Photo from Unsplash | LinkedIn Sales Solutions
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
“A warranty is a statement or representation made by the seller of goods – contemporaneously and as part of the contract of sale – that has reference to the character, quality or title of the goods; and is issued to promise or undertake to insure that certain facts are or shall be as the seller represents them.
A warranty is not necessarily written. It may be oral as long as it is not given as a mere opinion or judgment. Rather, it is a positive affirmation of a fact that buyers rely upon, and that influences or induces them to purchase the product.” (Philippine Steel Corporation v. Eduard Quiñones, G.R. No. 194533, April 19, 2017)
Can statements made by a seller, often called “dealer’s talk” or “trader’s talk” be considered as an express warranty?
“Dealer’s talk” or “trader’s talk” is regarded as statements or opinions expressed by a seller about a product or service. Generally, this is considered as a personal opinion of the seller and is not a binding warranty.
However, if the seller is recognized as an expert in the field, and the buyer relies on this expertise when making a purchase, then “dealer’s talk” or “trader’s talk” can be considered as an express warranty.
If the buyer places a significant trust in the seller’s knowledge, and this trust influences their decision to buy, then “dealer’s talk” or “trader’s talk” transforms into a legally binding warranty.
Jurisprudence says:
“The law allows considerable latitude to seller’s statements. Or “dealer’s or trader’s talk”. It is exceedingly risky to accept a seller’s statements at its face value. The refusal of the seller to warrant his estimate should have admonished the purchaser that such estimate was put forth as a mere opinion. The courts will not now hold the seller to a liability equal to that which would have been created by a warranty, if one had been given.” (Alejandro V. Tankeh v. Development Bank of the Philippines, et al. G.R. No. 171428, November 11, 2013)
Oral statements as express warranty
In the case of Philippine Steel Coating Corporation v. Eduard Quiñones (G.R. No. 194533, April 19, 2017), we are presented with the issue of whether the vague oral statements made by the seller on the characteristics of a generic good can be considered warranties that may be invoked to warrant the payment of damages.
The facts of the case are as follows:
In 1994, Richard Lopez (Lopez), a sales engineer of Philippine Steel Coating Corporation (PhilSteel) offered the owner of Amianan Motors Mr. Eduard Quiñones (Quiñones) PhilSteel’s new primer-coated, long-span, rolled galvanized iron (G.I.) sheets. Upon Quiñones’ inquiry if PhilSteel’s new product is compatible with Guilder acrylic paint process used by Amianan Motors in the finishing of its assembled buses.
Lopez’ immediate supervisor and PhilSteel’s Sales Manager Ferdinand Angbengco verbally assured Quinones that the quality of their new product was superior to that of the non-primer coated G.l. sheets being used by the latter in his business.
Sometime in 1995, Quinones received several complaints from customers who had bought bus units, claiming that the paint or finish used on the purchased vehicles was breaking and peeling off. Quinones then sent a letter-complaint to PhilSteel invoking the warranties given by the latter. According to PhilSteel, the damage to the vehicles was attributable to the hidden defects of the primer-coated sheets and/or their incompatibility with the Guilder acrylic paint process used by Amianan Motors, contrary to the prior evaluations and assurances of PhilSteel. Because of the barrage of complaints, Quinones was forced to repair the damaged buses.
Quiñones filed a complaint for damages against PhilSteel. The Regional Trial Court (RTC) found that the assurance made by Angbengco constituted an express warranty under Article 1546 of the Civil Code. Due to such assurance, Quiñones incurred damages from the repair of the buses and suffered business reverses. Thus, the RTC held PhilSteel liable for damages.
Article 1546 of the Civil Code provides that:
“Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller’s opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer.” (Emphasis supplied.)
Upon appeal by PhilSteel to the Court of Appeals, the ruling of the RTC was affirmed in toto. The appellate court ruled that PhilSteel in fact made an express warranty that the primer-coated G.I. sheets were compatible with the acrylic paint process used by Quiñones on his bus units. The assurances made by Angbengco were confirmed by Lopez, PhilSteel’s employee.
PhilSteel filed a Petition for Review on Certiorari before the Supreme Court assailing the decision of the Court of Appeal.
The Supreme Court ruled that the oral statements made by Angbengco created an express warranty. They were positive affirmations of fact that Quiñones relied on, and that induced him to buy PhilSteel’s primer-coated G.I. Sheets.
Jurisprudence says:
“The following requisites must be established in order to prove that there is an express warranty in a contract of sale:
(1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale;
(2) the natural effect of the affirmation or promise is to induce the buyer to purchase the thing; and
(3) the buyer purchases the thing relying on that affirmation or promise.”
Further:
“A warranty is a statement or representation made by the seller of goods – contemporaneously and as part of the contract of sale – that has reference to the character, quality or title of the goods; and is issued to promise or undertake to insure that certain facts are or shall be as the seller represents them.
A warranty is not necessarily written. It may be oral as long as it is not given as a mere opinion or judgment. Rather, it is a positive affirmation of a fact that buyers rely upon, and that influences or induces them to purchase the product.”
The oral statements made by Angbengco, the Sales Manager of PhilSteel, expressly represented to Quiñones that the primer-coated G.I. sheets were compatible with the acrylic paint process used by the latter on his bus units. This representation was made in the face of the latter’s concerns regarding incompatibility.
It must be noted that Quiñones had reservations about the compatibility of his acrylic paint primer with the primer-coated G.I. sheets of PhilSteel. He later surrended his doubts about the product after four to five meetings with Angbengco and his subordinate Lopez.
The Supreme Court further ruled that the oral statements made by Angbengco and Lopez were express affirmations not only of the costs that could be saved if Quiñones used PhilSteel’s G.I. sheets, but also of the compatibility of those sheets with the acrylic painting process customarily used in Amianan Motors. Angbengco did not aimlessly uttered those oral statements for nothing, but with a clear goal of persuading Quiñones to buy PhilSteel’s products.
PhilSteel was an expert in the eyes of the buyer Quiñones. Quiñones had asked if the primer-coated G.I. sheets were compatible with Amianan Motors’ acrylic painting process. PhilSteel’s former employee, Lopez, testified that he had to refer Quiñones to the former’s immediate supervisor, Angbengco, to answer that question. As the Sales Manager of PhilSteel, Angbengco made repeated assurances and affirmations and even invoked laboratory tests that showed compatibility. In the eyes of the buyer Quiñones, PhilSteel – through its representative, Angbengco – was an expert whose word could be relied upon.
Read also: Revocation of business permit due to violation of warranties
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.