Johannes Schuback & Sons Philippine Trading Corp. v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Johannes Schuback & Sons Philippine Trading Corporation (petitioner) was contacted by private respondent Ramon San Jose, Jr. (private respondent) for the purchase of MAN bus spare parts from Germany. Private respondent submitted a list of desired parts on October 16, 1981. Petitioner provided quotations and submitted a formal offer on December 17, 1981. On December 24, 1981, private respondent expressed his desire to avail of the current prices and enclosed Purchase Order No. 0101 dated December 14, 1981, promising to submit quantities later. On December 29, 1981, private respondent submitted the quantities and wrote on the purchase order, "NOTE: Above P.O. will include a 3% discount. The above will serve as our initial P.O." Petitioner immediately ordered the items from its trading partner, Schuback Hamburg, which in turn ordered from a supplier in Germany. Schuback Hamburg sent a proforma invoice on January 4, 1982, for the opening of a letter of credit in its favor. An order confirmation was later sent by Schuback Hamburg to petitioner and received by private respondent on February 3, 1982. Petitioner reminded private respondent to open the letter of credit on February 16, 1982, to avoid delays. Private respondent cited difficulties in securing dollar allocations and applying for the letter of credit. Schuback Hamburg paid for partial deliveries from its supplier. On October 18, 1982, petitioner again reminded private respondent, threatening to endorse the case to lawyers. Private respondent denied making a valid Purchase Order and claimed no definite contract existed. Petitioner proposed proceeding with the order, opening a letter of credit, or canceling with a 30% cancellation fee. Schuback Hamburg issued a Statement of Account and Debit Note to petitioner for DM 51,917.81, representing cancellation fee, storage, and interest, which was deducted from petitioner's account. Demand letters from petitioner's counsel were unheeded. Procedural History: Petitioner filed a complaint for damages against private respondent. The trial court ruled in favor of petitioner, ordering private respondent to pay actual compensatory damages and unearned profits. The Court of Appeals reversed the trial court's decision, dismissing the complaint and ruling that no contract of sale was perfected due to a lack of meeting of the minds on the price. The Petition: Petitioner questions the reversal by the Court of Appeals of the trial court's ruling that a contract of sale had been perfected.
Issue(s)
Whether a contract of sale was perfected between the parties, considering the elements of offer, acceptance, object, and price. Whether the Court of Appeals erred in reversing the trial court's decision, particularly regarding the necessity of a definite quantity, confirmed price, and the opening of a letter of credit for the perfection of the contract.
Ruling
The petition is GRANTED. The decision of the Court of Appeals is REVERSED and the decision of the trial court dated June 13, 1988, is REINSTATED with modification. The Court ruled that a contract of sale was perfected.
Ratio Decidendi
On the perfection of a contract of sale: The Court reiterated that a contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price, citing Article 1475 of the Civil Code. Consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. In this case, the offer was made by the petitioner on December 17, 1981, and the private respondent's acceptance occurred on December 24, 1981, when he expressed his desire to avail of the prices and enclosed his Purchase Order. The object of the contract was the spare parts, and the consideration was the price stated in the petitioner's offer. The subsequent submission of quantities on December 29, 1981, and the request for a 3% discount further indicated acceptance and a meeting of the minds on the essential elements of the contract. The immediate ordering of the items by the petitioner from its supplier demonstrated concurrence with the discount requested by the vendee, solidifying the perfection of the contract. On the absence of a definite quantity and price confirmation, and the failure to open a letter of credit: The Court clarified that while the quantity was made determinate only on December 29, 1981, quantity is immaterial in the perfection of a sales contract. What is of importance is the meeting of the minds as to the object and cause, which had already occurred as of December 24, 1981. The Court found the Court of Appeals' pronouncement that there was no confirmed price on or about the last week of December 1981 and/or the first week of January 1982 to be erroneous, as the price was established in the petitioner's offer dated December 17, 1981, and implicitly accepted by the respondent on December 24, 1981, with the subsequent request for a discount. The immediate action taken by the petitioner to order the goods further confirmed the existence of a perfected agreement at the old price. The Court held that the private respondent's failure to open an irrevocable letter of credit did not prevent the perfection of the contract. The opening of a letter of credit is not a suspensive condition, and the facts did not show that the petitioner reserved title to the goods until the letter of credit was opened. The Court emphasized that the opening of a letter of credit in favor of a vendor is merely a mode of payment and not an essential requirement for the perfection of a contract of sale as enumerated in Articles 1305 and 1474 of the Civil Code. To make the contract dependent on the opening of a letter of credit would be untenable, especially since the private respondent sought to avail of old prices that were available only for a limited period.
Main Doctrine
A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. The absence of a letter of credit, which is merely a mode of payment, does not prevent the perfection of the contract of sale.