Types of Warranties Implied Warranties Implied warranties are exactly what the term says they are: unspoken

and unwritten promises made by a seller to a buyer that the product being sold works. The concept that encompasses the IMPLIED WARRANTY comes from COMMON LAW, specifically, the principle of "fair value for money spent." Actually, there are two types of implied warranties, both outlined under Section 2 of the UCC. The implied warranty of merchantability is simply the promise that the product sold is in good working order and will do what it is supposed to do. A vacuum cleaner is expected to pick up dirt and dust from carpets and floors. A refrigerator is expected to keep food cold. A toaster is expected to toast bread. If the consumer buys a product and the product does not work, then this constitutes a breach of the implied warranty. The seller is required to remedy the problem, whether by repairing or replacing the product. (It should be noted that the section of the UCC covering this type of implied warranty, Section 2-314, is law in every state except Louisiana.) The implied warranty of fitness for a particular purpose is the promise that the seller's advice on how to use the product will be correct. For example, it a consumer asks an appliance dealer whether a particular air conditioner can cool a 600 square-foot room and the dealer says yes, that dealer has effectively created a warranty of fitness. If the air conditioner can only cool a 400 square-foot room effectively, the dealer has breached the warranty. The idea behind this is that the dealer is expected to know which product will be best for which use. Express Warranties An express warranty is an explicit offer made voluntarily by the seller that a product will perform according to particular expectations. The typical express warranty offers specific remedies in the event that the product is defective. Express warranties can be oral or written. Written warranties are covered under the federal Magnuson-Moss Act, which is explained in detail later. If a seller offers an express warranty, the product in question is still covered under implied warranty. The length of a warranty may be specified, but if it is not the general rule is that consumers have four years from the date of purchase to enforce a warranty claim. This does not mean that the product must last four years. Rather, it means that if there was a defect in the product at the time of purchase that manifests itself later, the consumer is entitled to some sort of remedy.

Extended Warranties Anyone who has purchased appliances, stereos, computers, or similar items knows that most stores will try to sell an "extended warranty" along with the standard one. These warranties, also known as service contracts, are often unnecessary; often, they duplicate current warranty coverage. The reason merchants are so eager to sell service contracts is that they make a handsome profit off those agreements. Service contracts are not illegal and in some cases they may be useful, but it is a good idea to read the existing warranty before spending unnecessary money on redundant coverage. An important point that consumers should know is that if they do wish to purchase a service contract, they are allowed by law to do so up until 30 days from the regular warranty's expiration date. Stores that claim a "now or never" policy are being deceptive.

Obligations of the Vendee Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract. If the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing sold. Art. 1583. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments. Where there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses without just cause to take delivery of or pay for one more instalments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken. Art. 1584. Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract if there is no stipulation to the contrary. Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by marking the goods with the words collect on delivery, or otherwise, the buyer is not entitled to examine the goods before the payment of the price, in the absence of agreement or usage of trade permitting such examination. Art. 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.

ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS Art. 1594. Actions for breach of the contract of sale of goods shall be governed particularly by the provisions of this Chapter, and as to matters not specifically provided for herein, by other applicable provisions of this Title. Art. 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 judgment 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 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 buyers and may maintain an action for the price. Art. 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 buyers breach of contract. Where there is an available market for the goods in question, the measure of damages 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 obligations 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 buyers repudiation or countermand. The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages. Art. 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 obligations 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.

Art. 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 judgment 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.

Article 1599. Remedies of buyer when seller commits breach of warranty. 1. Recoupmentwhereby the buyer accepts the goods but he sets up against the seller the reduction or extinction of the purchase price. 2. Action for damageswhereby the buyer may (a) accept the goods but w/ damages or (b) refuse to accept the goods for the breach of warranty but also with damages. 3. Rescissionwhereby the buyer seeks the cancellation of the sale and as a consequence there will be restoration on both sides.

DEFINITION AND NATURE OF CONTRACT OF SALE Definition Section 2(1) of the Act defines a contract of sale of goods as: a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.Subsections (3) and (4) give different names to two transactions:(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale.(4) Where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell. Sale distinguished from other contracts A contract of sale of goods must be distinguished from several other transactions which are normally quite different from a sale of goods but which, in particular circumstances, may closely resemble such a contract,1 namely (1) a contract of barter or exchange, (2) a gift,(3) a contract of bailment, (4) a contract of hire-purchase, (5) a contract of loan on the security of goods, (6) a contract for the supply of services, (7) a contract of agency, and (8) licences of intellectual property such as sales of computer software.2 These distinctions were at one time of importance mainly in connection with s. 4 of the 1893 Act. This section,which was originally part of s. 17 of the Statute of Frauds 1677 and was not applicable in Scotland, required contracts of sale of goods of the value of 10 and upwards to be evidenced in writing, whereas for the

other types of contract listed above there was no such requirement. Since the repeal of s. 4 by the Law Reform (Enforcement of Contracts) Act 1954, this particular point has ceased to be of importance in relation to domestic salesof goods,because no written formalities are now required in general for any of the abovekinds of contracts. 4 But it may still be necessary to decide whether a contract is a contract of sale of goods for one of a number of other reasons. In particular, of course, the provisions of the Sale of Goods Act apply only to such contracts. Given that the original Act of 1893 was largely a codifying Act, however, and given the tendency to construe the Act as though it were a part of the common law, it will often be immaterial whether a particular contract is labelled a contract of sale or a contract of a different character. In particular, when a question of implication of terms arises, the law may well be the same whether or not the Act applies. Indeed, there has been a noticeable tendency, first for the courts and then for Parliament, to model the common law contracts on the Sale of Goods Act and, in particular, to imply terms in these contracts very similar to those implied by the Act.5 Equitable Mortgage and Sales Mortgages are normal incidents in business transactions. For instance, lending institutions usually require a mortgage to secure a loan obligation obtained by the Pinoy Entrepreneur. There's really no problem if the contract is designated as a mortgage, as the parties are presumed to have understood its terms and conditions. In case a contract is designated as "Deed of Sale," can it be considered as a mortgage? Let's discuss. An equitable mortgage is one that - although lacking in some formality, forms and words, or other requisites demanded by a statute - nevertheless reveals the intention of the parties to charge a real property as security for a debt and contains nothing impossible or contrary to law. Before the legal provisions on equitable mortgage is applied, two conditions must be established: 1. the parties entered into a contract denominated as a contract of sale. 2. their intention was to secure an existing debt by way of an equitable mortgage. On the other hand, the instances when a contract -- regardless of its nomenclature (even if designated as a "Deed of Sale") -- may be presumed to be an equitable mortgage are as follows: (1) When the price of a sale with right to repurchase is unusually inadequate. (2) When the vendor remains in possession as lessee or otherwise. (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed.

(4) When the purchaser retains for himself a part of the purchase price.

(5) When the vendor binds himself to pay the taxes on the thing sold.

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any their obligation. Let's discuss an actual case to illustrate. Eulalia was engaged in the business of buying and selling large cattle for which she employed biyaheros whose task involved the procuring of large cattle with the financial capital provided by Eulalia and delivering the procured cattle to her for further disposal. In order to secure the financial capital she advanced for the biyaheros, Eulalia required them to surrender the Transfer Certificates of Title of their properties and to execute the corresponding Deeds of Sale in her favor. Eulalia discovered that one of the "biyaheros," Domeng, incurred shortage in the amount of P70,000.00. Domeng then executed a deed of sale over a parcel of land in favor of Eulalia, who then disposed of the property based on that document. The controversy reached the Supreme Court, which ruled that the parties (Domeng and Eulalia) never intended the transfer of ownership of the subject property, but merely to create an encumbrance to secure the indebtedness incurred by Domeng. The transaction was deemed an equitable mortgage, merely altering the relationship of the parties from seller and buyer, to mortgagor and mortgagee. The subject property is not transferred, but subjected to a lien in favor of Eulallia. *Source: Spouses Raymundo et al. vs. Spouses Bandong (G.R. No. 171250, 4 July 2007)

Sale With Pacto de Retro Transfer of Ownership

A sale with pacto de retro transfers the legal title to the vendee a retro. The essence of a pacto de retro sale is that the title and ownership of the property sold are immediately vested in the vendee a retro, subject to the resolutory condition of repurchase by a vendor a retro to repurchase the property within the period agreed upon by them, or, in the absence thereof, as provided by law, vests upon the vendee a retro absolute title and ownership over the property sold by operation of law. The failure of the vendee a retro to consolidate his title under Article 1607 of the New Civil Code does not impair such title and ownership because the method prescribed thereunder is merely for the purpose of registering and consolidating titles to the property. The essence of a pacto de retro sale is that title and ownership of the property sold is immediately vested in the vendee a retro, subject to the restrictive condition of repurchase by the vendor a retro within the period provided in Article 1606 of the New Civil Code, to wit: The failure of the vendee a retro to repurchase the property vests upon the latter by operation of law the absolute title and ownership over the property sold. (Cruz vs. Leis, G.R. No. 125233, March 9, 2000; 327 SCRA 570). A sale with pacto de retro transfers the legal title to the vendee (Aldente vs. Amandoron, 46 Phil 488). Hence, it is subject to the payment of capital gains tax pursuant to Section 21 (e) of the Tax

Code. If the period to repurchase expires, the ownership of the property becomes consolidated by operation of law in the vendee, and the vendor loses all his rights in the property sold (Ortiz vs. Ortiz, 26 Phil. 280; De Bayguen vs. Vda. De Elpa, 143 SCRA 412). The consolidation of ownershio, however, shall not be recorded/ registered by the Register of Deeds without a judicial order after the vendor has been duly heard (Art. 1697, Civil Code of the Philippines). (LRA Consulta No. 2836 dated April 14, 2000)