Case Summary (G.R. No. 128066)
Key Dates and Applicable Law
- Bidding pre-conference: November 1992.
- Award letter to FEMSCO: December 12, 1992.
- Cancellation of award: December 22, 1992.
- Trial court resolution (JARDINE’s demurrer): June 27, 1994.
- Trial court decision (PUREFOODS’s liability): July 28, 1994.
- Court of Appeals decision: August 14, 1996; motions denied January 31, 1997.
- Supreme Court decision: June 19, 2000.
- Governing law: 1987 Constitution (decision date post-1990), Civil Code (Arts. 1315, 1318, 1320, 1326), Rules on Contracts and Damages.
Factual Background and Contract Formation
PUREFOODS invited bids to supply/install two generators. FEMSCO, Monark, and Advance Power submitted compliant offers with 5 % bid bonds. On December 12, 1992, PUREFOODS sent FEMSCO a letter “confirming award” subject to six “basic terms and conditions” (contract price, specifications, material quality, completion deadline with liquidated damages, bonds/insurance, one-year warranty). FEMSCO furnished performance bond and all-risk insurance; PUREFOODS acknowledged receipt and returned FEMSCO’s bid bond. On December 22, 1992, PUREFOODS unilaterally canceled the award, citing newly discovered factors, and promptly contracted with JARDINE.
Offer, Acceptance, and Perfection of Contract
Under Civil Code Art. 1326, bidding terms are invitations to offer; bid proposals are offers; letters awarding contracts are acceptances. PUREFOODS’s December 12 letter unequivocally accepted FEMSCO’s November 20 proposal, binding both parties. The enumerated terms governed performance—not perfection—of the contract. Even if characterized as a “conditional counter-offer,” FEMSCO’s timely posting of performance bond and insurance, and PUREFOODS’s acknowledgment, constituted express or implied acceptance, perfecting the contract.
Bad Faith in Award Cancellation and Remedies
By unilaterally canceling a perfected contract and awarding to JARDINE, PUREFOODS acted in bad faith, contrary to good faith and fair dealing required by law. FEMSCO incurred engineering expenses and suffered reputational harm. The trial court awarded (a) P2,300,000 for engineering services; (b) US$14,000 (or peso equivalent) and P900,000 for installation mark-up; (c) attorney’s fees (20 %); and (d) costs. The Court of Appeals affirmed these awards and granted additional moral (P2,000,000) and exemplary (P1,000,000) damages for PUREFOODS’s bad faith.
Inducement Claim against Jardine Davies, Inc.
FEMSCO alleged JARDINE tortiously induced PUREFOODS to breach its contract. The trial court’s demurrer to evidence dismissal was reversed by the Court of Appeals, which imposed P2,000,000 moral damages on JARDINE. On review, the Supreme Court found no specific evidence of prior knowledge or inducement by JARDINE; similarity of design and lower price alone were insufficient to prove malice or activ
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Case Syllabus (G.R. No. 128066)
Facts of the Case
- In late 1992, amid a national power crisis, Pure Foods Corporation (“PUREFOODS”) called for bids to supply and install two 1500 KW generators at its Marikina plant.
- Eight prospective bidders attended a pre‐bidding conference; three submitted proposals with 5% bid bonds: Far East Mills Supply Corporation (“FEMSCO”), Monark, and Advance Power.
- On December 12, 1992, PUREFOODS sent FEMSCO a letter confirming award of the lump‐sum contract of ₱6,137,293.00 (VAT inclusive) under specified terms and conditions.
- FEMSCO promptly posted a 30% performance bond (₱1,841,187.90) and All Risk Insurance (₱6,137,293.00); PUREFOODS acknowledged receipt on December 18 and returned FEMSCO’s ₱1,000,000.00 bid bond.
- On December 22 1992, PUREFOODS unilaterally canceled the award, citing “significant factors” warranting re‐bidding; it then awarded the job to Jardine Davies Inc. (“JARDINE”), which had not participated in the original bidding.
- FEMSCO protested and, when rebuffed, sued PUREFOODS for breach of contract and JARDINE for tortious interference.
Procedural History
- At trial, after FEMSCO’s presentation, JARDINE filed a Demurrer to Evidence; the Pasig RTC granted it on June 27 1994 and dismissed FEMSCO’s complaint against JARDINE.
- The RTC, on July 28 1994, found PUREFOODS liable for (a) ₱2,300,000.00 as value of engineering services; (b) US$14,000.00 (or peso equivalent) and ₱900,000.00 contractor’s markup; (c) 20% attorney’s fees; and costs. It dismissed PUREFOODS’s counterclaim.
- Both FEMSCO and PUREFOODS appealed. On August 14 1996, the Court of Appeals (CA) unanimously:
• Affirmed the July 28 decision against PUREFOODS, and
• Reversed the June 27 resolution, holding JARDINE liable for inducing breach and awarding FEMSCO ₱2,0