Union Motors Corporation v. Rudy S. Labos & Associates

Summary

This case involves the rescission of a vehicle sale contract due to hidden defects. Respondent purchased a brand new Mitsubishi Van from petitioner for P517,000, paying P195,893 as down payment. Upon discovery of defective body (wheel alignment issues), respondent demanded replacement but petitioner refused. Respondent returned the vehicle and sought refund. All three court levels ruled in favor of respondent, finding breach of warranty against hidden defects under Civil Code Article 1561. The Supreme Court affirmed that rescission was proper under Article 1599, requiring petitioner to return the full down payment with interest. The case establishes that even if defects are later repaired, the fact that a supposedly new vehicle was defective when delivered constitutes breach of warranty justifying contract rescission and mutual restitution.