Rustan Pulp vs.
IAC machinery were discovered prompting the Japanese supplier
Summary: A paper mill started operations and accepted offers
to supply raw materials from several suppliers. One supplier
executed a contract with the paper mill with a condition that the
paper mill has the right to stop accepting deliveries whenever
the supply was sufficient. The paper mill exercised that right,
but continued accepting periodic deliveries from other
suppliers.
Rule of Law: When the fulfillment of the condition depends on
the sole will of the debtor, the conditional obligation shall be
void.
—Article 1182, Civil Code.
Facts: When Rustan Pulp & Paper Mills (D) started operations
Romeo Lluch (P) offered to supply raw materials. Rustan Pulp
(D) proposed a non-exclusive contract to buy wood pulp from
Lluch (P). However, a condition in the contract gave Rustan
Pulp (D) the right to stop accepting deliveries when the supply
became sufficient until such time the raw materials are
needed.
During the test run of the pulp mill, major defects on the
of the machinery to recommend the stoppage of the deliveries.
The suppliers were informed to stop deliveries, but were not
informed as to the reasons for the stoppage.
Lluch (P) sought to clarify the tenor of the notice as to whether
stoppage of delivery or termination of the contract of sale was
intended, but Rustan Pulp (D) failed to reply. This alleged
ambiguity notwithstanding, Lluch (P) and the other suppliers
resumed deliveries after a series of talks between Lluch (P)
and Romeo Vergara, the manager of Rustan Pulp (D).
Later, Lluch (P) filed a complaint for breach of contract. The
case was dismissed, but at the same time, the court enjoined
Rustan Pulp (D) to honor the contract. On appeal, the court
ruled that Rustan Pulp's (D) suspension of deliveries was not
in the lawful exercise of its rights under the contract of sale.
Issues: Is the suspension of deliveries by Rustan (D) a proper
exercise of its rights under the contract of sale?
Ruling: No. There is basis for the apprehension on the illusory
resumption of deliveries at Rustan Pulp (D) because the
prerogative suggests a condition solely dependent upon its
exclusive will. The literal import of contested condition is that
Rustan Pulp (D) can stop delivery of pulp wood from Lluch (P)
if the supply at the plant is sufficient as ascertained by Rustan
Pulp (D), subject to re-delivery when the need arises as
determined likewise by Rustan Pulp (D).

A purely potestative imposition of this character must be

obliterated from the face of the contract without affecting the
rest of the stipulations considering that the condition relates to
the fulfillment of an already existing obligation and not to its
inception (Civil Code Annotated, by Padilla, 1987 Edition,
Volume 4, Page 160).

A condition which is both potestative (or facultative) and

resolutory may be valid, even though the saving clause is left
to the will of the obligor as this Court ruled in Taylor vs. Uy
Tieng Piao (43 Phil. 873). But the Taylor case, which allowed a
condition for unilateral cancellation dependent on the arrival of
factory machinery, cannot be applied because the facts relate
to the birth of the undertaking and not to the fulfillment of an
existing obligation.
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* Keywords: potestative condition