Unit 3 – Contract of Sale (Art.

1458 -1637, Civil Code)

LESSON 4 - WARRANTIES IN SALE IN RELATION TO CONSUMER ACT

SALE BY INSTALLMENTS
PRESIDENTIAL DECREE NO. 957

A. TOPIC LISTS:
1. Warranties of the Vendor in relation to the consumer act.
2. Sale by Installments of Personal or movable property and real or
immovable property.
3. Presidential Decree No. 957 or the Revised Rules and Regulations
Implementing the Subdivision and Condominium Buyer’s Protective Decree.

B. TOPIC LEARNING OUTCOMES:

At the end of the unit, the students should be able to:
1. State the warranties of the vendor in a contract of sale.
2. Relate his warranties under the consumer act.
3. Understand the rules on sale by installments of movable and immovable
properties.
4. To know some salient features of Presidential Decree No. 957.
5. Apply the above concepts to real life problems.

C. TEACHING – LEARNING ACTIVITIES:

a. Preparatory:

a.1. Recall the obligations of vendor:

1. To take care of the thing, pending delivery, with proper

diligence. (Art. 1163)
2. To transfer ownership of the determinate thing sold. (Art. 1495)
3. To deliver the determinate thing.
4. To deliver the fruits.
5. To deliver the Accessions and Accessories of the Principal Object.
6. To warrant against eviction and against hidden defects. (Arts. 1495,
1547)
7. To pay for the expenses of the deed of sale, unless there is a
stipulation to the contrary. (Art. 1487)
8. To be liable for damages in case of breach. (Art. 1170)
 b. Acquiring New knowledge

b.1. To warrant the thing sold (Art. 1547)

b.1.1. KINDS OF WARRANTIES

1. Express Warranty - 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 there on. (Art. 1546)

2. Implied warranty - Warranties that are deemed included in all contracts of

sale by operation of law like the seller has the right to sell the thing and the thing
is free from hidden defects. (Art. 1547).

b.1.1.1. IMPLIED WARRANTIES UNDER CONTRACT OF SALE

EXAMPLES OF IMPLIED WARRANTIES:

1. Warranty that seller has right to sell. (Art. 1547)

Thus, the general rule is the seller must be the owner of the thing sold. You
can not sell what you do not own.
Except if authorized such as an agent or as long as the seller will
eventually become the owner thereof and thus can deliver the thing at the time
of delivery.

2. Warranty against eviction.

Requisites:

a. Vendee is Evicted in whole or in part from the subject matter of sale by

final Judgment.
b. Eviction was based on a right Prior to sale or an act imputable to
Vendor. (Art. 1548)
c. Vendor has been Summoned in the suit for eviction at the instance of
Vendee. (Art. 1558)

Any stipulation exempting the vendor from the obligation to answer for
eviction shall be void, if he acted in bad faith. (Art. 1553)
3. Warranty against encumbrances

If the immovable sold should be encumbered with any non-apparent

burden or servitude, not mentioned in the agreement, of 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. (Art. 1560)

4. Warranty against Hidden Defects

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. (Art. 1561)

The vendee may elect between:

1. withdrawing from the contract with damages; and

2. demanding a proportionate reduction of the price with damages in
either case. (Art. 1567)

But the said action for rescission or reduction of the price is must be
brought within the proper period

i. Six months from delivery of the thing sold (Art. 1571)

ii. Within Forty days from the delivery in case of defects of animals.
(Art. 1577)

Implied Warranty is not applicable:

1. The parties agreed that the sale is “as is and where is” basis.
2. Sale of second hand articles except if the seller has given an express written
warranty.
The DTI is advising consumers to ask for express warranty on second-hand or
used products, if they are to bind sellers to make good on such warranty.
The DTI stressed that as a general rule, there is no implied warranty in the sale of
second-hand articles. (https://www.philstar.com/business/2001/04/08/95752/dti-
issues-warning-used-products)

3. The sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell

by virtue of authority in fact or law. (Art. 1547)

b.1.1.2. EXPRESS WARRANTIES – Consumer Act of the Philippines (RA 7394)

Applicable Laws on Warranties

1. The provisions of the Civil Code on conditions and warranties shall govern
all contracts of sale with conditions and warranties. (Art. 67, RA 7394)

2. In addition to the Civil Code provisions on sale with warranties, the

following provisions shall govern the sale of consumer products with
warranty:

a) Terms of express warranty. — Any seller or manufacturer who gives an

express warranty shall:

1) set forth the terms of warranty in clear and readily understandable

language and clearly identify himself as the warrantor;
2) identify the party to whom the warranty is extended;
3) state the products or parts covered;
4) state what the warrantor will do in the event of a defect, malfunction
of failure to conform to the written warranty and at whose expense;
5) state what the consumer must do to avail of the rights which accrue
to the warranty; and
6) stipulate the period within which, after notice of defect, malfunction
or failure to conform to the warranty, the warrantor will perform any
obligation under the warranty.

b) Express warranty — operative from moment of sale. — All written

warranties or guarantees issued by a manufacturer, producer, or importer
shall be operative from the moment of sale. (Art. 68 RA 7394)
Duration of warranty

The seller and the consumer may stipulate the period within which the express
warranty shall be enforceable. If the implied warranty on merchantability
accompanies an express warranty, both will be of equal duration.

Any other implied warranty shall endure not less than sixty (60) days nor more
than one (1) year following the sale of new consumer products. (Art. 68 RA 7394)

Breach of warranties

1) In case of breach of express warranty, the consumer may elect

a. to have the goods repaired or

b. its purchase price refunded by the warrantor.

In case the repair of the product in whole or in part is elected, the warranty work
must be made to conform to the express warranty within thirty (30) days by
either the warrantor or his representative. The thirty-day period, however, may
be extended by conditions which are beyond the control of the warrantor or his
representative.

In case the refund of the purchase price is elected, the amount directly
attributable to the use of the consumer prior to the discovery of the non-
conformity shall be deducted.

2) In case of breach of implied warranty, the consumer may

a. retain the goods and recover damages, or

b. reject the goods, cancel and contract and recover from the seller so
much of the purchase price as has been paid, including damages. (Art. 68 RA
7394)
 b.2. SALE BY INSTALLMENTS

b.2.1. PERSONAL OR MOVABLE PROPERTIES

Remedies of vendor in installment sales of personal or movable property:

a. Exact fulfillment of the obligation, should the vendee, should the

vendee failed to pay at least one installment.

b. Cancel the sale, If the vendee failed to pay two or more

installments.

c. Foreclose the chattel mortgage on the thing sold, if one has been
constituted. Vendee will not be liable for any deficiency (Recto Law)(Art. 1484)

Note: If the vendee failed to pay two or more installments, he can avail of any
ONE of the three options.

The remedies under Art. 1484 of the civil code xxx are alternative and exclusive,
not cumulative. (Servicewide Specialists vs. IAC, GR 74553, 8 June 1989)

A good illustration of the Recto Law are transactions involving buying cars,
appliances or gadget by installment where the said object of the sale by
installment is the subject of Mortgage. When the Seller by installment opt to
foreclose the object he can no longer recover any deficiency.
But in foreclosure of a Chattel Mortgage, the Mortgagee can recover any
deficiency, thus, Recto Law is not applicable because it does not involve a sale
by installment.

b.2.2. REAL OR IMMOVABLE PROPERTIES

R.A. No. 6552 (Maceda Law), or the “Realty Installment Buyer Protection
Act” applies to Sale of Real or Immovable Property by Installments.

The Maceda Law declares as a public policy to protect the buyers of real estate
on installment payments against onerous and oppressive conditions of
developer or seller. (Sec. 2)

Properties covered include residential condominiums, apartments, houses,

townhouses, and house and lots, among others, but excluding industrial lots,
commercial buildings, and sales of properties to existing tenants. (Section 3)
This law deals with the right of the buyer paying by installments in case of default
in paying his installments.

The Maceda Law does not apply to housing loan through bank financing.

salient features:

1. After the Buyer having paid for at least two years (at least 24 months)

a. Buyer is entitled to mandatory grace period of one month for every

year of installment payments made to pay the unpaid installments without
interest.

b. If the contract is cancelled, the seller must refund to the buyer cash
surrender value equivalent to fifty (50%) percent of the total payments made
and after five years of installments, an additional five (5%) percent every year
but not to exceed 90% of the total payments made. (Sec. 3)

2. In case the installments paid by the Buyer is less than 2 years (less than 24
months)

a. the Seller shall give the buyer a Grace period of not less than 60 days
from the date the installments became due.

b. if the buyer fails to pay within 60 days grace period, then the Seller may
Cancel the contract after 30 days from receipt of the notice of the cancellation
or demand for rescission by notarial act but the buyer can still pay within the 30
days period. (Sec. 4)

Additional rights:

1. The buyer shall have the right during the grace period before the
cancellation of the contract:

a. To sell his rights to another by notarial act;

b. To assign his rights to another by notarial act; or
c. To reinstate the contract by updating the account. (Sec. 5)

2. To pay in advance any installment or the full unpaid installments any time
without interest. (Sec. 6)
3. To ask for the annotation of the full payment of the purchase price in the
certificate of title covering the property. (Sec 6)
 b.3. PRESIDENTIAL DECREE NO. 957

The provisions of Presidential Decree No. 957 or the Revised Rules and
Regulations Implementing the Subdivision and Condominium Buyer’s Protective
Decree is applicable in cases where the developers are at fault and committed
some delays or damages in the subdivision and condominium project.

SECTION 23. Non-Forfeiture of Payments. - No installment payment made by a

buyer in a subdivision or condominium project for the lot or unit he contracted
to buy shall be forfeited in favor of the owner or developer when the buyer,
after due notice to the owner or developer, desists from further payment due to
the failure of the owner or developer to develop the subdivision or
condominium project according to the approved plans and within the time limit
for complying with the same. Such buyer may, at his option, be reimbursed the
total amount paid including amortization interests but excluding delinquency
interests, with interest thereon at the legal rate.

SECTION 24. Failure to pay installments. - The rights of the buyer in the event of
this failure to pay the installments due for reasons other than the failure of the
owner or developer to develop the project shall be governed by Republic Act
No. 6552 (Maceda Law).

c. Class Discussion

Online Conference through BBB.

D. ACTIVITIES/ENHANCEMENT ACTIVITIES:

D.1. Assignment

State and explain the different modes of extinguishment of sale.

D.2. Extinguishment of sale:

https://www.youtube.com/watch?v=E17yK2Plu60

E. APPLICATION

Written Quiz
F. SOURCES/REFERENCES:

Civil Code of the Philippines

R.A. No. 6552 (Maceda Law)
PD No.957
Consumer Act of the Philippines (RA 7394)
Supreme Court Decisions

GOOD DAY AND STAY SAFE

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