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[No. 11491. August 23, 1918.]


ANDRES QUIROGA, plaintiff and appellant,
PARSONS HARDWARE Co., defendant and appellee.

vs.

1. 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.
2. ID. ID.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

502

502

PHILIPPINE REPORTS ANNOTATED


Quiroga vs, Parsons Hardware Co.

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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.
3. ID. ID.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.
4.

ID. ID.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.
5. ID. ID.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.

APPEAL from a judgment of the Court of First Instance of


Manija. Abreu, J.
The facts are stated in the opinion of the court.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for
appellant.
Crossfield & O'Brien for appellee.
AVANCENA, J.:
On January 24, 1911, in this city of Manila, a contract in
the following tenor was entered into by and between the
plaintiff, as party of the first part, and J. Parsons (to whose
rights and obligations the present defendant later
subrogated itself), as party of the second. part:
"CONTBACT EXECUTED BY AND BETWEEN ANDRES
QUIROGA AND
J. PAKSONS, BOTH MERCHANTS ESTABLISHED
IN MANILA,
FOR THE EXCLUSIVE SALE OF 'QUIROGA' BEDS
IN THE VI
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SAYAN ISLANDS.
"ARTICLE 1. Don Andres Quiroga grants the exclusive
right to sell his beds in the Visayan Islands to J. Parsons
under the following conditions:
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Quiroga vs. Parsons Hardware Co.

" (A) Mr. Quiroga shall furnish beds of his manufacture


to Mr. Parsons for the latter's establishment in
Iloilo, and shall invoice them at the same price he
has fixed for sales, in Manila, and, in the invoices,
shall make an allowance of a discount of 25 per cent
of the invoiced. prices, as commission on the sales
and, Mr. Parsons shall order the beds by the dozen,
whether of the same or of different styles.
"(B) Mr, Parsons binds himself to pay Mr. Quiroga for
the beds received, within a period of sixty days from
the date of their shipment.
"(C) The expenses for transportation and shipment shall
be borne by M. Quiroga, and the freight, insurance,
and cost of unloading from the vessel at the point
where the beds are received, shall be paid by Mr.
Parsons.
"(D) If, before an invoice falls due, Mr. Quiroga should
request its payment, said payment when made
shall be considered as a prompt payment, and as
such a deduction of 2 per cent shall be made f rom
the amount of the invoice. "The same discount shall
be made on the amount of any invoice which Mr.
Parsons may deem convenient to pay in cash.
"(E) Mr. Quiroga binds himself to give notice at least
fifteen days before hand of any alteration in price
which he may plan to make in respect to his beds,
and agrees that if on the date when such alteration
takes effect he should have any order pending to be
served to Mr. Parsons, such order shall enjoy the
advantage of the alteration if the price thereby be
lowered, but shall not be affected by said alteration
if the price thereby be increased, for, in this latter
case, Mr. Quiroga assumed the obligation to invoice
the beds at the price at which the order was given.
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"(F) Mr. Parsons binds himself not to sell any other kind
except the 'Quiroga' beds.
"ART. 2. In compensation for the expenses of
advertisement which, for the benefit of both contracting
parties, Mr. Parsons may find himself obliged to make, Mr.
Quiroga assumes the obligation to offer and give the
preference to
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PHILIPPINE REPORTS ANNOTATED


Quiroga vs. Parsons Hardware Co.

Mr. Parsons in case anyone should apply for the exclusive


agency for any island not comprised within the Visayan
group.
"ART. 3. Mr. Parsons may sell, or establish branches of
his agency for the sale of 'Quiroga' beds in all the towns of
the Archipelago where there are no exclusive agents, and
shall immediately report such action to Mr. Quiroga for his
approval.
"ART. 4. This contract is made for an unlimited period,
and may be terminated by either of the contracting parties
on a previous notice of ninety days to the other party."
Of the three causes of action alleged by the plaintiff in
his complaint, only two of them constitute the subject
matter of this appeal and both substantially amount to the
averment that the 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. As may be seen, with the exception of the
obligation on the part of the defendant to order the beds by
the dozen and in no other manner, none of the obligations
imputed to the defendant in the two causes of action 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. The whole question, therefore, reduces
itself to a determination as to whether the defendant, by
reason of the contract hereinbefore transcribed, was a
purchaser or an agent of the plaintiff f or the sale of his
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beds.
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
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Quiroga vs. Parsons Hardware Co.

stipulated. The price agreed upon was the one determined


by the plaintiff for the sale of these beds in Manila, with a
discount of from 20 to 25 per cent, according to their class.
Payment was to be made at the end of sixty days, or before,
at the plaintiff s request, or in cash, if the defendant so
preferred, and in these last two cases an additional
discount was to be allowed for prompt payment. 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 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 if, he returns it. By virtue of
the contract between the plaintiff and the defendant, the
latter, on receiving the beds, was necessarily obliged to pay
their price within the term fixed, without any other
consideration and regardless as to whether he had or had
not sold the beds.
It would be enough to held, as we do, that the contract
by and between the defendant and the plaintiff is one of
purchase and sale, in order to show that it was not one
made on the basis of a commission on sales, as the plaintiff
claims it was, for these contracts are incompatible with
each other. But, besides, examining the clauses of this
contract, none of them is found that substantially supports
the plaintiff's contention. Not a single one of these clauses
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
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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 plaintiff's beds in the Visayan
IslandsT. With regard to the remaining clauses, the least
that can be said is that they are not incompatible with the
contract of purchase and sale.
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PHILIPPINE REPORTS ANNOTATED


Quiroga vs. Parsons Hardware Co.

The plaintiff calls attention to the testimony of Ernesto


Vidal, a former vicepresident of the defendant corporation
and who established and managed the latter's business in
Iloilo. It appears that this witness, prior to the time of his
testimony, had serious trouble with the defendant, had
maintained a civil suit against it, and had even accused one
of its partners, Guillermo Parsons, of falsification. He
testified that it was he who drafted the contract Exhibit A,
and, when questioned as to what was his purpose in
contracting with the plaintiff, replied that it was to be an
agent for his beds and to collect a, commission on sales.
However, according to the def endant's evidence, it was
Mariano Lopez Santos, a director of the corporation, who
prepared Exhibit A. But, even supposing that Ernesto
Vidal has stated the truth, his statement as to what was
his idea in contracting with the plaintiff is of no
importance, inasmuch a$ the agreements contained in
Exhibit A which he claims to have drafted, constitute, as
we have said, a contract of purchase and sale, and not one
of commercial agency. This only means that Ernesto Vidal
was mistaken in his classification of the contract. But 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 plaintiff also endeavored to prove that the
defendant had returned beds that it could not sell that,
without previous notice, it forwarded to the defendant the
beds that it wanted and that the defendant received its
commission for the beds sold by the plaintiff directly to
persons in Iloilo. But all this, at the most only shows that,
on the part of both of them, there was mutual tolerance in
the performance of the contract in disregard of its terms
and it gives no right to have the contract considered, not as
the parties stipulated it, but as they performed it. Only the
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acts of the contracting parties, subsequent to, and in


connection with, the execution of the contract, must be
considered for the purpose of interpreting the contract,
when such interpretation is necessary, but not when, as in
the instant case, its essential
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VOL. 38, AUGUST 23, 1918

507

Quiroga vs. Parsons Hardware Co.

agreements are clearly set forth and plainly show that the
contract belongs to a certain kind and not to another.
Furthermore, the return made was of certain brass beds,
and was not effected in exchange for the price paid for
them, but was for other beds of another kind and for the
purpose of making this return, the defendant, in its letter
Exhibit L1, requested the plaintiff s prior consent with
respect to said beds, which shows that it was not
considered that the defendant had a right, by virtue of the
contract, to make this return. As regards the shipment of
beds without previous notice, it is insinuated in the record
that these brass beds were precisely the ones so shipped,
and that, for this very reason, the plaintiff agreed to their
return. And with respect to the socalled commissions, we
have said that they merely constituted a discount on the
invoice price, and the reason for applying this benefit to the
beds sold directly by the plaintiff to persons in Iloilo was
because, as the defendant obligated itself in the contract to
incur the expenses of advertisement of the plaintiff's beds,
such sales were to be considered as a result of that
advertisement.
In respect to the defendant's obligation to order by the
dozen, the only one expressly imposed by the contract, the
effect of its breach 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.
For the foregoing reasons, we are of opinion that the
contract by and between the plaintiff and the defendant
was one of purchase and sale, and that the obligations the
breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by
law.
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The judgment appealed from is affirmed, with costs


against the appellant. So ordered.
Arellano, C. J., Torres, Johnson, Street, and Malcolm,
JJ., concur.
Judgment affirmed.
508

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PHILIPPINE REPORTS ANNOTATED


Whitaker vs. Rafferty.

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