ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS (1594)

Art. 1595.

Where, under a contract of sale, the ownership of the goods has passed to the
buyer, and he wrongfully neglects or refuses to pay for the goods according to
the terms of the contract of sale, the seller may maintain an action against him
for the price of the goods. Where, under a contract of sale, the price is payable
on a certain day, irrespective of delivery or of transfer of title, and the buyer
wrongfully neglects or refuses to pay such price, the seller may maintain an
action for the price, although the ownership in the goods has not passed. But it
shall be a defense to such an action that the seller at any time before the
judgment in such action has manifested an inability to perform the contract of
sale on his part or an intention not to perform it. Although the ownership in the
goods has not passed, if they cannot readily be resold for a reasonable price,
and if the provisions of Article 1596, fourth paragraph, are not applicable, the
seller may offer to deliver the goods to the buyer, and, if the buyer refuses to
receive them, may notify the buyer that the goods are thereafter held by the
seller as bailee for the buyer. Thereafter, the seller may treat the goods as the
buyer’s and may maintain an action for the price.

Art. 1596.

Where the buyer wrongfully neglects or refuses to accept and pay for the goods,
the seller may maintain an action against him for damages for non-acceptance.
The measure of damages is the estimated loss directly and naturally resulting in
the ordinary course of events from the buyer’s breach of contract.

Where there is an available market for the goods in question, the measure of
damages is, in the absence of special circumstances showing proximate
damage of a different amount, the difference between the contract price and
the market or current price at the time or times when the goods ought to have
been accepted, or, if no time was fi xed for acceptance, then at the time of the
refusal to accept. If, while labor or expense of material amount is necessary on
the part of the seller to enable him to fulfi ll his obligations under the contract of
sale, the buyer repudiates the contract or notifi es the seller to proceed no
further therewith, the buyer shall be liable to the seller for labor performed or
expenses made before receiving notice of the buyer’s repudiation or
countermand. The profi t the seller would have made if the contract or the sale
had been fully performed shall be considered in awarding the damages.

(1) Remedy of Seller if Buyer Refuses to Accept and Pay

Example : S sold B a piano. If B wrongfully refuses to accept and pay for

the goods, S may bring an action against him for damages for non-
acceptance.

(2) Measure of Damages The estimated loss directly and naturally resulting in
the ordinary course of events from the buyer’s breach of contract.

(3) Query What action or actions are available to the seller of the goods in
case the buyer wrongfully refuses to accept the goods sold?

ANS.: (a) Maintain an action for damages because of the non-

acceptance. (Art. 1596).

(b) Hold the goods as bailee for the buyer and bring an action for the
price. (See Art. 1595, 3rd paragraph).

(c) Ask for the resolution of the contract for failure of the buyer to fulfill his
obligations.

Art. 1597.

Where the goods have not been delivered to the buyer, and the buyer has
repudiated the contract of sale, or has manifested his inability to perform his
obligations thereunder, or has committed a breach thereof, the seller may
totally rescind the contract of sale by giving notice of his election so to do to the
buyer.

When Seller May Totally Rescind the Contract of Sale

(a) This Article which deals with the instances when the seller may totally rescind
the contract of sale, applies only if the goods have not yet been delivered.

(b) The automatic rescission here requires notice thereof to the buyer.
 Art. 1598.

Where the seller has broken a contract to deliver specifi c or ascertained goods,
a court may, on the application of the buyer, direct that the contract shall be
performed specifi cally, without giving the seller the option of retaining the
goods on payment of damages. The judgment or decree may be unconditional,
or upon such terms and conditions as to damages, payment of the price and
otherwise, as the court may deem just.

Rule When Seller Has Broken a Contract to Deliver Specific or Ascertained

Goods

(a) Observe that here the seller is guilty; hence, there is no right of retention
on his part even if said seller is willing to pay damages.
(b) Note that there must be an order from the court for the specific
performance.
(c) Note further that the court may make the order on the application of the
buyer.

Art. 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. When the buyer has
claimed and been granted a remedy in anyone of these ways, no other remedy
can thereafter be granted, without prejudice to the provisions of the second
paragraph of Article 1191. Where the goods have been delivered to the buyer,
he cannot rescind the sale if he knew of the breach of warranty when he
accepted the goods without protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he fails to return or to offer to
return the goods to the seller in substantially as good condition as they were in
at the time the ownership was transferred to the buyer. But if deterioration or
injury of the goods is due to the breach of warranty, such deterioration or injury
 shall not prevent the buyer from returning or offering to return the goods of the
seller and rescinding the sale. Where the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the price upon returning or
offering to return the goods. If the price or any part thereof has already been
paid, the seller shall be liable to repay so much thereof as has been paid,
concurrently with the return of the goods, or immediately after an offer to return
the goods in exchange for repayment of the price. Where the buyer is entitled to
rescind the sale and elects to do so, if the seller refuses to accept an offer of the
buyer to return the goods, the buyer shall thereafter be deemed to hold the
goods as bailee for the seller, but subject to a lien to secure payment of any
portion of the price which has been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid seller by Article 1526. (5) In the
case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the
difference between the value of the goods at the time of delivery to the buyer
and the value they would have had if they had answered to the warranty.

(1) Remedies of the Buyer if Seller Commits a Breach of Warranty

The first paragraph of the Article enumerates the FOUR REMEDIES of the
buyer.

(2) Effect if Buyer Selects Any of the Four Remedies Given

If the buyer has selected any of the remedies, and has been GRANTED
the same, no other remedy can be given. However, the second
paragraph of Art. 1191 will still apply.

Article 1191 provides: “The power to rescind obligations is implied in

reciprocal ones in case one of the obligors should not comply with what is
incumbent upon him. “The injured party may choose between the
fulfilment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has
chosen fulfilment, if the latter should become impossible. “The court shall
decree the rescission claimed, unless there be just cause authorizing the
fixing of a period. “This is understood to be without prejudice to the rights
 of third persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.”

(3) Effect if Buyer Still Accepted the Goods Despite His Knowledge of the
Breach of the Warranty

The 3rd paragraph of the Article gives the effect — generally, NO

RESCISSION.

Mr. Wee Sion Ben, President of Best Emporium, and Best Emporium, Pagadian
City vs. SEMEXCO /ZEST-O Marketing Corporation, et.al. GR 153898, October 18,
2007, 536 SCRA 615

FACTS:
 In payment for the fruit juices, Wee Sion Ben issued Metro Bank Check
dated August 15, 1995 in the sum of P104,277.80 payable to cash.

 Maloney Sorolla, Semexco’s sales representative, received and encashed

the check but did not remit the money

 Upon learning of the delivery of the check to Sorolla, Nelson Azarcon, district
sales manager, inquired from Wee Sion Ben why he issued a “pay to cash”
check when the Charge Invoice states that all payments must be made
payable to the order of the corporation.

 Thereupon, Wee Sion Ben issued Metro Bank Check dated September 1,
1995 to replace the “pay to cash” check.

 However, when presented for payment, Wee Sion Ben directed it to “stop
payment” or not to pay the new check.

 Wee Sion Ben filed with the Regional Trial Court, Branch 35, Ozamis City a
complaint for sum of money

 RTC: favored Wee Sion Ben - obligation had been extinguished when they
delivered the “pay to cash” check to Sorolla

 CA: affirmed with modification

ISSUE: W/N Wee Sion Ben's issuance of the check payable to cash delivered and
received by Sorolla constitutes a valid payment

HELD: NO. CA AFFIRM

 Charge Invoice issued by respondent to petitioners clearly states that they
shall “make all checks payable to SEMEXCO Marketing Corporation only.”

 issuance of the “pay to cash” check is a clear violation on their part of the
term or condition stipulated in the Charge Invoice

 Sorolla himself who requested them to issue the check payable to cash, they
should have been warned of potential risk

Article 1595(1) of the Civil Code provides:

Where, under a contract of sale, the ownership of the goods has passed to the
buyer and he wrongfully neglects or refuses to pay for the goods according to
the terms of the contract of sale, the seller may maintain an action against him
for the price of the goods.