Jardine Davies v. CA
Jardine Davies v. CA
Jardine Davies v. CA
*
G.R. No. 128069. June 19, 2000.
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* SECOND DIVISION.
685
VOL. 333, JUNE 19, 2000 685
prestation to give, to do, or not to do.” There can be no contract unless the
following requisites concur: (a) consent of the contracting parties; (b) object
certain which is the subject matter of the contract; and, (c) cause of the
obligation which is established. A contract binds both contracting parties
and has the force of law between them.
Same; To produce a contract, there must be acceptance, which may be
express or implied but must not qualify the terms of the offer.—Contracts are
perfected by mere consent, upon the acceptance by the offeree of the offer
made by the offeror. From that moment, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good
faith, usage and law. To produce a contract, the acceptance must not qualify
the terms of the offer. However, the acceptance may be express or implied.
For a contract to arise, the acceptance must be made known to the offeror.
Accordingly, the acceptance can be withdrawn or revoked before it is made
known to the offeror.
Same; Bids and Bidding; Where a party starts the process of entering
into the contract by conducting a bidding, Article 1326 of the Civil Code,
which provides that “[a]dvertisements for bidders are simply invitations to
make proposals,” applies.—To resolve the dispute, there is a need to
determine what constituted the offer and the acceptance. Since petitioner
PUREFOODS started the process of entering into the contract by
conducting a bidding, Art. 1326 of the Civil Code, which provides that
“[advertisements for bidders are simply invitations to make proposals,”
applies. Accordingly, the Terms and Conditions of the Bidding disseminated
by petitioner PUREFOODS constitutes the “advertisement” to bid on the
project. The bid proposals or quotations submitted by the prospective
suppliers including respondent FEMSCO, are the offers. And, the reply of
petitioner PUREFOODS, the acceptance or rejection of the respective
offers.
Same; Same; Even if a letter accepting an offer enumerates certain
“basic terms and conditions,” if these conditions are prescriptions on how
the obligation is to be performed and implemented, they are not to be
considered as conditions for the perfection of the contract.—Quite
obviously, the 12 December 1992 letter of petitioner PUREFOODS to
FEMSCO constituted acceptance of respondent FEMSCO’s offer as
contemplated by law. The tenor of the letter, i.e.,
686
“This will confirm that Pure Foods has awarded to your firm (FEMSCO) the
project,” could not be more categorical. While the same letter enumerated
certain “basic terms and conditions,” these conditions were imposed on the
performance of the obligation rather than on the perfection of the contract.
Thus, the first “condition” was merely a reiteration of the contract price and
billing scheme based on the Terms and Conditions of Bidding and the bid or
previous offer of respondent FEMSCO. The second and third “conditions”
were nothing more than general statements that all items and materials
including those excluded in the list but necessary to complete the project
shall be deemed included and should be brand new. The fourth “condition”
concerned the completion of the work to be done, i.e., within twenty (20)
days from the delivery of the generator set, the purchase of which was part
of the contract. The fifth “condition” had to do with the putting up of a
performance bond and an all-risk insurance, both of which should be given
upon commencement of the project. The sixth “condition” related to the
standard warranty of one (1) year. In fine, the enumerated “basic terms and
conditions” were prescriptions on how the obligation was to be performed
and implemented. They were far from being conditions imposed on the
perfection of the contract.
Same; While failure to comply with a condition imposed on the
perfection of a contract results in the failure of a contract, failure to comply
with a condition imposed merely on the performance of an obligation only
gives the other party options and/or remedies to protect his interests.—In
Babasa v. Court of Appeals we distinguished between a condition imposed
on the perfection of a contract and a condition imposed merely on the
performance of an obligation. While failure to comply with the first
condition results in the failure of a contract, failure to comply with the
second merely gives the other party options and/or remedies to protect his
interests.
Same; Purchase orders (POs) do not make or break a contract.—For
all intents and purposes, the contract at that point has been perfected, and
respondent FEMSCO’s conforme would only be a mere surplusage. The
discussion of the price of the project two (2) months after the 12 December
1992 letter can be deemed as nothing more than a pressure being exerted by
petitioner PUREFOODS on respondent FEMSCO to lower the price even
after the contract had been perfected. Indeed from the facts, it can easily be
surmised that petitioner PUREFOODS was haggling for a lower price even
after
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BELLOSILLO, J.:
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VOL. 333, JUNE 19, 2000 689
Jardine Davies, Inc. vs. Court of Appeals
Gentlemen:
This will confirm that Pure Foods Corporation has awarded to your
firm the project: Supply and Installation of two (2) units of 1500
KW/unit Generator Sets at the Processed Meats Plant, Bo. San
Roque, Marikina, based on your proposal number PC 28-92 dated
November 20, 1992, subject to the following basic terms and
conditions:
690
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691
2
stand up very well in a court of law.” Meanwhile trial proceeded as
regards the case against PUREFOODS.
On 28 July 1994 the trial court rendered a decision ordering
PUREFOODS: (a) to indemnify FEMSCO the sum of
P2,300,000.00 representing the value of engineering services it
rendered; (b) to pay FEMSCO the sum of US$14,000.00 or its peso
equivalent, and P900,000.00 representing contractor’s mark-up on
installation work, considering that it would be impossible to compel
PUREFOODS to honor, perform and fulfill its contractual
obligations in view of PUREFOOD’s contract with JARDINE and
noting that construction had already started thereon; (c) to pay
attorney’s fees in an amount equivalent to 20% of the total amount
due; and, (d) to pay the costs. The trial court dismissed the
counterclaim filed by PUREFOODS for lack of factual and legal
basis.
Both FEMSCO and PUREFOODS appealed to the Court of
Appeals. FEMSCO appealed the 27 June 1994 Resolution of the
trial court which granted the Demurrer to Evidence filed by
JARDINE resulting in the dismissal of the complaint against it,
while PUREFOODS appealed the 28 July 1994 Decision of the
same court which ordered it to pay FEMSCO.
On 14 August 1996 the Court of Appeals
3
affirmed in toto the 28
July 1994 Decision of the trial court. It also reversed the 27 June
1994 Resolution of the lower court and ordered JARDINE to pay
FEMSCO damages for inducing PUREFOODS to violate the latter’s
contract with FEMSCO. As such, JARDINE was ordered to pay
FEMSCO P2,000,000.00 for moral damages. In addition,
PUREFOODS was also directed to pay FEMSCO P2,000,000.00 as
moral damages and P1,000,000.00 as exemplary damages as well as
20% of the total amount due as attorney’s fees.
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2 Resolution of the trial court dated 27 June 1994; Rollo of G.R. No. 128066, p.
66.
3 Special Fifteenth Division; Decision penned by Associate Justice Maximiano C.
Asuncion, concurred in by Associate Justices Godardo A. Jacinto, Chairman, and
Celia Lipana-Reyes.
692
692 SUPREME COURT REPORTS ANNOTATED
Jardine Davies, Inc. vs. Court of Appeals
693
4
fulfillment of a prestation to give, to do, or not to do.” There can be
no contract unless the following requisites concur: (a) consent of the
contracting parties; (b) object certain which is the subject matter5 of
the contract; and, (c) cause of the obligation which is established. A
contract binds both contracting parties and has the force of law
between them.
Contracts are perfected by mere consent, upon the acceptance by
the offeree of the offer made by the offeror. From that moment, the
parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which,
according 6
to their nature, may be in keeping with good faith, usage
and law. To produce a contract, the acceptance must not qualify the
terms of7 the offer. However, the acceptance may be express or
implied. For a contract to arise, the acceptance must be made
known to the offeror. Accordingly, the acceptance can be withdrawn
or revoked before it is made known to the offeror.
In the instant case, there is no issue as regards the subject matter
of the contract and the cause of the obligation. The controversy lies
in the consent—whether there was an acceptance of the offer, and if
so, if it was communicated, thereby perfecting the contract.
To resolve the dispute, there is a need to determine what
constituted the offer and the acceptance. Since petitioner
PUREFOODS started the process of entering into the contract by
conducting a bidding, Art. 1326 of the Civil Code, which provides
that “[advertisements for bidders are simply invitations to make
proposals,” applies. Accordingly, the Terms and Conditions of the
Bidding disseminated by petitioner PUREFOODS constitutes the
“advertisement” to bid on the project. The bid proposals or
quotations submitted by the prospective suppliers including
respondent FEMSCO, are the offers. And,
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694
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8 G.R. No. 124045, 21 May 1998, 290 SCRA 532, citing Romero v. Court of
Appeals, G.R. No. 107207, 23 November 1995, 250 SCRA 223, and Lim v. Court of
Appeals, G.R. No. 118347, 24 October 1996, 263 SCRA 569.
695
As can be inferred from the actual phrase used in the first portion of the
letter, the decision to award the contract has already been made. The letter
only serves as a confirmation of such decision. Hence, to the Court’s mind,
there is already an acceptance made of the offer received by Purefoods.
Notwithstanding the terms and conditions enumerated therein, the offer has
been accepted and/or amplified the details of the terms and conditions
contained in the Terms and Conditions of Bidding given out by Purefoods to
9
prospective bidders.
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9 Decision of the appellate court, pp. 7-8; Decision of the trial court, p. 5.
10 Art. 1320, Civil Code.
696
the price of the project two (2) months alter the 12 December 1992
letter can be deemed as nothing more than a pressure being exerted
by petitioner PUREFOODS on respondent FEMSCO to lower the
price even after the contract had been perfected. Indeed from the
facts, it can easily be surmised that petitioner PUREFOODS was
haggling for a lower price even after agreeing to the earlier
quotation, and was threatening to unilaterally cancel the contract,
which it eventually did. Petitioner PUREFOODS also makes an
issue out of the absence of a purchase order (PO). Suffice it to say
that purchase orders or POs do not make or break a contract. Thus,
even the tenor of the subsequent letter of petitioner PUREFOODS,
i.e., “Pure Foods Corporation is hereby canceling the award to your
company of the project,” presupposes that the contract has been
perfected. For, there can be no cancellation if the contract was not
perfected in the first place.
Petitioner PUREFOODS also argues that it was never in bad
faith. On the contrary, it believed in good faith that no such contract
was perfected. We are not convinced. We subscribe to the factual
findings and conclusions of the trial court which were affirmed by
the appellate court—
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11 Decision of the appellate court, pp. 9-10; Decision of the trial court, pp. 5-6.
697
698
SO ORDERED.
——o0o——
699