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Property rules

Warranties attached to a contract of sale

(First of two parts)

Under a contract of sale involving real property, the seller is obliged to deliver it and transfer its ownership, upon the buyer’s payment of the price agreed upon.

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The seller is deemed to have delivered the property when he transfers to the buyer the control and possession thereof, and executes a public instrument evidencing the sale.

Besides these obligations, the seller shall warrant the property being sold. In this regard, the Supreme Court referred to the seller’s warranties as statements or representations—contemporaneously and as part of the contract of sale, that refers to the character, quality or title of the goods or property to be sold.

FEATURED STORIES

Warranties are issued to promise or undertake to insure that certain facts are or shall be as the seller represents them.

Warranties are not the same as conditions imposed in a contract of sale. To be sure, warranties go into the performance of the seller’s obligation, while conditions go into the existence of the sale transaction itself.

Warranties may be agreed upon by the contracting parties—that is, express warranties, or by provision of law—that is, implied warranties, while conditions must be imposed by said parties.

An express warranty in a contract of sale involving real property exists when: (a) it affirms a fact or relates to any promise by the seller relating to the property; (b) the affirmation or promise naturally induced the buyer to purchase the property; and (c) the buyer purchases the property, relying on that affirmation or promise.

A seller’s opinion does not constitute an express warranty, unless he expressed his opinion as an expert and it was relied upon by the buyer.

Moreover, an express warranty may either be written into the contract or orally agreed upon by the parties.

Meanwhile, the Supreme Court held that an implied warranty is one which the law derives by application or inference from the nature of the transaction or the relative situation or circumstances of the parties.

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Thus, unless a contrary intention appears, the following implied warranties attach to a contract of sale: (a) the seller has a right to sell the property at the time when the ownership is to pass, while the buyer shall from that time have and enjoy the legal and peaceful possession of the property; (b) the property shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer; and (c) warranty against eviction, where the buyer would be deprived of the whole or part of the property purchased upon a final judgment based on a right prior to the sale or an act imputable to the seller.

The parties may increase, diminish or suppress the seller’s warranty against eviction. Any stipulation exempting the seller from the obligation to answer for eviction, however, shall be void, if he acted in bad faith.

The seller shall be liable for eviction arising from the prior sale of property for nonpayment of taxes due, which the buyer was not made known of at the time of the current sale.

Likewise, the seller’s liability arises from eviction in judicial sales, unless it is otherwise decreed in the judgment.

Meanwhile, the seller shall not be liable for eviction when adverse possession of the property had been commenced before the sale but the prescriptive period is completed after the transfer of ownership to the buyer.

If the buyer renounced the right to warranty in case of eviction, and eviction should take place, the seller shall only pay the value which the property had at the time of the eviction. But, the seller shall not be liable for eviction if the buyer waived said right with knowledge of the risks of eviction, and assumed the consequences thereof.

Whether the parties expressly agreed upon the warranty against eviction, in case eviction occurs, the buyer may demand the seller the: (a) return of the value of the property sold at the time of the eviction, be it greater or less than the price of the sale; (b) income or fruits, if the buyer was directed to deliver them to the party who won the suit against him; (c) costs of the suit which caused the eviction and in a proper case, those of the suit brought against the seller for the warranty; (d) expenses of the contract, if the buyer paid them; and (e) damages and interests and ornamental expenses, if the sale was made in bad faith.

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TAGS: contract of sale, Property Rules
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