August 10, 2011

Mr. Antonio Anton

Campus Director
Philippine Trade and Commerce College
Tibanga, Iligan City
Dear Mr. Anton,
This has reference to your request for legal advice regarding the issue
between Philippine Trade and Commerce College (PTCC) and the previous
canteen concessionaire of PTCC.
Extant records show that PTCC, represented by the former Campus
Director, Mr. Richard Rick, entered into a contract on July 2, 2007 with Mr.
Pepito Manaloto to be the canteen concessionaire of the said institution. The
said contract is to run for two years and the agreement between them are
these:
1. PTCC is to provide an area where Mr. Manaloto can build his canteen in
the school site and in the dormitory site located at TESDA;
2. PTCC is to make ensure the safety and security of said areas and that
Mr. Manaloto is the only food services on both areas at any time;
3. PTCC has the right to inspect and evaluate the area including the
services for contract and sanitary standards compliance;
4. Mr. Manaloto is to submit and weekly menu to PTCC and that said
menu should be posted in a conspicuous space in the canteen
premises.
5. Mr. Manaloto is to comply with the above provisions and if in case the
contract is not renewed after two years, Mr. Manaloto is to be
reimbursed 50% of the cost of the canteen buildings by the succeeding
concessionaire.
After one year of operation, the canteen operation at TESDA was
terminated due to the closure of the dormitory thus students was not
patronizing the canteen anymore. Nevetheless, Mr. Manaloto continued the
canteen operation at the campus site and even though the contract was
never renewed after two years, Mr. Manaloto still continued its operation. On
March 20, 2010, the Federated Parents Teachers Association (FPTA)opened a
new canteen operated by Bruno Marz. On April 8, 2010 Mr. Manaloto
demanded the 50% reimbursement as stated in the contract. It is your
opinion that Mr. Manaloto is not entitled to the said reimbursement since the
new canteen is not using the space that Mr. Manaloto built and that Mr.
Manaloto can actually pull out and retrieved the materials he used.
On the first issue that Mr. Manaloto violated the terms of the contract, it is
our opinion that Mr. Manaloto didnt violate said terms. RCPI v. Verchez,
et al. GR NO. 190601 enlightens that breach of contract is defined as the
failure without legal reason to comply with the terms of a contract. It is also
defined as the [f]ailure, without legal excuse, to perform any promise which
forms the whole or part of the contract. On this case, Mr. Manoloto is in good
faith observing the stipulations in the contract. It is in fact, the PTCC violated
the conditions stated in the contract since there was no due notice to inform
Mr. Manoloto that his canteen at the TESDA site will be close because of the
construction of another building. Another is, they did not restrict, ban nor

forbid any other concessionaire to use the grounds of the school property.
With the presence of Mr. Bruno Marz a new canteen concessionaire it illicit
a threat to Mr. Manoloto since, the PTCC did not inform him that there will be
another concessionaire whose going to occupy the said premises.
The law, recognizing the obligatory force of contracts, will not permit
a party to be set free from liabilit y for any kind of
m i s p e r f o r m a n c e o f t h e contractual undertaking or a contravention of
the tenor thereof. A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been lost or
suffered. (RCPI v. Verchez, et al. GR NO. 190601)
Although, as a general rule, contracts shall be obligatory, in whatever form
they may have been entered into, yet there are certain contracts falling
within the purview or scope of this rule which, by reason of their importance,
should be executed in accordance with certain formalities in order to insure
their efficacy and to protect the interests of the contracting parties as well as
that of third persons. The Civil Code, recognizing this necessity, enumerates
in Art. 1358 the different classes of contracts which must appear either in a
public or in a private document, and grants in Art. 1357 a coercive power to
the contracting parties by which they can reciprocally compel the
observance of the required form. (Pascual vs. realty Investment, Inc. 91
Phil. 257)
On second issue that Mr. Manaloto is entitled for the reimbursement of
50% of his expenses, for the building of the canteens, we are of the opinion
that he is not entitled to said reimbursement. One of the precluded
conditions between the agreement parties is that In case of non renewal
of the contract after two years, the Second Party shall be reimbursed by the
next contracting party upon assumptionxxxx It is evident and clearly
stated that there will be only reimbursement if there is the assumption of the
next contracting party. Mr. Bruno Marz the other concessionaire did not
occupy the said premises; hence there is no reimbursement for Mr. Manoloto.
Art. 1370 of the Civil Code of the Philippines stated If the terms of a
contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control. In the recent
case of Abad v. Goldloop Properties, Inc., [12] we explained: The cardinal
rule in the interpretation of contracts is embodied in the first paragraph of
Article 1370 of the Civil Code: "[i]f the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control." This provision is akin to the
"plain meaning rule" applied by Pennsylvania courts, which assumes
that the intent of the parties to an instrument is "embodied in the writing
itself, and when the words are clear and unambiguous the intent is to be
discovered only from the express language of the agreement."
On the third issue that the Campus Director can forge a contract with
canteen concessionaires on behalf of the students, we are on the opinion
that he can. Fundamentally, two or more parties can enter into a contract. A
"party" may be an individual, a group of people, or even an "artificial person"
such as a corporation. The parties to a contract must have the legal capacity
to enter into that contract. Persons who are deemed incompetent due to

physical or mental illness lack capacity to enter into contracts.(Murray,

John Edward. Murray on Contracts. 3rd ed. Charlottesville,VA:
Michie Co., 1990) Mr. Richard Rick the former Campus Director who
entered the agreement with Mr. Manoloto qualified the requirements set to
enter a valid contract. He is of legal age and has the capacity. Since he is the
Campus Director, he is cloaked with the authority vested by the school and
this allows him to represent on behalf of the students who are still minors.
The Campus Director has all the qualifications and none of the
disqualification.

On the fourth issue whether the contract entered by FPTA with the new
concessionaire, we qualify our opinion that on the terms regarding the
elements of the contract, it is valid. It is valid since the contract between the
PTCC and Mr. Manoloto has long been overdue. The two years term has
reached its limit already and it was even extended. I would like to quote from
book of
Calamari, John D. and Joseph M. Perillo. The Law of
Contracts. 3rded. St. Paul, MN: West, 1987 that A contract is
considered valid when two or more parties with capacity make an
agreement involving valid consideration to do or to refrain from doing
some lawful act. If these elements exist, the contract is valid. If one or more
of these necessary elements is missing, the contract is void or voidable. In
other words, it is not a true contract and therefore cannot be
enforced.Another is the aforementioned statement in the book of Murray,
John Edward. Murray on Contracts. 3rd ed. Charlottesville,VA:
Michie Co., 1990 that contract to be valid and legally binding ,the
agreement must specifically define the terms under which the promise can
be considered fulfilled by both parties. In addition, the agreement must
prescribe remedies for conditions unfulfilled by one of the parties involved.
Since these elements are present between the FPTA and the new
concessionaire, then the contract is valid and enforceable.
On the fifth issue that the second contract forged by FPTA violates the
rights of Mr. Manaloto, we are of the opinion that it is not valid since it
prejudices the right of Mr. Manaloto. In a legal contract, it must appear
clearly that full or complete performance has been made by one party;
nothing less will suffice, and if anything remains to be done after the
expiration of its term besides the mere payment of money, the statute would
apply (Babao vs. Perez, 54 O.G. 2888). The doctrine of partial
performance cannot be invoked since the stipulated conditions of the
contract is not vague, ambiguous and uncertain in its terms as to the
subject matter. (Babao vs. Perez, 54 O.G. 2888).On this case ,PTCC did
not duly informed Mr. Manoloto which is one of the advent of his duties, to
inform the other party to any changes or any course of action he will make.

Thus, there is the absence of the complete performance by the PTCC towards
the other party.
On the last and final issue whether there is a connection between the
former and subsequent contract which entitles Mr. Manaloto to demand that
certain provisions in the former contract be implemented against the new
concessionaire, we are of the affirmative opinion that Mr. Manaloto have the
right to demand reimbursement of his expenses. He has the right to demand
for his loss since PTCC violates the terms and conditions on their contract.
After the one year operation of Mr. Manoloto, the dormitory was been close
where the first canteen was located leaving him no choice. On this ground,
he could demand for the recovery of his loss, since there was no notice
coming from the PTCC that his business will be affected. Burnham,
William. Introduction to the Law and Legal System of theUnited
States. St. Paul, MN: West, 1995 - When a party does not fulfill the
promise made in a valid, enforceable contract at the time such fulfillment, or
"performance," is due, the contract has been "breached." At this point legal
remedy may be sought. (Legal remedy may be sought even before this time,
if a party has indicated it will not honor its previously agreed upon promise.)
Most commonly, some form of monetary compensation is sought for a
breach of contract. In some cases, the contract may have stipulated the
maximum amount of money recoverable in the event of breach. Both parties
commit violations in the agreed contract, it is our opinion that there should
be a compromise agreement between them for the recovery of their loss.
Lastly, It is an established principle in law that one who comes in equity must
come with clean hands. (Tala Realty Services Corporation vs. Banco
Filipino Savings and Mortgage Bank, G.R. No. 137533, 22 November
2002, 392 SCRA 506). One who seeks equity must do equity, and he who
comes into equity must come with clean hands. He or she who has done
inequity shall not have equity. The courts may deny equitable relief on the
ground that the conduct and actions of a party are inequitable, unfair,
dishonest, or fraudulent, or deceitful. (Miller vs. Miller, G.R. No. 149615,
29 August 2006; Abacus Security vs. Ampil, G.R. No. 160016, 27
February 2006, 483 SCRA 315.)