Case Summary (G.R. No. 11491)
Contract Formation and Terms
On January 24, 1911, Quiroga and Parsons entered into an exclusive-distribution agreement for “Quiroga” beds in the Visayan Islands. The agreement provided that Quiroga would invoice beds at Manila prices less a 25% discount as Parsons’s commission. Parsons was to order by the dozen, pay within sixty days of shipment, and bear inland freight, insurance, and unloading costs. Quiroga would cover transportation to port and grant a 2% discount for accelerated or cash payments. Price adjustments required fifteen days’ notice, benefiting Parsons on any price decrease but preserving locked‐in prices on increases for existing orders. Parsons agreed to sole representation, advertising expenses, and potential expansion rights under Articles 2 and 3. The contract was unlimited in duration but terminable by ninety days’ prior notice.
Issues Presented
Quiroga sued Parsons for breach of several obligations he characterized as agency duties: maintaining an open Iloilo establishment, keeping beds on public display, ordering only by the dozen, paying advertising costs, and refraining from selling at prices above invoice. The sole legal question was whether Parsons’s role was that of purchaser or sales agent. If an agent, Parsons owed implied duties of commercial representation; if a purchaser, Parsons owed only the obligations expressly stated.
Classification of Contract: Purchase and Sale vs. Agency
Contract classification depends on essential clauses reflecting its cause and subject matter. The agreement obliged Quiroga to supply beds and Parsons to pay stipulated prices within defined terms, with discounts for prompt payment. Those reciprocal obligations—delivery of goods against payment—characterize a contract of sale. Under the law, an agency contract would obligate the agent to deliver sale proceeds to the principal and return unsold goods, which Parsons did not do.
Examination of Contractual Clauses
A detailed clause-by-clause review revealed no express agency obligations. Clause A’s “commission on sales” was defined as a discount on the invoice price. The terms on payment, pricing notice, and territorial exclusivity were fully consistent with a sale contract, not an agency arrangement. References to “agency” and “exclusive agent” in Articles 2 and 3 merely described Parsons’s territorial market rights, not a contractual mandate to act on Quiroga’s behalf.
Testimony and Extrinsic Evidence
Quiroga relied on testimony from Ernesto Vidal, former Parsons vice-president, who claimed to have drafted the contract as an agency agreement. The court emphasized that a contract’s legal nature is determined by its terms, not the drafter’s subjective intent. Parsons offered conflicting testimony from a corporate director who drafted the agreement. Even accepting Vidal’s subjective belief, the contract’s clear features created a sale, not an agency.
Performance, Waiver, and Interpretati
...continue readingCase Syllabus (G.R. No. 11491)
Facts of the Case
- On January 24, 1911, Andres Quiroga (plaintiff/appellant) and J. Parsons (party of the second part) entered into a written contract in Manila.
- Parsons’s rights and obligations under that contract were later subrogated by Parsons Hardware Co. (defendant/appellee).
- The agreement granted J. Parsons exclusive rights to sell “Quiroga” beds in the Visayan Islands under specified terms.
- Quiroga sued Parsons Hardware Co., alleging breach of various obligations he claimed were implied in the contract.
Contract Provisions
- Article 1(A): Quiroga to supply beds at Manila prices minus 25% “commission,” invoiced by the dozen.
- Article 1(B): Parsons to pay for beds within 60 days of shipment.
- Article 1(C): Quiroga to bear inland transport; Parsons to pay freight, insurance, and unloading costs.
- Article 1(D): A 2% prompt-payment discount if Parsons pays before maturity or in cash.
- Article 1(E): Price alterations require 15 days’ notice; pending orders benefit only from price reductions, not increases.
- Article 1(F): Parsons must sell only “Quiroga” beds.
- Article 2: In exchange for Parsons’s advertising expenses, Quiroga grants him right of first refusal for exclusive agency outside the Visayan group.
- Article 3: Parsons may open branches or appoint sub-a