Jardine Davies Inc. v. Court of Appeals and Far East Mills Supply Corporation
REITERATIONFacts
The Antecedents: Pure Foods Corporation (PUREFOODS) decided to install two generators due to power failures. A bidding process was conducted, and respondent Far East Mills Supply Corporation (FEMSCO) submitted a bid proposal. PUREFOODS, through a letter dated December 12, 1992, confirmed the award of the contract to FEMSCO, subject to certain basic terms and conditions. FEMSCO submitted the required performance bond and contractor's all-risk insurance, which PUREFOODS acknowledged. FEMSCO also made arrangements with its principal and purchased necessary materials. However, PUREFOODS, through a letter dated December 22, 1992, unilaterally canceled the award, citing uncovered significant factors. FEMSCO protested the cancellation. Subsequently, PUREFOODS awarded the project to Jardine Nell, a division of Jardine Davies, Inc. (JARDINE), which was not among the original bidders. Procedural History: FEMSCO sued PUREFOODS for breach of contract and JARDINE for tortious interference. The Regional Trial Court (RTC) granted JARDINE's Demurrer to Evidence, dismissing the case against it. The RTC later ordered PUREFOODS to indemnify FEMSCO for engineering services rendered, contractor's mark-up, and attorney's fees, noting the impossibility of compelling PUREFOODS to honor the contract due to its agreement with JARDINE. Both parties appealed. The Court of Appeals (CA) affirmed the RTC's decision regarding PUREFOODS but reversed the dismissal of the case against JARDINE, ordering JARDINE to pay FEMSCO moral damages for inducing PUREFOODS to violate its contract. PUREFOODS and JARDINE filed separate motions for reconsideration, which were denied. Hence, these consolidated petitions for review. The Petition: PUREFOODS argued that its letter to FEMSCO was a qualified acceptance or counter-offer, not a perfected contract, and thus it was within its rights to revoke it. JARDINE asserted it had no prior knowledge of the contract between PUREFOODS and FEMSCO and did not induce PUREFOODS to violate it, also questioning FEMSCO's entitlement to moral damages as a corporation. The main issues were whether a perfected contract existed between PUREFOODS and FEMSCO, and if so, whether JARDINE induced PUREFOODS to breach it.
Issue(s)
Whether a perfected contract was formed between PUREFOODS and FEMSCO. Whether JARDINE induced PUREFOODS to violate its contract with FEMSCO. Whether FEMSCO, as a corporation, is entitled to moral damages. Whether the awards for moral and exemplary damages were excessive.
Ruling
The Supreme Court ruled that a perfected contract existed between PUREFOODS and FEMSCO. It affirmed the decision ordering PUREFOODS to pay FEMSCO for engineering services, contractor's mark-up, and attorney's fees. However, it reversed the Court of Appeals' decision ordering JARDINE to pay FEMSCO moral damages, finding insufficient evidence of inducement. The Court also modified the awards for moral and exemplary damages against PUREFOODS.
Ratio Decidendi
On the existence of a perfected contract: The Court held that a perfected contract was formed between PUREFOODS and FEMSCO. It clarified that advertisements for bidders are invitations to make proposals, and the bid proposals are the offers. PUREFOODS' letter dated December 12, 1992, confirming the award to FEMSCO, was deemed a categorical acceptance of FEMSCO's offer. The enumerated "basic terms and conditions" were considered prescriptions on the performance of the obligation, not conditions precedent to the perfection of the contract. The Court distinguished between conditions on perfection and conditions on performance, citing Babasa v. Court of Appeals. Even if considered a "conditional counter-offer," FEMSCO's submission of the performance bond and all-risk insurance, and PUREFOODS' acknowledgment thereof, constituted implied acceptance. The Court found that PUREFOODS acted in bad faith by unilaterally canceling the perfected contract, which was further aggravated by its subsequent contract with JARDINE. On JARDINE's inducement: The Court found no specific evidence on record to support the claim that JARDINE induced PUREFOODS to violate its contract with FEMSCO. The similarity in designs and JARDINE's lower quotation were deemed insufficient to prove inducement. Therefore, the award of moral damages against JARDINE was reversed and set aside for insufficiency of evidence. On FEMSCO's entitlement to moral damages: The Court affirmed that a corporation, like FEMSCO, can be awarded moral damages if its reputation has been besmirched, citing previous jurisprudence. FEMSCO sufficiently showed that its reputation was tarnished due to the cancellation of the project after it had already ordered equipment. Thus, the award of moral damages was sustained. On the excessiveness of damages: While sustaining the award of moral damages, the Court reduced the amount from P2,000,000.00 to P1,000,000.00, stating that moral damages are not intended for enrichment. Similarly, the award of exemplary damages was reduced from P2,000,000.00 to P1,000,000.00, considering it was by way of example for the public good and the previous award was deemed excessive.
Main Doctrine
A contract is perfected by the meeting of the offer and acceptance upon the thing which are to constitute the contract. The acceptance must not qualify the terms of the offer; otherwise, it is a counter-offer. However, acceptance can be express or implied, and can be inferred from the contemporaneous and subsequent acts of the contracting parties. A unilateral cancellation of a perfected contract constitutes a breach and may give rise to damages.