PERFORMANCE OF CONTRACT

PERFORMANCE OF CONTRACT
a. Delivery of thing sold I. Sale of movables II. Sale of immovable III. Inspections and acceptance b. Payment of price

I. Delivery of the Thing - Transfer ownership (tradicion) covers a twin obligations of the seller which are: 1. to transfer the ownership; and 2. to deliver a determinate thing
II. Different kinds of delivery: 1. Actual or real- when thing sold is placed in the control and possession of the buyer 2. Legal or Constructive- can take several forms and may be any manner signifyingan agreement that the possession is transferred from the vendor to the vendee.

III. Different forms of Constructive Delivery

Constructive delivery has same legal effect as actual or physical delivery
1. Traditio Longa Manu Delivery of thing by mere agreement; when SELLER points to the property without need of actually delivering 2. Traditio Brevi Manu Before contract of sale, the would be buyer was already in possession of the would be subject matter of sale (ex: as lessee)

3. Symbolic delivery As to movables ex: delivery of the keys to a car 4. Constitutum possessarium When at the time of the perfection of the contract of sale, seller had possession of the subject matter in the concept of owner and pursuant to the contract, seller continues to hold physical possession no longer in the concept of an owner but as a lessee or any other form of possession other than in the concept of owner. 5. Quasi-tradition Delivery of rights, credits or incorporeal property, made by: a. Placing titles of ownership in the hands of the buyer b. Allowing buyer to make use of rights 6. Tradition by operation of law

IV. WHEN EXECUTION OF PUBLIC INSTRUMENT DOES NOT PRODUCE THE EFFECTS OF DELIVERY When there is stipulation to contrary, execution does not produce effect of delivery 2. When at the time of execution of instrument, subject matter was not subject to control of the seller

3. Subject matter should be within control of seller; he should have capacity to deliver at the time of execution of public instrument when he wants to effect actual delivery
4. Such capacity should subsist for a reasonable time after execution of instrument (reasonable time depends on circumstances of persons, places and things)

V. Delivery of Fruits and Accessions/Accessories

Right to fruits and accessions/accessories accrue from time sale is perfected but no real right over it until it is delivered.

VI. Delivery Through Carrier

General Rule: Where the seller is authorized or required to send the goods to the buyer, delivery to the carrier is delivery to the buyer. Exceptions: a contrary intention appears or implied reservation of ownership under pars.1,2,3 of Art. 1503 1. FAS FREIGHT ALONG SIDE When goods delivered alongside the ship, there is already delivery to the buyer (twin effects deemed fulfilled) 2. FOB - FREIGHT ON BOARD - Shipment when goods are delivered at ship at point of shipment; delivery to carrier by placing goods on vessel is delivery to buyer Destination when goods reach the port even if not disembarked yet from the vessel, there is delivery to the buyer

3. CIF COST, INSURANCE, FREIGHT When buyer pays for services of carrier delivery to carrier is delivery to buyer; carrier is agent of the buyer When buyer pays seller the price from moment the vessel is at port of destination, there is already delivery to buyer. See Arts. 1522, 1539, 1540, 1541, 1542, 1543.

VII. COMPLETENESS OF DELIVERY

1. MOVABLES a. delivery of thing plus accessories and accessions in the condition in which they were upon the perfection of the contract including the fruits b. When the seller delivers to the buyer a quantity of goods LESS than he contracted to sell, buyer has the option to reject or accept it. i. When accepts with knowledge that seller is not going to performcontract in full, he must pay at price stipulated

ii. When accepts and consumes before knowledge that buyer will not perform contract in full,liable only for fair value of goods delivered

c. When seller delivers to the buyer a quantity of goods LARGER than he contracted to sell the buyer has the following options: i. accept per contract and reject the rest ii. accept the whole pay price stipulated iii. reject whole if subject matter is indivisible d. When the seller delivers to the buyer the goods he contracted to sell, MIXED with goods of a different description not included in the contract, buyer has 2 options: i. accept goods w/c are in accordance with contract and reject the rest ii. reject goods entirely if indivisible

COMPLETENESS OF DELIVERY 2. Immovable

a. Sold per unit or number
i. If the sale should be made with statement of its area, rate at certain price, deliver all that may have been stated in the contract if impossible, remedies of buyer: ii. If Less in area: - rescission - proportional reduction of price LACK IN AREA SHLD NOT BE LESS THAN 1/10 OF AREA AGREED UPON

iii. If Greater in area:

- accept per stipulation and reject the rest - accept whole area pay at contract rate - Not applicable to judicial sales

iv. Sold for lump sum

- When price per unit not indicated - If area delivered is either greater or lesser price will not be adjusted accordingly

TIME & PLACE OF DELIVERY

1. follow stipulation in contact, or 2. follow usage of trade, or 3. sellers place of business or his residence 4. specific goods place where the thing is 5. at reasonable hour

EFFECTS OF DELIVERY: Title to thing is transferred/ownership is transferred Except: contrary is stipulated as in the case of:
1. contract to sell 2. sale on acceptance/approval 3. sale or return 4. there is implied reservation of ownership

Sale of Goods on installment: a.Goods must be delivered in full, except when stipulated

b. When not examined by buyer not accepted until examined or at least had reasonable time to examine Acceptance of goods in general, absent contrary express stipulation, does not discharges seller from liability in case of breach of warranties (unless no notice or failure to give it within reasonable time)
When buyer has a right to refuse goods, no need to return; shall be considered as depositary; unless there is stipulation to contrary

iii. Inspections and Acceptance Acceptance of the Thing bought

Acceptance of the delivery of the thing bought at the time and place stipulated in the contract. If time and place is not stipulated in the contract, payment must be made at the time and place of the delivery of the thing sold

Opportunity to Inspect Goods

Goods delivered to the buyer is not deemed to have accepted them unless and until he has had an 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.
Exception: C.O.D. (Collect on Delivery) Sales Goods Sold On Installments The buyer of goods is not bound to accept delivery thereof by Installments Effect of Acceptance of Goods on Sellers Warranty Refusal to Accept Goods

PAYMENT OF PRICE
Obligation to pay for the price at the time and place stipulated in the contract.

Mere sending of a letter by the buyer expressing his intention to pay without the accompanying payment is not considered a valid tender of payment.
Art. 1240 Civil Code provides that payment shall be made to the person in whose favor the obligation has been constituted or his successor in interest, or any person authorized to receive. Buyer is also obliged to pay interest for the period between delivery of the Subject matter and the payment of the price when:
I. The same has been stipulated II. Should object delivered produce fruits or income III. In case the buyer is in default, from the time of judicial and extrajudicial demand.

Non-payment of the consideration in the sale does not prove simulation; at most, it gives the seller the right to sue for collection. Payment is a resolutory condition in a Sale and the remedy of the seller is to exact fulfillment or in case of substantial breach, to rescind the contract under article 1191 of the Civil Code.

PERFORMANCE OF CONTRACT

WARRANTIES
a. b. c. d. e. Express warranties Implied warranties Effects of warranties Effects of waivers Buyers option in case of breach of warranty

Warranties A statement or representation made by the seller contemporaneously and as a part of the contract of sale, having reference tot eh character, quality, or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents Express Warranties ( requisites ):
1. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale 2. natural tendency of affirmation or promise is to induce buyer to purchase subject matter 3. buyer purchases the subject matter relying thereon 4. When breached, seller is liable for damages

Implied Warranties
Deemed included in all contracts of sale whether parties are actually aware or not, whether they were intended or not; by operation of law 1. warranty that seller has a right to sell
refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition not applicable to sheriff, auctioneer, mortgagee, pledge

2. warranty against eviction

a. implied, unless contrary provision appears in contract b. when ownership is transferred, buyer shall enjoy the legal and peaceful possession of the thing

c. Requisites of breach of warranty against eviction: - buyer is evicted in whole or in part from the subject matter of sale - there is a final judgement - basis of eviction is a right prior to sale or an act imputable to vendor - seller has been summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer Vendors liability shall consists of (Total Eviction)(VICED)
1. Value of the thing at the time of eviction; 2. Income or fruits if he has been ordered to deliver the to the party who won the suit 3. Cost of the suit 4. Expenses of the contract; and 5. Damages and interests if the sale was in bad faith

1. to enforce vendors liability for eviction (VICED); or 2. to demand rescission of contract. a. no appeal needed nor a need for buyer to resist eviction for right to accrue; it is enough that the aforementioned requisites are complied with b. warranty cannot be enforced until aforementioned requisites concur c. applies to judicial sale; judgment debtor responsible for eviction unless otherwise decreed in judgment d. vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is completed after transfer e. Rights of buyer when deprived of only part of the subject matter but would not have bought such part if not in relation for the whole: 1. Rescission 2. Mutual restitution

3. warranty against encumbrances (nonapparent) Requisites: a. immovable sold is encumbered with nonapparent burden or servitude not mentioned in the agreement

b. nature of nonapparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof
c. when breach of warranty exist: buyer may ask for rescission of indemnity d. warranty not applicable when non apparent burden or servitude is recorded in the Registry of Property unless there is express warranty that the thing is free from all burdens and encumbrances

4. warranty against hidden defects

SELLER does not warrant patent defect; caveat

emptor

Except when hidden 1. subject matter may be movable or immovable 2. nature of hidden defect is such that it should render the subject matter unfit for the use of which it was intended or should diminish its fitness 3. had the buyer been aware, he would not have acquired it or would have given a lower price

a. when defect is visible or even if not visible but buyer is an expert by reason of his trade or profession, seller is not liable b. obligation of seller for breach depends on whether he has knowledge of such defect or not c. seller is aware seller should return price and refund expenses of contract with damages d. seller is not aware - seller should return price and interest and refund expenses ( no damages ) e. buyer may elect between withdrawing from contract or demanding proportionate reduction of price with damages in either case

f. applicable to judicial sale except that judgment debtor not liable for damages
g. action to prescribe 6 months from delivery of subject matter

5. defects on animals
a. even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not sufficient to discover it - defect shall be considered as REDHIBITORY b. if vet fails to discover through ignorance or bad faith he is liable for damages c. sale of animals on teams (2 or more) - when only one is defective, only one is redhibited and not the others exception: when it appears buyer would not have purchased the team without the defective one - apply to sale of other things

d. animals at fair or public auction- no w arranty against hidden defects

e. sale of animals with contagious disease is void

f. sale of unfit animals - void if use / service for which they are acquired has been stated in the contract and they are found to be unfit therefore
prescription of action:40 days from date of delivery to buyer if sale is rescinded, animals to be returned in same condition when they were acquired; buyer shall answer for injury / loss due to his fault
- buyer may elect between withdrawing from sale and

demanding proportionate reduction of price with damages in either case

Specific Implied Warranties in the Sale of Goods Warranty as to fitness and quality; requisites:
1. Buyer makes known to seller the particular purpose for which goods are acquired and it appears that the buyer relied on the sellers skill or judgment

2. Goods are bought by description from seller who deals in goods of that description
3. in case of sale of specified article under its patent or trade name, no warranty unless there is a stipulation to the contrary 4. measure of damage: difference between value of goods at time of delivery and value they would have had if they had answered to the warranty

Effects of Waiver
Waiver in Warranty against eviction Parties may increase or diminish implied warranty against eviction; but effect depends on good faith or bad faith on the part of the seller. 1. Seller in bad faith and there is waiver against eviction null and Void 2. buyer without knowledge of a particular risk, made general renunciation of warranty not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction) 3. buyer with knowledge of risk of eviction assumed its consequences and made a waiver vendor not liable (applicable only to waiver of warranty against eviction) 4. waiver to a specific case of eviction - wipes out warranty as to that specific risk but not as to eviction caused by other reasons.

Waiver against Hidden Defects

If there has been a stipulation exempting seller from hidden defects
2. If seller not aware of hidden defects loss of the thing due to such defect will not make seller liable 3. If seller aware waiver is in bad faith, thus seller still liable

Buyers Option in Case of Breach of Warranty

1. Accept goods and set up breach of warranty by way of recoupment in diminution or extinction of the price.

2. Accept goods and maintain action against seller for damages 3. Refuse to accept goods and maintain action against seller for damages 4. Rescind contract of sale and refuse to receive goods/return them when already received.

When rescission by buyer not allowed:

1. if the buyer accepted the goods knowing the breach of warranty WITHOUT protest

2. if he fails to notify the seller within a reasonable time of his election to rescind
3. if he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him

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