ANDRES QUIROGA, vs. PARSONS HARDWARE CO.

,
GR No. L-11491 August 23, 1918

FACTS:

On January 24, 1911, Manila, a contract was entered into by and Quiroga, and J. Parsons (to whose rights and
obligations the present defendant later subrogated itself), for the exclusive sale of "Quiroga" beds in the Visayan
Islands.

The contract only stipulates that J.Parsons should pay Quiroga within 6 months upon the delivery of beds.
Quiroga filed a case against Parsons for allegedly violating the following stipulations:
a. not to sell the beds at higher prices than those of the invoices;
b. to have an open establishment in Iloilo;
c. itself to conduct the agency;
d. to keep the beds on public exhibition,
e. to pay for the advertisement expenses for the same; and
f. to order the beds by the dozen and in no other manner*.
With the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other
manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the
contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said
obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser
or an agent of the plaintiff for the sale of his beds.

ISSUE:
WON the contract between them was one of agency, not sale

HELD:
NO. The contract is one of purchase and sale, and not of commercial agency.

In order to classify a contract, due attention must be given to its essential clauses. In the contract in
question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the
defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the
price in the manner stipulated. Payment was to be made at the end of sixty days, or before, at the plaintiff’s
request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be
allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There
was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay
their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or
agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from
the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the
contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay
their price within the term fixed, without any other consideration and regardless as to whether he had or had not
sold the beds.

Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be
considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant
case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to
another.
In respect to the defendant’s obligation to order by the dozen, the only one expressly imposed by the
contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might
place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for
having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the
defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of
action are not imposed upon the defendant, either by agreement or by law.

GONZALO PUYAT & SONS, INC., vs. ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco),
G.R. No. L-47538 June 20, 1941

FACTS:

 "Teatro Arco" is a corporation engaged in the business of operating cinematographs. In 1930, its name was changed to Arco
Amusement Company. C. S. Salmon was the president, while A. B. Coulette was the business manager. About the same
time, Gonzalo Puyat & Sons, Inc., was acting as exclusive agents in the Philippines for the Starr Piano Company of
Richmond, Indiana, U.S. A. It would seem that this last company dealt in cinematographer equipment and machinery, and
the Arco Amusement Company desiring to equipt its cinematograph with sound reproducing devices, approached Gonzalo
Puyat & Sons, Inc., thru its then president and acting manager, Gil Puyat, and an employee named Santos.
 It was agreed after some negotiations that Arco Amusement Company would order sound reproducing equipment from the
Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 per cent
commission, plus all expenses, such as, freight, insurance, banking charges, cables, etc
 At the expense of the plaintiff, the defendant sent a cable, to the Starr Piano Company, inquiring about the equipment
desired and making the said company to quote its price without discount. A reply was received by Gonzalo Puyat & Sons,
Inc., with the price, evidently the list price of $1,700 f.o.b. factory Richmond, Indiana. The defendant did not show the
plaintiff the cable of inquiry nor the reply but merely informed the plaintiff of the price of $1,700.

 Being agreeable to this price, the plaintiff, by means of a letter signed by C. S. Salmon dated November 19, 1929, formally
authorized the order. The equipment arrived about the end of the year 1929, and upon delivery of the same to the plaintiff
and the presentation of necessary papers, the price of $1.700, plus the 10% commission agreed upon and plus all the
expenses and charges, was duly paid by the plaintiff to the defendant.

 Sometime the following year, Arco Amusement Company placed another order for sound reproducing equipment to Gonzalo
Puyat & Sons, Inc. on the same terms as the first order. This agreement or order was confirmed by the plaintiff by its letter
without date, that is to say, that the plaintiff would pay for the equipment the amount of $1,600, which was supposed to be
the price quoted by the Starr Piano Company, plus 10% commission, plus all expenses incurred. The equipment under the
second order arrived in due time, and the defendant was duly paid the price of $1,600 with its 10% commission, and $160,
for all expenses and charges. This amount of $160 does not represent actual out-of-pocket expenses paid by the defendant,
but a mere flat charge and rough estimate made by the defendant equivalent to 10% of the price of $1,600 of the equipment.

 About three years later, the officials of the Arco Amusement Company discovered that the price quoted to them by the
defendant with regard to their two orders mentioned was not the net price but rather the list price, and that the defendants
had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery
and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant
were much too high including the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction
from the defendant or rather a reimbursement, and failing in this they brought the present action.

RTC:
The contract between the petitioner and the respondent was one of outright purchase and sale, and absolved that petitioner
from the complaint.

CA: (by a division of four, with one justice dissenting)

The relation between petitioner and respondent was that of agent and principal, the petitioner acting as agent of the
respondent in the purchase of the equipment in question, and sentenced the petitioner to pay the respondent alleged
overpayments in the total sum of $1,335.52 or P2,671.04, together with legal interest thereon from the date of the filing of the
complaint until said amount is fully paid, as well as to pay the costs of the suit in both instances.
The appellate court further argued that even if the contract between the petitioner and the respondent was one of purchase
and sale, the petitioner was guilty of fraud in concealing the true price and hence would still be liable to reimburse the
respondent for the overpayments made by the latter. (by a division of four, with one justice dissenting)

ISSUE:
WON the contract between Gonzalo Puyat and Arco Amusement is an Agency to merit Arco Amusement a reimbursement or
is an Outright Purchase and Sale Contract that would absolve Gonzalo Puyat of the case.

HELD:
The contract between Gonzalo Puyat and Arco Amusement is an Outright Purchase and Sale Contract and not
one of agency.

In the first place, the contract is the law between the parties and should include all the things they are supposed to
have been agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's
talk", which cannot bind either party. The letters, by which the respondent accepted the prices of $1,700 and $1,600,
respectively, for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit
no other interpretation that the respondent in question at the prices indicated which are fixed and determinate.

The contract is the law between the parties and should include all the things they are supposed to have agreed upon.
The letters, by which Arco accepted the prices of $1,700 and S1,600 plus the commission and other expenses for the sound
reproducing equipment are clear in their terms and admit of no other interpretation than that Arco agreed to purchase from
Gonzalo Puyat the equipment in question at the prices indicated which are fixed and determinate. Arco admitted in its
complaint filed with the CFI that Gonzalo Puyat agreed to sell to it the first sound reproducing equipment and machinery.
Whatever unforeseen events might have taken place unfavorable to Arco, such as change in prices, mistake in their quotation,
or failure of Starr Piano to properly fill the orders as per specifications, Gonzalo Puyat might still legally hold Arco to the prices
fixed. This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in
agency, the agent is exempted from all liability in the discharge of his commission provided that he acts in accordance with the
instructions received from his principal and the principal must indemnify the agent for all damages which the latter may incur in
carrying out the agency without fault or imprudence on his part. To hold the petitioner an agent of the respondent in the
purchase of the equipment from Starr Piano is incompatible with the fact that the petitioner is the exclusive agent of the same
company in the Phils. It is out of the ordinary for one to be the agent of both the vendor and the vendee. It follows that Gonzalo
Puyat as a vendor is not bound to reimburse Arco as vendee for any difference between the cost price and the sales price
which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which
merchants or middlemen would not exist.
FAR EASTERN EXPORT & IMPORT CO., vs. LIM TECK SUAN,
G.R. No. L-7144 May 31, 1955

FACTS:

ISSUE:

HELD:

FACTS:
Ignacio Delizalde, an agent of the Far Eastern Export& Import Company, went to the store of Lim TeckSuan in
Manila and offered to sell textile. Having arrived at an agreement with Bernardo Lim,General Manager of Lim
Teck Suan, Delizalde returned with a buyer†™s order. Suan established a letter of credit in favour ofFrenkel
International Corporation through HSBC. The textile arrived and was received by Suan, butcomplained to Far
Eastern of the inferior quality of the textile. Upon the instruction of Far Eastern, Suan depositedthe goods in a
warehouse and withdrew the sameand was offered for sale. The net direct loss is nowbeing claimed against Far
Eastern. The defense set up is that Far Eastern only acted as abroker in this transaction. The lower
court acquitted Far Eastern. CA reversed the judgment, basing its decision ofreversal on the case of Jose
Velasco v. UniversalTrading where the transaction therein involved wasfound by the court to be one of purchase
and saleand not of brokerage or agency Issue: WON the Far Eastern Company not only an agent of the Frenkel
Corporation but also the agent of or broker for Suan? Held: The Supreme Court, speaking through Justice
Montemayor, held that it could only be an agent of the former. Said the Court: ". . . where a foreign company has
an agent here selling its goods and merchandise, that same agent could not very well act as agent for local
buyers, because the interests of his foreign principal and those of the buyer would be in direct conflict. He could
not serve two masters at the same time." In holding that the transaction was one of purchase and sale and not
one of brokerage or agency, the Court noticed the following similarities between the present case and the Velasco
case: (1) Here, the Far Eastern company acted as agent for Frenkel Corporation, the supplier of the textile sold; in
the Velasco case, the Universal Trading Co. was acting as agent for Wilson Co., the supplier of the whisky sold;
(2) In this instant case, Suan was merely commissioning the export company to procure for him the textile, just as
in the other case, Velasco was supposed to be ordering the whisky through the Universal Trading Co.; (3) In the
present case, the price was paid for by Suan by means of an irrevocable letter of credit in favor of the supplier. In
the other case, Velasco was allowed either to open a similar letter of credit in favor of the supplier or make a cash
deposit; (4) Although in the Velasco case, the buyer there refused to receive the whisky shipped, and that in the
present case Suan received the goods, the latter nonetheless made an immediate protest and later sold the
merchandise at a lose; (5) The present case was even a stronger one than that of the other case for holding the
transaction as one of purchase and sale because the agreement in the present case spoke of the merchanise
therein involved as sold, and the sale was even confirmed by the Far Eastern Company; (6) In both cases, the
agents dealt directly with the local buyers without expressly revealing their principals; (7) In both cases, there was
no privity of contract between the local buyers and the foreign firms; and that (8) In both cases, no commission
was paid or agreed to be paid by the buyers to the Far Eastern company and the universal Trading Co., proof that
there was no agency or brokerage as between them.