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.
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.
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.
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.
The buyer may demand the rescission of the contract of sale, while being obliged to return the property without other encumbrances than those which it had when he acquired it in the following instances:
(a) when the buyer loses, by reason of eviction, a part of the property sold of such importance, in relation to the whole, that he would not have bought it without said part; and
(b) when two or more properties or things have been sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the buyer would not have purchased one without the other.
The warranty against eviction can only be enforced upon the promulgation of a final judgment, in which the buyer loses the property acquired or a part thereof. Moreover, the seller shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction, at the purchaser’s instance.
Meanwhile, the buyer may demand the rescission of the contract or the appropriate indemnity, if the property sold should be encumbered with any non-apparent burden or servitude, of such nature that it must be presumed that the buyer would not have acquired it had he been aware thereof, but which was not mentioned in the contract.
The buyer may bring the action for rescission or damages within one year, to be computed from the execution of the deed. One year having elapsed, he may only bring an action for damages with an equal period, to be counted from the date on which he discovered the burden or servitude.
Meanwhile, should the buyer be disturbed in the possession or ownership of the property, or should he have reasonable grounds to fear such disturbance, by vindicatory action or foreclosure of mortgage, he may suspend the payment of the price until the seller has caused the disturbance or danger to cease.
The seller, however, may give security for the return of the price in a proper case, or it has been stipulated that, despite such contingency, the buyer shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price.
In this regard, as held by the Supreme Court in one case, the pendency of a suit over the property sold justifies the buyer in suspending the payment of the balance of the purchase price. The sellers’ assurances that buyer need not worry about the suit because it was pure and simple harassment is not the kind of security that the seller may give to prevent the suspension of said payment.
Besides the implied warranties that usually attach to a contract of sale of real property, the contracting parties should also be mindful of the seller’s warranty against hidden defects, which applies to both movable and immovable properties. Thus, the seller shall be responsible for this warranty when the hidden defects:
(a) render the property unfit for the use for which it is intended; or
(b) diminish the property’s fitness for such use to the extent that, had the buyer been aware thereof, he would not have acquired it or would have given a lower price for it.
The seller shall not be liable for breach of this warranty, however, in the case of patent defects, or those which may be visible, or for those which are not visible if the buyer is an expert who, by reason of his trade or profession, should have known them.
The seller is responsible to the buyer for any hidden faults or defects in the property, even though he was not aware thereof. The seller shall not be so held liable, however, if the contrary was stipulated, and he was not aware of said faults or defects.
The warranty against hidden defects shall apply to judicial sales, except that the judgment debtor shall not be liable for damages.
In case of a breach of the warranty against hidden defects, the buyer may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. Furthermore, actions arising from the warranty against hidden defects should be initiated within six months from the delivery of the property sold, as defined by law.
Source: Inquirer
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