19) THAT, in the case between the plaintiff and Hahaha Online Store, the
plaintiff can avail any one of the remedies laid down in Article 1599 of
the New Civil Code, to wit:

“Article 1599. Where there is a breach of warranty by the seller, the

buyer may, at his election:

(1) Accept or keep the goods and set up against the seller, the
breach of warranty by way of recoupment in diminution or
extinction of the price;
(2) Accept or keep the goods and maintain an action against the
seller for damages for the breach of warranty;

(3) Refuse to accept the goods, and maintain an action against

the seller for damages for the breach of warranty;

(4) Rescind the contract of sale and refuse to receive the goods
or if the goods have already been received, return them or offer
to return them to the seller and recover the price or any part
thereof which has been paid.

Liabilities of Shopzada to Mr. Juan Tamad

(20) THAT, Shopzada, upon refusal of Mr. Tamad to accept the hoodie
jacket, shall be liable for damages for breach of warranty (Art. 1599,
par. 3, NCC)
(21) THAT, since Mr. Juan Tamad refuses to accept the hoodie jacket,
paragraph 4 of Article 1599 of the same law also provides that Mr.
Tamad can recover the price he paid from Shopzada.

Liabilities of HaHaHa Online Store to Mr. Juan Tamad

(22) HaHaHa Online Store should be held liable for warranty for the
Airpods Pro. HaHaHa Online Store deceived Mr. Tamad from
purchasing the Airpods Pro through its description “100% ORIGINAL
APPLE Airpods”. If it weren’t because of the deceitful description, it
would not have given Mr. Tamad a false belief that the Airpods Pro
were authentic and would not have made Mr. Tamad buy the
product.

(23) Under Article 1561(NCC), 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 profession, should have known them.

(24) In addition, even if HaHaHa Online Store has no knowledge of the

defect, they should still be held liable for warranty. (Art. 1566, NCC)

(25) In this case, since it is very clear that HaHaHa Online Store
committed fraud by misrepresenting the Airpods as “100% Original
Apple Airpods”. Under Article 1170 of the New Civil Code, those who
in the performance of their obligations are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof,
are liable for damages.

(26) Article 1599, paragraph 1 (NCC), HaHaHa Online Store shall be

obligated to compensate Mr. Tamad for the reduction of the
product’s price.

(27) Moreover, because of the breach, Mr. Tamad has been granted by
law the option to accept the Airpods Pro and maintain an action
against the HaHaHa Online Store for damages for the breach of
warranty. (par. 2, Art. 1599 NCC)
 (28) In case Mr. Tamad elects rescission as a remedy, HaHaHa Online
Store shall be liable to return the purchase price. (par. 4, Art. 1599,
NCC)

(29) Under the Article 100 of the Consumer Act of the Philippines
deemed suppliers liable for inconsistent information provided in the
labels or publicity messages or advertisements.

“Suppliers of durable or non-durable consumer products are

jointly liable for imperfections in quality that renders the products
unfit or inadequate for consumption for which they are designed or
decrease their value, and for those resulting from inconsistency with
the information provided on the container, packaging, labels or
publicity messages/advertisement, with due regard to the variations
resulting from their nature, the consumer being able to demand
replacement to the imperfect parts.”

Responsibilities of Mr. Juan Tamad in purchasing online.

(30) THAT, Mr. Juan Tamad, when buying online, should conduct due
diligence in checking online products that he wishes to purchase. Mr.
Tamad should check online reviews and customer feedback to find
out if the seller or the business is reputable.

(31) THAT, Mr. Tamad should know the terms of the sale – check the
terms and conditions of the transaction, warranties, policies on
refunds and replacements, mechanisms for addressing buyer
complaints, and the cost or other additional charges.

(32) THAT, He should avoid payments directly to a seller’s bank account,

regardless of the reasons given. Use the auction website’s preferred
payment methods to ensure access to their disputes resolution
processes. Cash-on-delivery term is a good option.

(33) THAT, To be a responsible online shopper, one should prepare a

record of online purchases (Office of Cybercrime Advisory Opinion
No. 02, Series of 2015).

C. ON RESPECTIVE RIGHTS AND OBLIGATIONS

(34) THAT, it bears to reiterate that under the provisions of the New Civil
Code, as established between a buyer-seller relationship of Mr. Juan
 Tamad to Shopzada and HaHaHa Online Store, have their
respective obligations.

(35) THAT, Mr. Juan Tamad, for his part have honored and obliged, will
continue to faithfully adhere and administer the following:

Article 1599 of the New Civil Code, where there is a breach of warranty
by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the
breach of warranty by way of recoupment in diminution or extinction
of the price;
(2) Accept or keep the goods and maintain an action against the
seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the
seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or
if the goods have already been received, return them or offer to
return them to the seller and recover the price or any part thereof
which has been paid.

Office of Cybercrime Advisory Opinion No. 02, Series of 2015 provides

that:
(1) when buying online, one should conduct due diligence in
checking online products that he wishes to purchase.
(2) check the terms and conditions of the transaction, warranties,
policies on refunds and replacements, mechanisms for
addressing buyer complaints, and the cost or other additional
charges.
(3) avoid payments directly to a seller’s bank account, regardless
of the reasons given. Use the auction website’s preferred payment
methods to ensure access to their disputes resolution processes.
Cash-on-delivery term is a good option.
(4) To be a responsible online shopper, one should prepare a
record of online purchases.

(36) THAT, for Shopzada and HaHaHa Online Store, for their part should
be as follows:

Article 1163 of RA 386, as amended

Every person obliged to give something is also obliged to take care of
it, with the proper diligence of a good father of a family, unless the law
or the stipulation of the parties requires another standard of care.
Article 1170 of RA 386 as amended
Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.

Article 1171 of RA 386 as amended

Responsibility arising from fraud is demandable in all obligations. Any
waiver of an action for future fraud is void.

Article 1226 of RA 386 as amended

In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interest in case of
noncompliance, if there is no stipulation to the contrary. Nevertheless,
damages shall be paid if the obligor refuses to pay the penalty or is
guilty of fraud in the fulfilment of obligation.

Article 1547 of RA 386 as amended

In a contract of sale there is:
(1) An implied warranty on the part of the seller that 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.

Article 1561 of RA 386 as amended

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 profession, should have known
them.

Article 1562 of RA 386 as amended

In a sale of goods, there is an implied warranty or condition as to the
quality or fitness of the goods:
 …(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.

Article 1566 of RA 386 as amended

The vendor is responsible to the vendee for any hidden faults or

defects in the thing sold, even though he was not aware thereof.

Section 50 of the Consumer Act of the Philippines provides for the

prohibition against deceptive sales acts or practices which includes but
not limited to:

...b. A consumer product or service is of a particular standard,

quality, grade, style, or model when in fact it is not.
c. A consumer product is new, original, or unused, when in fact,
it is in a deteriorated, altered, reconditioned, reclaimed, or second-
hand state.

Article 100 of the Consumer Act of the Philippines deemed suppliers

liable for inconsistent information provided in the labels or publicity
messages or advertisements.

“Suppliers of durable or non-durable consumer products are

jointly liable for imperfections in quality that renders the products unfit
or inadequate for consumption for which they are designed or
decrease their value, and for those resulting from inconsistency with
the information provided on the container, packaging, labels or
publicity messages/advertisement, with due regard to the variations
resulting from their nature, the consumer being able to demand
replacement to the imperfect parts.”

Section 22 of the amendatory law of the Intellectual Property Code of

the Philippines provides that, to be liable for contributory infringement,
one must: (1) benefit from the infringing activity; (2) have been given
notice of the infringing activity and a grace period to act on the same;
and (3) have the right and ability to control the activities of the person
committing the infringement.
 PRAYER

WHEREFORE, it is respectfully prayed, after notice and hearing, in deep

respect to this honorable Court, that the defendant be ordered to pay the
plaintiff the amount of damages that is due to him and that the Shopzada
and HaHaHa Online Store be enjoined and sanctioned to provisions of the
New Civil Code as mentioned therein. Other just and equitable reliefs, the
honorable Court may find merit under the circumstances, are also prayed
for.

Respectfully submitted, December 9, 2020, Cebu City, Philippines.

RIZON-PEPITO-SALANG-HERRERO-JONSON LAW OFFICES

Suite 2C Capitol Centrum Bldg., Corner Escario & Clavano Sts.
6000 Cebu City
Philippines
Tel Nos. (032) 254-0466

By
DONALD SALANG
Roll No. 52686
PTR No. 7118396/12-18-14/Cebu
IBP P.R. No. 961606/12-15-14/Cebu
MCLE Compliance No. V - 0004998 December 14, 2014

Copy furnished:

ATTY. NINOTCHKA TRIA

Counsel for Shopzada
Cebu City, Philippines

ATTY. IAN KHARLO TORREFRANCA

Counsel for HaHaHa Online Store
Cebu City, Philippines

Registry receipt no. 1537

Date mailed: December 9, 2020

Explanation: Filing and service was made through registered mail due to
the distance and the lack of messengers to effect personal filing and
delivery due to pandemic.
D SALANG
Annex A

Annex B