203: ABS-CBN vs CA
FACTS:
In 1990, ABS-CBN and VIVA executed a Film Exhibition
Agreement whereby the latter gave the former an exclusive
right to exhibit 24 VIVA Films for TV telecast. Later, VIVA,
through respondent Vincent del Rosario, offered ABS-CBN a
list of 3 film packages (36 titles) from which the latter may
exercise its right of first refusal under their agreement. ABS-
CBN ticked off 10 titles therefrom.
Thereafter, in February 1992, Del Rosario offered ABS-CBN
airing rights over a package of 104 movies for P60 million. In
April, 1992, Del Rosario, and Eugenio Lopez of ABS-CBN, met
at a restaurant to discuss the package proposal. According to
Lopez, however, what they agreed upon was ABS-CBN's
exclusive film rights to 14 films for P36 million. Del Rosario
denied the same. He insisted that the discussion was on
VIVA's offer of 104 films for P60 million, to which ABS-CBN
later made a counter proposal but rejected by VIVA's Board of
Directors. Hence, VIVA later granted RBS the exclusive right to
air the 104 VIVA films, including the 14 films supposedly
granted to ABS-CBN.
ISSUE:
WON there was a perfected contract between VIVA and ABS-
CBN with regards to offer made by VIVA on Feb. 1992.
RULING:
NO. Absence of the requisites to make a valid contract.
A contract is a meeting of minds between two persons whereby
one binds himself to give something or to render some service
to another 37 for a consideration. There is no contract unless
the following requisites concur: (1) consent of the contracting
parties; (2) object certain which is the subject of the contract;
and (3) cause of the obligation, which is established. 38 A
contract undergoes three stages:
(a) preparation, conception, or generation, which is the
period of negotiation and bargaining, ending at the
moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment
when the parties come to agree on the terms of the
contract; and
(c) consummation or death, which is the fulfillment or
performance of the terms agreed upon in the contract. 39
Contracts that are consensual in nature are perfected upon
mere meeting of the minds. Once there is concurrence
between the offer and the acceptance upon the subject matter,
consideration, and terms of payment a contract is produced.
The offer must be certain. To convert the offer into a contract,
the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional,
and without variance of any sort from the proposal. A qualified
acceptance, or one that involves a new proposal, constitutes a
counter-offer and is a rejection of the original offer.
Consequently, when something is desired which is not exactly
what is proposed in the offer, such acceptance is not sufficient
to generate consent because any modification or variation from
the terms of the offer annuls the offer.
When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN
at the Tamarind Grill on 2 April 1992 to discuss the package of
films, said package of 104 VIVA films was VIVA's offer to ABS-
CBN to enter into a new Film Exhibition Agreement. But ABS-
CBN, sent, through Ms. Concio, a counter-proposal in the form
of a draft contract proposing exhibition of 53 films for a
consideration of P35 million. This counter-proposal could be
nothing less than the counter-offer of Mr. Lopez during his
conference with Del Rosario at Tamarind Grill Restaurant.
Clearly, there was no acceptance of VIVA's offer, for it was met
by a counter-offer which substantially varied the terms of the
offer. Even if it be conceded arguendo that Del Rosario had
accepted the counter-offer, the acceptance did not bind VIVA,
as there was no proof whatsoever that Del Rosario had the
specific authority to do so.
204: PALATTAO vs CA
Facts:
When respondent's lease contract expired, he filed an action
for specific performance to enforce his alleged right to
purchase the property. Pending negotiations for an amicable
settlement, the trial court issued a status quo order. Unable to
reach an amicable settlement, petitioner-lessor subsequently
filed an ejectment case against the respondent on the ground
of expiration of the period of the lease contract. Respondent
refused to vacate the leased premises claiming that there was
a perfected contract of sale of the leased property. He also
contended that the filing of the ejectment case violated their
agreement to maintain the status quo. The MTC rendered a
decision in favor of petitioner and ordered respondent to
vacate the property. The RTC and CA, however, reversed the
decision.
On appeal, the Supreme Court held that the status quo applied
only during the period of negotiations for an amicable
settlement, not for the duration of the pendency of the specific
performance case; that an injunction suit and/or specific
performance case cannot preclude the filing of, or abate, an
ejectment case; that there are no "strong reason of equity" to
sustain the suspension or dismissal of the ejectment case; that
no contract of sale was perfected because the parties failed to
agree on the extent of the lot subject of the proposed sale; and
that even assuming, that they did agree, there was
subsequently a mutual withdrawal from the contract because
respondent failed to pay the downpayment and did not insist
on the sale of the subject lot.
Ruling:
Contracts that are consensual in nature, like a contract of sale,
are perfected upon mere meeting of the minds. Once there is
concurrence between the offer and the acceptance upon the
subject matter, consideration, and terms of payment, a contract
is produced. The offer must be certain. To convert the offer into
a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the
proposal. A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and is a rejection of the
original offer. Consequently, when something is desired which
is not exactly what is proposed in the offer, such acceptance is
not sufficient to generate consent because any modification or
variation from the terms of the offer annuls the offer. In the
case at bar, while it is true that private respondent informed
petitioner that he is accepting the latter's offer to sell the leased
property, it appears that they did not reach an agreement as to
the extent of the lot subject of the proposed sale. Clearly,
therefore, private respondent's acceptance of petitioner's offer
was not absolute, and will consequently not generate consent
that would perfect a contract.
205: National Commercial Bank of Saudi Arabia vs CA
Facts:
As the case has been pending for more than nineteen years,
this Court ordered the trial court (Regional Trial Court of Makati
City) and the Court of Appeals to elevate all the records of the
case for final resolution. Upon this Court's directive, petitioner
National Commercial Bank of Saudi Arabia and the
Metropolitan Bank and Trust Co., Inc. (successor of movant
respondent Philippine Banking Corporation) filed their
memoranda. On December 7, 2004, the parties, through their
respective counsels, filed a joint motion before this Court for
approval of an undated compromise agreement which was
executed for the purpose of ending the longstanding litigation.
Issue:
WON Compromise Agreement is valid
Ruling:
Under Article 1306 of the Civil Code, contracting parties may
establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy. Thus,
a compromise agreement whereby the parties make reciprocal
concessions to resolve their differences to thereby put an end
to litigation is binding on the contracting parties and is
expressly acknowledged as a juridical agreement between
them. To be valid, the compromise agreement must be based
on real claims and actually agreed upon in good faith. Both
conditions are present in the case at bar. In clear, categorical
language, each of the parties have manifested their desire, by
forging the Compromise Agreement, to abbreviate the legal
battle and settle the case amicably to both their satisfaction. As
the Agreement is not contrary to law, public order, public policy,
morals or good customs, the same is hereby approved
206: Development Bank of the Philippines vs Perez
DBP sent a letter to Bonita Perez, informing the latter
of the approval of an industrial loan amounting to P214,000.00.
The respondents were made to sign four promissory notes
covering the total amount of the loan, P235,000.00. Three
promissory notes for P24,000.00, P48,000.00, and
P142,000.00, respectively, were executed, totaling
P214,000.00. These promissory notes were all due on August
31, 1988. A fourth promissory note due on September 19, 1988
was, likewise, executed to cover the additional loan of
P21,000.00. The promissory notes were to be paid in equal
quarterly amortizations and were secured by a mortgage
contract covering real and personal properties. On September
6, 1978, the petitioner sent a letter to the respondents
informing them of the terms for the payment of the
P214,000.00 industrial loan. On November 8, 1978, the
petitioner sent another letter to the respondents informing them
about the terms and conditions of their additional P21,000.00
industrial loan. Due to the respondents' failure to comply with
their amortization payments, the petitioner decided to foreclose
the mortgages that secured the obligation. However, in a Letter
dated October 7, 1981, Mrs. Perez requested for a
restructuring of their account due to difficulties they were
encountering in collecting receivables. The restructuring of
their accounts was approved. The loan was restructured, and
the respondents signed another promissory note in the amount
of P231,000.00 at 18% interest per annum, payable quarterly,
over a period of ten years.
Issue:
WON the new promissory note is voidable for not having been
voluntarily signed by the respondents and for being a contract
of adhesion
Held:
No. There was no evidence showing that the respondents
signed the new promissory note through mistake, violence,
intimidation, undue influence, or fraud. The respondents
merely alleged that they were forced to restructure their loan
for fear of having their mortgaged properties foreclosed.
However, it is axiomatic that this would not amount to vitiated
consent. The last paragraph of Article 1335 of the New Civil
Code specifically states that a threat to enforce ones claim
through competent authority, if the claim is just or legal, does
not vitiate consent. Foreclosure of mortgaged properties in
case of default in payment of a debtor is a legal remedy
afforded by law to a creditor. Hence, a threat to foreclose the
mortgage would not, per se, vitiate consent.
The new promissory note is a contract of adhesion. It is so-
called because its terms are prepared by only one party while
the other party merely affixes his signature signifying his
adhesion thereto. They are not invalid per se; they are not
entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his
consent.
207: Archbishop Fernando R. Capalla, etc. vs COMELEC
Winning bidder is not precluded from modifying or
amending certain provisions of the contract bidded upon.
However, such changes must not constitute substantial or
material amendments that would alter the basic parameters of
the contract and would constitute a denial to the other bidders
of the opportunity to bid on the same terms.
Facts:
Pursuant to its authority to use an Automated Election System
(AES), the Commission on Elections (COMELEC) posted and
published an invitation to apply for eligibility and to bid for the
2010 Poll Automation Project. COMELEC awarded the contract
for the project to respondent Smartmatic-TIM. Thereafter,
COMELEC and Smartmatic-TIM entered into a Contract for the
Provision of an Automated Election System for the May 10,
2010 Synchronized National and Local Elections (AES
Contract, for brevity). The contract between the COMELEC
and Smartmatic-TIM was one of lease of the AES with option
to purchase (OTP) the goods listed in the contract. In said
contract, the Comelec was given until December 31, 2010
within which to exercise the option. In a letter, Smartmatic-TIM,
through its Chairman Cesar Flores (Flores), proposed a
temporary extension of the option period to buy the PCOS
machines until March 31, 2011. The COMELEC did not
exercise the option within the extended period. Several
extensions were given for the COMELEC to exercise the OTP
until its final extension on March 31, 2012. On March 29, 2012,
the COMELEC issued a resolution resolving to accept
Smartmatic-TIMs offer to extend the period to exercise the
OTP until March 31, 2012. Archbishop Capalla, et al. thus
assailed the validity and constitutionality of the COMELEC
Resolutions for the purchase of the subject PCOS machines as
well as the Extension Agreement and the Deed of Sale
covering said goods mainly on the ground that the option
period provided for in the AES contract between the
COMELEC and Smartmatic-TIM had already lapsed and, thus,
could no longer be extended, such extension being prohibited
by the contract.
ISSUE:
Whether or not the unilateral extension of the option period
which Smartmatic-TIM granted to COMELEC and which the
latter accepted constitutes circumvention of the law on public
bidding. No
HELD:
It is a basic rule in the interpretation of contracts that an
instrument must be construed so as to give effect to all the
provisions of the contract. In essence, the contract must be
read and taken as a whole. While the contract indeed
specifically required the COMELEC to notify Smartmatic-TIM of
its OTP the subject goods until December 31, 2010, a reading
of the other provisions of the AES contract would show that the
parties are given the right to amend the contract which may
include the period within which to exercise the option. There is,
likewise, no prohibition on the extension of the period, provided
that the contract is still effective.
Considering, however, that the AES contract is not an ordinary
contract as it involves procurement by a government agency,
the rights and obligations of the parties are governed not only
by the Civil Code but also by RA 9184. In this jurisdiction,
public bidding is the established procedure in the grant of
government contracts. The award of public contracts, through
public bidding, is a matter of public policy. The parties are,
therefore, not at full liberty to amend or modify the provisions of
the contract bidded upon. A winning bidder is not precluded
from modifying or amending certain provisions of the contract
bidded upon. However, such changes must not constitute
substantial or material amendments that would alter the basic
parameters of the contract and would constitute a denial to the
other bidders of the opportunity to bid on the same terms. The
determination of whether or not a modification or amendment
of a contract bidded out constitutes a substantial amendment
rests on whether the contract, when taken as a whole, would
contain substantially different terms and conditions that would
have the effect of altering the technical and/or financial
proposals previously submitted by the other bidders. The
modifications in the contract executed between the
government and the winning bidder must be such as to render
the executed contract to be an entirely different contract from
the one bidded upon. Smartmatic-TIM was not granted
additional right that was not previously available to the other
bidders. Admittedly, the AES contract was awarded to
Smartmatic-TIM after compliance with all the requirements of a
competitive public bidding. Although the AES contract was
amended after the award of the contract to Smartmatic-TIM,
the amendment only pertains to the period within which the
COMELEC could exercise the option because of its failure to
exercise the same prior to the deadline originally agreed upon
by the parties. Hence, the amendment of the AES contract is
not substantial. More importantly, the amendment of the AES
contract is more advantageous to the Comelec and the public
208: LTB vs. Manabat
Facts: On January 20, 1956, a contract was executed whereby
the Bian Transportation Company leased to the Laguna-
Tayabas Bus Company at a monthly rental of P2,500.00 its
certificates of public convenience over the lines known as
Manila-Bian, Manila-Canlubang and Sta. Rosa-Manila, and to
the Batangas Transportation Company its certificate of public
convenience over the line known as Manila-Batangas Wharf,
together with one 'International' truck, for a period of five years,
renewable for another similar period, to commence from the
approval of the lease contract by the Public Service
Commission. On the same date the Public Service
Commission provisionally approved the lease contract on
condition that the lessees should operate on the leased lines in
accordance with the prescribed time schedule and that such
approval was subject to modification or cancellation and to
whatever decision that in due time might be rendered in the
case.
Sometime after the execution of the lease contract, the plaintiff
Bian Transportation Company was declared insolvent.
Plaintiff Bian Transportation Company, represented by
Francisco C. Manabat, then filed this action against defendants
Laguna Tayabas Bus Company and Batangas Transportation
Company for the recovery of the sum of P42,500 representing
the accrued rentals for the lease of the certificates of public
convenience of the former to the latter, corresponding to the
period from January, 1958, to May, 1959.
Laguna Bus Company and Batangas Transportation Company
refused to pay and even demanded that their rentals be
reduced since they can hardly pay the rentals on the leased
premises.
Issues: WON the lessees (LBC and BTC) may be given a
reduction of rent
Ruling:
No.
We are not at all convinced that the lease contract brought no
material advantage to the lessor for the period of suspension. It
must be recalled that the lease contract not only stipulated for
the transfer of the lessor's right to operate the lines covered by
the contract, but also for a forbearance on the part of the lessor
to operate transportation business along the same lines and
to hold a certificate for that purpose. Thus, even if the lessee
would not actually make use of the lessor's certificates over the
leased lines, the contractual commitment of the lessor not to
operate on the lines would sufficiently insure added profit to the
lessees on account of the lease contract. In other words, the
commitment alone of the lessor under the contract would
enable the lessees to reap full benefits therefrom since the
commuting public would, after all, be forced at their
inconvenience and prejudice to patronize petitioner's
remaining buses.
209: National Marketing Corp vs. Alias Development Corp
Facts:
On July 21, 1948, defendant Atlas offered to sell to
the plaintiff 8,000 metric tons of galvanized sheets at the price
of U.S. $247 per ton of 1,000 kilos, to be shipped beginning
August, 1948.
On July 24, 1948, the plaintiff made an order and
agreed to purchase the galvanized sheets offered by
defendant Atlas with the condition that the seller should furnish
a performance bond in favor of the plaintiff in the amount of
P100,000.00;
On August 5, 1948, the plaintiff and defendant Atlas
(sales broker for West India Commercial Corp. of New York
City, N.Y., U.S.A.) executed a contract of purchase and sale
wherein the said defendant obligated itself to sell 8,000 metric
tons of galvanized steel sheets, at the price of U.S. $247 per
ton of 1,000 kilos;
Under the aforementioned contract, defendant Atlas
obligated itself to furnish in favor of Pratra (who?) a
performance bond in the sum of P100,000.00 to guarantee the
faithful compliance of all the terms and conditions of the said
contract, with defendant Alto as surety;
In compliance with its undertakings in the contract,
the plaintiff on August 26, 1948, opened a letter of credit with
the Philippine National Bank for the amount of U.S.
$1,976,000.00 in favor of the West India Commercial Corp. of
New York, United States.
Defendant and West India Corp failed to deliver the
8,000 galvanized sheets.
Issues: WON the non-delivery of defendant is justifiable
Ruling:
Yes. There is a New York Supreme Court decision to
the effect that a "material variance between the letter of credit
and the sales agreement would excuse non-performance by
the seller.
No liability was incurred under the contract of purchase and
sale because of such failure to make the delivery. Such being
the case, the question of whether or not defendant Atlas, which
acted as a sales broker, could be held liable for the alleged
breach need not be passed upon.