Legal Aid 101: Warranties Against Hidden Faults or Defects what you need to know about the warranties of your purchased equipment.

by GERALDINE RULLAN-BORROMEO
(Manila, Philippines)

Legal Aid 101: Warranties Against Hidden Faults or Defects what you need to know about the warranties of your purchased equipment.

BY GERALDINE RULLAN-BORROMEO

What are the warranties that a vendor is liable for in sales of equipment, even if such warranties are not stated in a contract? These warranties are provided by law and are implied in every contract of sale, unless the contract itself states differently. It always helps to know your rights when it comes to equipment warranties.

Under the Civil Code provisions on sales, Article 1547 provides for an implied warranty that the thing sold shall be free from any hidden faults or defects.
The Civil Code provisions on sales also places the responsibility for the warranty on the vendor, should the thing:

•be rendered unfit for the use for which it is intended;

•diminish its fitness for such use, for had the vendee been aware of such diminishing fitness, he would not have acquired it or would have given a lower price for it.

Note that the 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)

But vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware of said faults or defects. The warranty shall not apply if the vendor and vendee agree that there shall be no warranty whatsoever, and in such waiver, the vendor must be not aware of the hidden faults or defects in the thing sold, otherwise he will be a vendor in bad faith. (Art. 1566)

LA FUERZA, INC. vs. COURT OF APPEALS and ASSOCIATED ENGINEERING CO., INC. G.R. No. L-24069 decided on June 28, 1968 illustrates the limitations of the application of these warranties. La Fuerza, a winemaker engaged Associated Engineering to manufacture and install a flat belt conveyor system for La Fuerza wine bottles.

In May 1960 the installation of the flat belt conveyors for wine bottles was completed and several trial runs until the month of July 1960 were made in the presence of La Fuerza officers. La Fuerza discovered that the conveyor system, when operated caused several bottles to collide with each other. In fact, some bottles jumped off the conveyor belt and were broken, causing damage.

When Associated Engineering billed La Fuerza for the balance of the contract price, La Fuerza refused to pay as the conveyor system installed did not serve the purpose for which it was manufactured and installed. Associated Engineering filed a court action to collect the balance.

The Supreme Court applied the provisions on sales of the Civil Code, namely Articles 1561 and 1567, where the vendee may choose between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. The choice of the remedy must be exercised within six months from the delivery of the thing sold. The Court held that:

“Article 1497 on sales of the Civil Code provides that when the thing subject of the sale is placed in the control and possession of the vendee, delivery is complete. Delivery is an act of the vendor. The vendee has nothing to do with the act of delivery by the vendor. On the other hand, acceptance is an obligation on the part of the vendee (Art. 1582). Delivery and acceptance are two distinct and separate acts of different parties. Consequently, acceptance cannot be regarded as a condition to complete delivery.”

Thus, upon the completion of the installation of the conveyors in May 1960, and until after the last trial run, in July 1960, La Fuerza could have exercised the right to categorically accept or reject the installation. Since the conveyors were actually in its possession and control, the conveyors are considered as delivered and the six (6) month period to accept or reject under Article 1571 had begun to run.

However, La Fuerza merely informed Associated Engineering of the defects and did not categorically avail of the right to demand rescission or the withdrawal from the contract until April 1961, or over 10 months after the installation of the conveyors in question had been completed on May 30, 1960. Due to the lapse in the six-month period provided, La Fuerza was sentenced to pay Associated Engineering the balance of the contract price with interest from July 1960 until fully paid, plus as attorney’s fees and court costs.

While buyers are protected by the implied warranties provided by law, the Court was adamant that such remedies must be exercised within the periods provided by law and not a day longer. The Court held in its closing statement in the case that:

“Indeed, in contracts of the latter type, especially when goods, merchandise, machinery or parts or equipment thereof are involved, it is obviously wise to require the parties to define their position, in relation thereto, within the shortest possible time. Public interest demands that the status of the relations between the vendor and the vendee be not left in a condition of uncertainty for an unreasonable length of time x x x.”

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