In Philippine Steel Coating Corp. v. Eduard Quiñones, the Supreme Court ruled that oral statements made by a seller can constitute an express warranty if those statements are positive affirmations of fact that induce the buyer to purchase the product, especially when the seller is perceived as an expert. This decision clarifies that warranties are not limited to written agreements and highlights the importance of seller representations in sales transactions. This ruling protects buyers who rely on sellers’ expertise and assurances when making purchasing decisions.
When Words Become Warranties: Examining Liability for Assurances in Steel Sales
This case originated from a complaint filed by Eduard Quiñones, owner of Amianan Motors, against Philippine Steel Coating Corporation (PhilSteel). Quiñones alleged that he purchased primer-coated galvanized iron sheets from PhilSteel based on assurances from their sales manager, Ferdinand Angbengco, that the sheets were compatible with his existing acrylic paint process. However, after using the sheets, Quiñones received numerous complaints from customers regarding paint peeling and blistering on the buses he manufactured. He then discovered that the primer-coated sheets were incompatible with his painting process, leading to significant damages. Quiñones sought compensation from PhilSteel for these damages, arguing that the company had breached an express warranty.
The Regional Trial Court (RTC) ruled in favor of Quiñones, finding that Angbengco’s assurances constituted an express warranty under Article 1546 of the Civil Code. The Court of Appeals (CA) affirmed the RTC’s decision, emphasizing that PhilSteel’s representations induced Quiñones to purchase their product. PhilSteel then elevated the case to the Supreme Court, questioning whether vague oral statements could be considered warranties and whether Quiñones himself was negligent in using the product.
The Supreme Court denied PhilSteel’s petition, reinforcing the principle that an express warranty can indeed be oral. The Court anchored its decision on Article 1546 of the Civil Code, which defines express warranty as follows:
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.
To establish an express warranty, the Court cited Carrascoso, Jr. v. CA, specifying three key requirements: first, the warranty must be an affirmation of fact or a promise related to the sale’s subject matter; second, the affirmation or promise must naturally induce the buyer to make the purchase; and third, the buyer must rely on the affirmation or promise when making the purchase. The Court found that Angbengco’s statements regarding the compatibility of PhilSteel’s product with Quiñones’ painting process met these requirements.
Moreover, the Supreme Court emphasized that a warranty is not confined to written agreements; it can be oral if it constitutes a positive affirmation of fact relied upon by the buyer. In this case, PhilSteel, through Angbengco, expressly represented that the primer-coated G.I. sheets were compatible with Quiñones’ acrylic paint process. This representation was crucial, as Quiñones had initially expressed concerns about potential incompatibility. Angbengco’s assurances and the claim that using their product would cut costs further induced Quiñones to make the purchase.
The Court dismissed PhilSteel’s argument that Angbengco’s statements were mere “dealer’s talk” or exaggerations in trade. It distinguished this case from situations involving ordinary sales clerks, noting that Angbengco, as the sales manager, possessed specialized knowledge and authority. His assertions, particularly the claim of laboratory tests confirming compatibility, went beyond mere opinion or exaggeration. They induced Quiñones to believe that PhilSteel was an expert whose statements could be relied upon.
Regarding the prescription period, the Court clarified that the applicable period for breach of an express warranty is either that specified in the contract or, in its absence, the general rule for rescission of contracts, which is four years. Since Quiñones filed the case within this period, his action was not time-barred.
The Court also addressed the issue of Quiñones’ alleged negligence, finding that he had acted reasonably. He had raised concerns about compatibility from the outset and relied on PhilSteel’s expertise. The fact that a painting test, conducted under Angbengco’s instructions, initially proved successful further supported Quiñones’ diligence.
Finally, the Supreme Court upheld Quiñones’ nonpayment of the balance, citing Article 1599 of the Civil Code, which allows a buyer to reduce the price in case of a seller’s breach of warranty. The Court reasoned that Quiñones was justified in refusing to pay the unpaid balance of P448,041.50, as PhilSteel had breached its express warranty.
However, the Supreme Court also addressed the award of attorney’s fees, deeming them inappropriate in this instance. Neither the CA nor the RTC provided sufficient factual basis to warrant such fees. The Court emphasized that an award of attorney’s fees cannot be based solely on an allegation or testimony that a party has agreed to pay a certain percentage to their counsel.
FAQs
| What was the key issue in this case? | The key issue was whether oral statements made by a seller regarding a product’s characteristics could be considered express warranties, making the seller liable for damages if those statements proved false. |
| What is an express warranty according to the Civil Code? | According to Article 1546 of the Civil Code, an express warranty is any affirmation of fact or promise by the seller that induces the buyer to purchase the product, relying on that affirmation or promise. |
| Can a warranty be oral, or must it be in writing? | The Supreme Court clarified that a warranty is not necessarily written; it can be oral if it is a positive affirmation of fact that the buyer relies upon when making the purchase. |
| What did PhilSteel’s sales manager, Angbengco, assure Quiñones? | Angbengco assured Quiñones that PhilSteel’s primer-coated G.I. sheets were compatible with the acrylic paint process used by Amianan Motors, even claiming that laboratory tests had confirmed this compatibility. |
| Why was Quiñones justified in not paying the balance for the G.I. sheets? | Quiñones was justified in not paying the balance because PhilSteel breached its express warranty. Article 1599 of the Civil Code allows a buyer to reduce the price in case of a seller’s breach of warranty. |
| Was Quiñones considered negligent in using the G.I. sheets? | No, the Supreme Court found that Quiñones was not negligent. He had raised the compatibility issue from the start and relied on PhilSteel’s expertise and assurances, which initially appeared to be confirmed by a successful painting test. |
| What was the prescription period for filing a breach of warranty claim in this case? | Since no specific period was stipulated in the contract, the general rule for rescission of contracts—four years—applied. Quiñones filed the case well within this period. |
| Why was the award of attorney’s fees deleted? | The award of attorney’s fees was deleted because neither the CA nor the RTC provided a specific factual basis to justify it, and the award was based solely on Quiñones’ allegation of an agreement to pay 25% to his counsel. |
This case emphasizes the importance of clear communication and accurate representation by sellers, especially when dealing with buyers who rely on their expertise. It serves as a reminder that oral assurances can carry significant legal weight, potentially leading to liability for breach of warranty. Businesses should ensure that their sales representatives are well-informed and make only accurate claims about their products.
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Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Philippine Steel Coating Corp. v. Eduard Quiñones, G.R. No. 194533, April 19, 2017