CHAPTER 6 - ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS

ARTICLE 1594. Actions for breach of contract of sale of goods shall be governed particularly by the provision of this
Chapter, and as to matters not specifically provided for herein, by other applicable provisions of
this Title.

GOODS, meaning
“Goods” includes all chattels personal but not things in action or money of legal tender in the Philippines.
The term includes growing fruits or crops.

Note:
This chapter is not applicable to sale of immovable property.

ARTICLE 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 judgement 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 them 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.

The seller may maintain an action against the buyer for the price of the goods.

ARTICLE 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 nonacceptance.

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.

When there is an available market for the goods in question, the measure of damage 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 fixed 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 fulfill his obligation under the contract of sale, the buyer repudiates the contract or notifies 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 profit
of the seller would have made if the contract or the sale have been fully performed shall be
considered in awarding the damages.

The seller may maintain an action against the buyer for damages.
DAMAGES, meaning
Money claimed by, or ordered to be paid to, a person as compensation for loss or injury.

MEASURE OF DAMAGES
It is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s
breach of contract.

MEASURE OF DAMAGES WHEN THERE IS AN AVAILABLE MARKET FOR THE GOODS

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 fixed for acceptance, then at the time of the refusal
to accept.

MEASURE OF DAMAGES FOR REPUDIATION OR COUNTERMAND

The measure of damages would include:
A. The labor performed or expenses incurred for materials before receiving notice of the buyer’s repudiation
or countermand; and
B. The profit he would have realized if the sale had been fully performed.

WHAT IS COUNTERMAND?
A contradictory command that overrides or annuls a previous one.
An action that has the effect of avoiding something previously ordered.
A revocation.

ARTICLE 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 obligation 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.

THE SELLER MAY TOTALLY RESCIND THE CONTRACT OF SALE

1. The buyer has repudiated the contract of sale;
2. The buyer has manifested his inability to perform his obligations thereunder; or
3. The buyer has committed a breach of the contract of sale.

Note:
The above-stated article applies when there has been no delivery of the goods yet.
Note:
The rescission here requires giving notice to the buyer.

ARTICLE 1598. Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the
application of the buyer, direct that the contract shall be performed specifically, without giving the
seller the option of retaining the goods on payment of damages. The judgement 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.

WHAT IS SPECIFIC PERFORMANCE?

The rendering, as nearly as practicable, of a promised performance through a judgement or decree;
specifically, a court-ordered remedy that requires precise fulfillment of a legal or contractual obligation
when monetary damages are inappropriate or inadequacy, as when the sale of real estate or a rare article is
involved.

Note:
The seller committed a breach of contract by not delivering the specific goods to the buyer.

Note:
The buyer applies with the court for specific performance to compel the seller to deliver the specific goods.
Note:
There must be an order from the court for the specific performance to compel the seller to deliver the
specific goods.

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 in 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 of 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 or warranty, such deterioration or
injury shall not prevent the buyer from returning or offering to return the goods to 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
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.

REMEDIES OF THE BUYER IN CASE OF BREACH OF WARRANTY BY THE SELLER

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; and
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.
ALTERNATIVE REMEDIES
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 which read;

Article 1191.xxx
The injured party may choose between the fulfillment and rescission of the obligation, with the payment
of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
Xxx

NO RESCISSION
Where the good have been delivered to the buyer, he cannot rescind the sale if:
1. The buyer knew of the breach of warranty when he accepted the goods without protest; or
2. The buyer fails to notify the seller within a reasonable time of the election to rescind; or
3. The buyer 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 or warranty, such deterioration or injury shall not prevent the buyer from
returning or offering to return the goods to the seller and rescinding the sale.

EFFECT OF RESCISSION ON BUYER’S RIGHT AND OBLIGATION

1. The buyer 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.
2. 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 which has been paid, and with the
remedies for the enforcement of such lien allowed to an unpaid seller.

MEASURE OF DAMAGES
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.