REPUBLIC ACT No. 7653 THE NEW CENTRAL BANK ACT Section 60. Legal Character.

- Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided, however, That a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account. CIRCULAR NO. 537 Series of 2006 Pursuant to Section 52 of Republic Act No. 7653 and Monetary Board Resolution No. 862 dated 6 July 2006, the maximum amount of coins to be considered as legal tender is adjusted as follows: One thousand pesos (P1,000.00) for denominations of 1-Piso, 5-Piso and 10-Piso coins; and One hundred pesos (P100.00) for denominations of 1-sentimo, 5-sentimo, 10-sentimo, and 25sentimo coins. This Circular shall take effect after fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation. FOR THE MONETARY BOARD: AMANDO M. TETANGCO, JR. Governor -----------------San Miguel Properties vs. Huang (G.R. No. 137290) It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. Was it an earnest deposit? NO. At the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. It does not satisfy Article 1482. The stages of a contract of sale are as follows: (1) negotiation, (2) perfection, and (3) consummation. The alleged indubitable evidence of a perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner. There was also failure to agree on the manner of payment. The manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil

Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. Agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Vicenta Cantemprate et al., vs. CRS Realty Dev't. Corp. et al. G.R. No. 171399 May 8, 2009 Petitioners bought on an installment basis subdivision lots from respondent CRS Realty and had paid in full the agreed purchase prices; but notwithstanding the full payment and despite demands, respondents failed and refused to deliver the corresponding certificates of title to petitioners. They alleged that respondent Casal was the owner of a parcel of land situated in General Mariano Alvarez, Cavite known as the CRS Farm Estate while respondent Salvador was the president of respondent CRS Realty, the developer of CRS Farm Estate. Petitioners averred that respondents failed to deliver the titles to their respective properties. Casal averred that despite his willingness to deliver them, petitioners refused to accept the certificates of title with notice of lis pendens covering the subdivision lots. Respondent Salvador alleged that the failure by respondent Casal to comply with his obligation under the first agreement to deliver to CRS or the buyers the certificates of title was caused by the annotation of the notice of lis pendens on the certificate of title covering the subdivision property. HLURB Arbiter Ma. Perpetua Y. Aquino declared that the regular courts and not the HLURB had jurisdiction over petitioners complaint, thus, the complaint for quieting of title could not be given due course. The Heirs of Laudiza and Ligon were dropped as parties on the ground of lack of cause of action. However, she found respondents CRS Realty, Casal and Salvador liable on their obligation to deliver the certificates of title of the subdivision lots to petitioners who had paid in full the purchase price of the properties. She also found as fraudulent and consequently nullified the subsequent transfer of a portion of the subdivision to respondents Ang and Cuason. Issues: (1) whether or not the absence of a license to sell has rendered the sales void; (2) whether or not the subsequent sale to respondent Cuason and Ang constitutes double sale; (3) whether or not the HLURB has jurisdiction over petitioners complaint; and (4) whether a minute decision conforms to the requirement of Section 14, Article VIII of the Constitution. Ruling: 1. The only requisite for a contract of sale or contract to sell to exist in law is the meeting of minds upon the thing which is the object of the contract and the price, including the manner the price is to be paid by the vendee. The absence of the license to sell does not affect the validity of the already perfected contract of sale between petitioners and respondent CRS Realty.

2. The HLURB has exclusive jurisdiction over the complaint for specific performance to compel respondents CRS Realty, Casal and Salvador as subdivision owners and developers to deliver to petitioners the certificates of title after full payment of the subdivision lots. On this score, the Court affirms the findings of HLURB Arbiter Aquino with respect to the obligation of respondents Casal, Salvador and CRS Realty to deliver the certificates of title of the subdivision to petitioners pursuant to their respective contracts to sell.

On January 14, 1985, the Corporation filed the instant case5 for specific performance seeking to compel Cortes to deliver the TCTs and the original copy of the Deed of Absolute Sale. According to the Corporation, despite its readiness and ability to pay the purchase price, Cortes refused delivery of the sought documents. There is no doubt that the contract of sale in question gave rise to a reciprocal obligation of the parties. Reciprocal obligations are those which arise from the same cause, and which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Issue: whether there is delay in the performance of the parties' obligation that would justify the rescission of the contract of sale The settled rule is that the decisive factor in evaluating an agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement. As such, therefore, documentary and parol evidence may be submitted and admitted to prove such intention.10 In the case at bar, the stipulation in the Deed of Absolute Sale was that the Corporation shall pay in full the P2,200,000.00 down payment upon execution of the contract. However, as correctly noted by the Court of Appeals, the transcript of stenographic notes reveal Cortes' admission that he agreed that the Corporation's full payment of the sum of P2,200,000.00 would depend upon his delivery of the TCTs of the three lots. In fact, his main defense in the Answer is that, he performed what is incumbent upon him by delivering to the Corporation the TCTs and the carbon duplicate of the Deed of Absolute Sale, but the latter refused to pay in full the down payment. Since Cortes did not perform his obligation to have the Deed notarized and to surrender the same together with the TCTs, the trial court erred in concluding that he performed his part in the contract of sale and that it is the Corporation alone that was remiss in the performance of its obligation. Actually, both parties were in delay. Considering that their obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the Corporation therefore gave rise to a compensation morae or default on the part of both parties because neither has completed their part in their reciprocal obligation.20 Cortes is yet to deliver the original copy of the notarized Deed and the TCTs, while the Corporation is yet to pay in full the agreed down payment of P2,200,000.00. This mutual delay of the parties cancels out the effects of default,21 such that it is as if no one is guilty of delay. Congregation of the Religious of the Virgin Mary vs. Orola

There is no question that respondents Casal, Salvador and CRS Realty breached their obligations to petitioners under the contracts to sell. It is settled that a breach of contract is a cause of action either for specific performance or rescission of contracts.Respondents Casal, Salvador and CRS Realty have the obligation to deliver the corresponding clean certificates of title of the subdivision lots, the purchase price of which have been paid in full by petitioners. That the subject subdivision property is involved in a pending litigation between respondent Casal and persons not parties to the instant case must not prejudice petitioners. 3. As regards petitioners prayer to declare them the absolute owners of the subdivision lots, the HLURB had no jurisdiction to declare petitioners as absolute owners of the subdivision lots as against the Heirs of Laudiza who filed an action for reconveyance against respondent Casal, which is still pending before the RTC. 4. The decision of the OP does not violate the mandate of Section 14, Article VIII of the Constitution, which provides that No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. The OP decision ruled that the findings of fact and conclusions of law of the office a quo are amply supported by substantial evidence and that it is bound by said findings of facts and conclusions of law and hereby adopt(s) the assailed resolution by reference. The Court finds these legal bases in conformity with the requirements of the Constitution. The Court has sanctioned the use of memorandum decisions, a species of succinctly written decisions by appellate courts in accordance with the provisions of Section 40, B.P. Blg. 129 on the grounds of expediency, practicality, convenience and docket status of our courts. The Court has declared that memorandum decisions comply with the constitutional mandate. ANTONIO R. CORTES (in his capacity as Administrator of the estate of Claro S. Cortes), petitioner, vs. HON. COURT OF APPEALS and VILLA ESPERANZA DEVELOPMENT CORPORATION, respondents. The antecedents show that for the purchase price of P3,700,000.00, the Corporation as buyer, and Cortes as seller, entered into a contract of sale over the lots located at Baclaran, Paraaque, Metro Manila. On various dates in 1983, the Corporation advanced to Cortes the total sum of P1,213,000.00. Sometime in September 1983, the parties executed a deed of absolute sale Said Deed was retained by Cortes for notarization.

G.R. No. 169790, April 30, 2008 Nachura, J. Facts: On April 1999, petitioner, acting through Sr. Fe Enhenco, and respondents mets to talk about the sale of the property of respondents adjacent to St. Marys Academy. Said property is Lot 159-B-2

which is registered in the name of Manuel Laserna. Josepehine Orola went to Manila on May, 1999 for the subject property and was enetertained by Ma. Clarita Balleque. A contract to sale was made between the parties where petitioners are bounde to pay the property for Php. 5,555,000.00 with 10% of the total consideration payable upon the execution of the contract. This was signed by Sr. Enhenco as witness. On June 7, 1999, Josephine and Antonio receieved the RCBC check bearing the amount of P555,550.00 as down payment by petitioner. An extrajudicial settlement was executed for the estate of Trinidad Andrada Laserna adjudicating to themselves the subject property. Transfer Certificates were now under their names. With an undated Absolute Deed of Sale, respondents scheduled to meet with petitioner for the remaining balance. Petitioner did not arrive. They instead refused to pay respondents due to unreasonable grounds. This made respondents file a complaint before the RTC with alternative causes of action or rescission. RTC granted respondets.On appeal, the matter was resolved by the appellate court through Article 1378 of the New Civil Code. Issue: Whether or not Article 1191 should be applied instead of Article 1378 of the New Civil Code. Held: Yes. Such case falls under Article 1191 because it applies to breach of reciprocal obligations. Article 1191 speaks of the remedy of rescission in reciprocal obligations. In the present case, when RVM refused to pay the balance which breached the contract, respondents have availed of the remedies granted by Article 1191. They are entitled to damages regardless of the relief that would be granted by the Court. Hence, the court should apply Article 1191 of the New Civil Code. Gaite vs. Fonacier (G.R. No. L-11827 July 31, 1961) Facts: Defendant-appellant Fonacier was the owner/holder of 11 iron lode mineral claims, known as the Dawahan Group, situated in Camrines Norte. By Deed of Assignment, Respondent constituted and appointed plaintiff-appellee Gaite as attorney-in-fact to enter into contract for the exploration and development of the said mining claims on. On March 1954, petitioner executed a general assignment conveying the claims into the Larap Iron Mines, which owned solely and belonging to him. Thereafter, he underwent development and the exploitation for the mining claims which he estimates to be approximately 24 metric tons of iron ore. However, Fonacier decide to revoke the authority given to Gaite, whereas respondent assented subject to certain conditions. Consequently a revocation of Power of Attorney and Contract was executed transferring P20k plus royalties from the mining claims, all rights and interest on the road and other developments done, as well as , the right to use of the business name, goodwill, records, documents related to the mines. Furthermore, included in the transfer was the rights and interest over the 24K+ tons of iron ore that had been extracted. Lastly the balance of P65K was to be paid for covering the first shipment of iron ores. To secure the payment of P65k, respondent executed a surety bond with himself as principal, the Larap Mines and Smelting Co. and its stockholder as sureties. Yet, this was refused by petitioner. Appelle further required another bond underwritten by a bonding company to secure the payment of the balance. Hence a second bond was produced with Far Eastern Surety as an additional surety, provided the liability of Far Eastern would only prosper when there had been an actual sale of the

iron ores of not less than the agreed amount of P65k, moreover, its liability was to automatically expire on December 1955. On December 1955, the second bond had expired and no sale amounting to the stipulation as prior agreed nor had the balance been paid to petitioner by respondent. Thus such failure, prompted petitioner to file a complaint in the CFI of Manila for the payment of the balance and other damages. The Trial Court ruled in favor of plaintiff ordering defendant to pay the balance of P65k with interest. Afterwards an appeal was affected by the respondent where several motions were presented for resolution: a motion for contempt; two motions to dismiss the appeal for becoming moot and academic; motion for a new trial, filed by appellee Gaite. The motion for contempt was held unmeritorious, while the rest of the motions were held unnecessary to resolve Held: The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment. A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price),but each party anticipates performance by the other from the very start. While in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the companys stockholders, but also on one by a surety company; and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000.00. Assuming that there could be doubt whether by the wording of the contract the parties indented a suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules of interpretation would incline the scales in favor of the greater reciprocity of interests, since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides: If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests. There can be no question that greater reciprocity obtains if the buyer obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, that if such obligation were viewed as non-existent or not binding until the ore was sold. Buenaventura vs CA Facts: Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-

defendant children. The petitioners contend that there was no actual valid consideration and that assuming that there was consideration in the sums reflected the properties are more than threefold times more valuable than the small sums appearing therein. The RTC ruled in favor of the defendants and dismissed the case. RTCs ruling was affirmed by CA. Hence the appeal. Issue:Whether or not there was a valid consideration in the deeds of sale Held: If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. Article 1470 of the Civil Code further provides: Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. CELESTINO CO & COMPANY vs. COLLECTOR OF INTERNAL REVENUE G.R. No. L-8506 August 31, 1956 Facts: Celestino Co & Company is a duly registered general copartnership doing business under the trade name of Oriental Sash Factory. From 1946 to 1951 it paid percentage taxes of 7% on the gross receipts of its sash, door and window factory. However in 1952 it began to claim liability only to the contractors 3 per cent tax (instead of 7 per cent) under section 191 of the same Code. It alleges primarily that it is an ordinary contractor, presenting as evidence letters, sketches and price quotations sent by the manager to four customers who allegedly made special orders to doors and window from the said factory. It contended that it does not manufacture ready-made doors, sash and windows for the public but only upon special order of its select customers. Issue: 1) WON Co & Co. is a manufacturer or contractor? MANUFACTURER, hence still liable for 7% tax. 2) WON Is Co & Co.s business a matter of contract of sale or contract of piece of work? SALE. Held:

1) The important thing to remember is that Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it manufactures the same is practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually to manufacture. The Oriental Sash Factory does nothing more than sell the goods that it massproduces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its customers may desire. 2) Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is contract for a piece of work. When it accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it-it thereby contracts for a piece of work filing special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work nothing is shown to call them special requiring extraordinary service of the factory. Oriental Sash Factory did not merely sell its services to Teodoro & Co. It sold materials ordinarily manufactured by it sash, panels, mouldings to Teodoro & Co., although in such form or combination as suited the fancy of the purchaser. Such new form does not divest the Oriental Sash Factory of its character as manufacturer. Neither does it take the transaction out of the category of sales under Article 1467 above quoted, because although the Factory does not, in the ordinary course of its business, manufacture and keep on stock doors of the kind sold to Teodoro, it could stock and/or probably had in stock the sash, mouldings and panels it used therefor. Supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a contractor. But as the doors and windows had been admittedly manufactured by the Oriental Sash Factory, such transactions could be, and should be taxed as transfers thereof under section 186 of the National Revenue Code. COMMISSIONER OF INTERNAL REVENUE vs. ENGINEERING EQUIPMENT G.R. No. L-27044 June 30, 1975 Facts: Engineering Equipment and Supply Co., an engineering and machinery firm, is engaged in the design and installation of central type air conditioning system, pumping plants and steel fabrications. CIR received an anonymous letter denouncing Engineering for tax evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due thereon in connivance with its foreign suppliers. Engineering was likewise denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar allocations. So, NBI and Central Bank conducted a raid and search on which

occasion voluminous records of the firm were seized and confiscated. CIR also reported about deficiency advance sales tax. CIR assessed against the Company payment of the increased amount and suggested that P10,000 be paid as compromise in extrajudicial settlement of the Companys penal liability for violation of the Tax Code. The firm, however, contested the tax assessment and requested that it be furnished with the details and particulars of the Commissioners assessment.Engineering appealed the case to the Court of Tax Appeals. During the pendency of the case the investigating revenue examiners reduced the Companys deficiency tax. CTA declared that Engineering is a contractor and is exempt from deficiency manufacturers sales tax. The Commissioner, not satisfied with the decision of the CTA, appealed to the Supreme Court. Issue: 1) WON Engineering Equipment is a manufacturer or contractor? CONTRACTOR. 2) Corrollarily WON the installation of a centralized air-conditioning system a contact of sale or a contract for piece of work? CONTRACT FOR PIECE OF WORK. 3) Is Celestino Co vs. CIR case applicable in this case? NO. Held: 1) The word contractor has come to be used with special reference to a person who, in the pursuit of the independent business, undertakes to do a specific job or piece of work for other persons, using his own means and methods without submitting himself to control as to the petty details. The true test of a contractor is that when he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished. Engineering did not manufacture air conditioning units for sale to the general public, but imported some items (as refrigeration compressors in complete set, heat exchangers or coils) which were used in executing contracts entered into by it. Engineering undertook negotiations and execution of individual contracts for the design, supply and installation of air conditioning units of the central type taking into consideration in the process such factors as the area of the space to be air conditioned; the number of persons occupying or would be occupying the premises; the purpose for which the various air conditioning areas are to be used; and the sources of heat gain or cooling load on the plant such as sun load, lighting, and other electrical appliances which are or may be in the plan. Relative to the installation of air conditioning system, Engineering designed and engineered complete each particular plant and that no two plants were identical but each had to be engineered separately. 2) NATURE OF OBJECT TEST: The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one NOT in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has

been the subject of sale to some other persons even if the order had not been given. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at defendants request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendants order for it. The air conditioning units installed in a central type of air conditioning system would not have existed but for the order of the party desiring to acquire it and if it existed without the special order of Engineerings customer, the said air conditioning units were not intended for sale to the general public. Hence, it is a contract for a piece of work. 3) Celestino Co compared to Engineering Equipment: Points of discussion: 1) Advertisement as manufacturer/contractor 2) Ready-made materials In Celestino Co, the Court held the taxpayer to be a manufacturer rather than a contractor of sash, doors and windows manufactured in its factory. From the very start, Celestino Co intended itself to be a manufacturer of doors, windows, sashes etc. as it did register a special trade name for its sash business and ordered company stationery carrying the bold print ORIENTAL SASH FACTORY. As a general rule, sash factories receive orders for doors and windows of special design only in particular cases, but the bulk of their sales is derived from ready-made doors and windows of standard sizes for the average home, which sales were reflected in their books of accounts totalling P118,754.69 for the period of only nine (9) months. The Court found said sum difficult to have been derived from its few customers who placed special orders for these items. In the present case, the company advertised itself as Engineering Equipment and Supply Company, Machinery Mechanical Supplies, Engineers, Contractors and not as manufacturers. It likewise paid the contractors tax on all the contracts for the design and construction of central system. Similarly, it did not have ready-made air conditioning units for sale. QUIROGA V. PARSONS HARDWARE CO. August 23, 1918 Facts A contract was entered into by and between Andres Quiroga (plaintiff) and J. Parsons (defendant) for the exclusive sale of Quiroga beds in the Visayan Islands. Plaintiff alleges that defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. However, none of the obligations, except for that part of the defendant to order the beds by the dozen and no other manner, 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.

Issue Whether Parsons, by reason of the contract, was a purchaser or an agent of Quiroga for the sale of his beds Held The contract by and between the plaintiff and the defendant was one of purchase and sale. Ratio In order to classify a contract, due regard 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. 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. Not a single one of the clauses in the contract necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiffs beds in the Visayan Islands. The testimony of the person who drafted this contract, to the effect that his purpose was to be an agent for the beds and to collect a commission on the sales, is of no importance to prove that the contract was one of agency, inasmuch as the agreements contained in the contract constitute, according to law, covenants of purchase and sale, and not of commercial agency. It must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties. GONZALO PUYAT & SONS VS. ARCO AMUSEMENT COMPANY June 20, 1941 Keywords: discounted price of sound reproducing equipment not disclosed; Arco Amusement seeks reimbursement. Facts: In 1929, Arco Amusement Company (formerly known as Teatro Arco) was engaged in the business of operating cinematographs. Around 1930, Arco Amusement approached Gonzalo Puyat & Sons, Inc., the exclusive agents in the Phils of the Starr Piano Company (of Richmond, Indiana, USA) to negotiate with them their intent to buy sound reproducing equipment from Starr Piano through Gonzalo Puyat & Sons. After some negotiations, the parties agreed that Gonzalo Puyat & Sons would order the equipment from Starr Piano and Arco Amusement would pay Gonzalo Puyat, in addition to the price of the equipment, a 10% commission, plus expenses, such as freight, insurance, banking charges, cables etc.

In ordering the equipment, Gonzalo Puyat & Sons was able to get a discounted price from Starr Piano. However, Gonzalo Puyat did not inform Arco Amusement of the discounted price, and still billed them the list price of $ 1,700 plus the 10% commission and the expenses incurred in ordering the equipment. Arco Amusement paid the bills and then placed another order for a second sound reproducing equipment, which was quoted at $1,600 plus commission and other expenses. Arco paid the amount assessed by Gonzalo Puyat. 3 years later, Arco Amusement discovered that the price quoted to them by Gonzalo Puyat was not the net price but was rather the list price and that Gonzalo Puyat obtained a discount from Starr Piano. They sought for reimbursement of what they have paid Gonzalo Puyat by filing a case for reimbursement. CFI of Manila held that the contract between the petitioner and the respondent was one of outright purchase and sale, and absolved Gonzalo Puyat from the complaint. CA reversed the decision of the CFI, holding that the relation between Gonzalo Puyat and Arco Amusement was that of an agent and a principal, and sentenced Gonzalo Puyat to reimburse Arco Amusement of all the alleged overpayments in the total sum of $1,335.52 or Php 2,671.04 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 Ratio: 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. Yuson vs Vitan 12 LO V KJS ECO-FORMWORK SYSTEM PHIL., INC. (Agency to Sell Calinisan)Facts:A) KJS Eco-Framework (KJS)is engaged in the sale of steel scaffoldings.B) Sonny Lo, doing business under the name Sans Enterprises, is a building contractor.C) Lo ordered scaffolding equipment from KJS to be paid on installment.D) Lo was only able to pay 2 of the 10 installment payments.E) Lo executed a Deed of Assignment, whereby he assigned to respondent his receivables from the JomeroRealty Corporation (JRC).F) JRC refused to pay KJS since Lo also owed him money.G) Lo refuses to pay KJS since allegedly, his obligation is already extinguished when they executed the Deed of Assignment. Issue: W/N Los obligation is already extinguished Held: A) No. SC upheld the CA.a. Lo failed to comply with his warranty under the Deed.b. The object of the deed did not exist at the time of the transaction, rendering it void pursuant to Art1409c. Lo violated the terms of the Deed of Assignment when he failed to execute and do all acts and deedsas shall be necessary to effectually enable the respondent to recover the collectiblesB) assignment sale; dation saleC) It may well be that the assignment of credit, which is in the nature of a sale of personal property, producedthe effects of a dation in payment which may extinguish the obligation. However, as in any other contract of sale, the vendor or assignor is bound by certain warranties.a.

Art 1628: The vendor in good faith shall be responsible for the existence and legality of the credit atthe time of the sale, unless it should have been sold as doubtful; but not for the solvency of thedebtor, UNLESS it has been so expressly stipulated or unless the insolvency was prior to the sale andof common knowledge.D) Lo, as vendor or assignor, is bound to warrant the existence and legality of the credit at the time of the saleor assignment. He should make good his warranty.E) By warranting the existence of the credit, Lo should be deemed to have ensured the performance thereof incase the sake is later found to be inexistent. He should be held liable to pay to KJS the amount of hisindebtedness.