Under Philippine law, a seller’s responsibility does not end upon the delivery of an item. The Civil Code of the Philippines imposes an implied warranty against hidden defects to protect consumers from purchasing goods that are unfit for their intended use or possess flaws that are not readily apparent.

1. Legal Definition of a Hidden Defect

A hidden defect (also known as redhibitory defect) is a flaw in the item sold which renders it unfit for the use for which it is intended, or which diminishes its fitness to such an extent that, had the vendee (buyer) been aware thereof, they would not have acquired it or would have given a lower price for it.

To be actionable, the defect must meet the following criteria:

It must be hidden: The flaw cannot be discovered by an ordinary inspection or by a person using reasonable care.
It must be pre-existing: The defect must have existed at the time of the sale, even if it only manifests later.
It must be grave: It must render the thing unfit for use or significantly impair its value.
It must not be excluded: There must be no valid waiver of warranty.

2. Nature of the Seller's Liability

The seller is liable to the buyer for any hidden faults or defects, even if the seller was unaware of them at the time of the transaction. This is a matter of law (Article 1566, Civil Code). Good faith on the part of the seller is not a defense against the obligation to provide a functional product, though it does affect the extent of damages.

Exceptions to Liability:

Patent Defects: Defects that are visible or even those not visible if the buyer is an expert who, by reason of their trade or profession, should have easily known them.
Waiver: If the parties agreed that the seller would not be liable, provided the seller was unaware of the defect. If the seller knew of the defect and concealed it, a waiver is void.
"As Is, Where Is" Sales: Generally, these sales imply that the buyer takes the property in its current condition, though this does not always provide an absolute shield against active misrepresentation.

3. Remedies Available to the Buyer

If a hidden defect is proven, the buyer may choose between two "alternative" remedies under Article 1567, known as Accion Redhibitoria and Accion Quanti Minoris:

Accion Redhibitoria (Withdrawal): The buyer may opt to withdraw from the contract, returning the thing and recovering the price paid.
Accion Quanti Minoris (Price Reduction): The buyer may elect to keep the item but demand a proportionate reduction in the purchase price.

4. Impact of the Seller's Awareness

The extent of the seller's liability depends on whether they acted in bad faith:

Seller in Bad Faith: If the seller knew of the hidden defects and did not reveal them, and the thing is lost due to the defects, the seller must:
Return the price.
Refund the expenses of the contract.
Pay for damages.
Seller in Good Faith: If the seller was unaware of the defects, they are only required to:
Return the price.
Refund the interest.
Refund the expenses of the contract (if paid by the buyer).

5. Rules in Case of Loss

Loss due to the Hidden Defect: As noted above, the seller bears the loss by returning the price and expenses (plus damages if in bad faith).
Loss due to Fortuitous Event or Fault of Buyer: If the thing had a hidden defect but was subsequently lost due to a freak accident or the buyer’s fault, the buyer may still demand the price paid less the value which the thing had when it was lost. If the seller acted in bad faith, they must also pay damages.

6. Prescription Period

The timeframe to file an action for hidden defects is strictly limited. Under Article 1571, the action must be brought within six months from the delivery of the thing sold.

However, under the Consumer Act of the Philippines (R.A. 7394), which applies to consumer products (goods primarily for personal, family, or household purposes), the duration of the implied warranty may vary. If a consumer product is covered by a written warranty, the period of the implied warranty shall be co-extensive with the duration of the express warranty.

7. Special Rules for Animals

The Civil Code provides specific "redhibitory" rules for livestock. For instance, if an animal dies within three days after purchase, the seller may be liable if the disease that caused the death existed at the time of the contract. A sale of animals with contagious diseases is considered void.