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Quiroga v. Persons Hardware, 38 Phil.

501
Facts:
A contract was entered into between Andres Quiroga and J. Parsons, who were both merchants, which granted
the exclusive right to sell his beds in the Visayan Islands to Parsons under the following conditions: (1) There be
a discount of 2.5% as commission of the sale; (2) Parsons shall order the beds by the dozen, whether of the
same or of different styles; (3) Expenses for transportation and shipment shall be borne by Quiroga (4) Parsons
is bound to pay Quiroga for the beds received within 60 days from the date of their shipment; (5) If Quiroga
should request payment before the invoice falls due, it shall be considered as prompt payment with 2%
deduction; (6) 15-day notice must at least be given by Quiroga before any alteration in price of beds; and (7)
Parsons bind himself to only sell Quiroga beds.

Quiroga alleged that Parsons breached its contract by selling the beds at a higher price, not having an
establishment in Iloilo, not maintaining a public exhibition, and for not ordering the beds by the dozen. Only the
last imputation was provided for by the contract, the others were not stipulated.

Quiroga argued that since there was a contract of agency between them, such obligations were necessarily
implied.

Issue:
Whether the contract between them is one of agency and not of sale.

Held:
NO.
SALES; INTERPRETATION OF CONTRACT.—For the classification of contracts, due regard must be paid to
their essential clauses. In the contract in the instant case, what was essential, constituting its cause and subject
matter, was that the plaintiff was to furnish the defendant with the beds which the latter might order, at the
stipulated price, and that the defendant was to pay this price in the manner agreed upon. 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 that of the defendant, to pay their price. These features exclude the legal conception
of an agency or order to sell whereby the mandatary or agent receives 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. Held: That this contract is one of purchase and sale, and not of commercial
agency.

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.

The fact that the contracting parties did not; perform the contract in accordance with its terms, only shows mutual
tolerance and gives no right to have the contract considered, not as the parties stipulated it, but as they performed
it.

Only the acts of the contracting parties, subsequent to, and in connection with, the performance of the contract
must be considered in the interpretation of 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.

The defendant obligated itself to order the beds from the plaintiff by the dozen. Held: That the effect of a breach
of this clause by the defendant 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.