ALEGARME, JASON JOHN V.

ANDRES QUIROGA v. PARSONS HARDWARE CO.

G.R. No. L-11491 August 23, 1918

Facts
On January 24, 1911, plaintiff and the respondent entered into a contract making the
latter an “agent” of the former. The contract stipulates that Don Andres Quiroga, herein
petitioner, grants exclusive rights to sell his beds in the Visayan region to J. Parsons. The
contract only stipulates that J. Parsons should pay Quiroga within 6 months upon the delivery
of the beds.

Quiroga files a case against Parsons for allegedly violating the following stipulations:
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. 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, reduced 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 for the sale of his beds.

Issue
Whether or not the contract is a contract of agency or of sale.

Held
The contract is one of sale. The Court held that in order to classify a contract, due
attention 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 stipulated. 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 it, 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.

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, the Court is 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.
ALEGARME, JASON JOHN V.

KER & CO., LTD. v. LINGAD

G.R. No. L- 20871 April 30, 1971

Facts
Petitioner was assessed by then Commissioner of Internal Revenue Melencio R.
Domigno the sum of P20,272.33 as the commercial broker’s percentage tax, surcharge and
compromise penalty from July 1, 1949 - December 31, 1953. Petitioner requested its
cancellation but such request was turned down. When the CTA reviewed it, it held the
petitioner is liable except for compromise penalty amounting to P500. The total liability now
is P19, 772.33. Such liability arose from the contract of the petitioner with United States
Rubber International. The petitioner is the distributor of the products of the said company.
The shipment would cover products for consumption in Cebu, Bohol, Leyte, Samar, Jolo,
Negros and Mindanao except Davao.

Petitioner was precluded from selling in other than those mentioned places unless they
secured consent to the company. There was a stipulation in the contract whereby the said
company shall, from time to time, consign to the distributor and the distributor will receive,
accept and or hold upon consignment the products specified under the terms of such
agreement in such quantities and in the judgment of the company that may be successful in
the solicitation and maintenance of business. All goods in consignment shall remain with the
company until sold by petitioner but all sales made by the petitioner shall be in his name. It
was further agreed that the contract does not constitute the petitioner the agent of the
company for any purpose. The petitioner did have the right to assume authority that will bind
the company. However under the stipulation in the contract, the distributor can only sell it
within the stipulated limits, that it merely receives, accepts and holds upon consignment the
products which will remain in the custody of the company, that distributor shall promote the
products, that the sales are subject to the approval of the company, that the company may ask
for inventory any time and that after the termination of the agreement all goods held on
consignment by petitioner for the account of the company until their disposition is provided
by the latter.
 Issue
Whether or not the contract between Ker & Co. and United States Rubber
International was that of an agency.

Held
Yes. The Court ruled that all the circumstances are irreconcilably antagonistic to the
idea of an independent merchant. Since the company retained ownership of the goods, even
as it delivered possession unto the dealer for resale to customers and terms of which were
subject to the company’s control, the relation between the company and the dealer is one of
agency. Distinguish from contract of sale: the price paid in the transfer of an agreement or
title is the essence of sale. If such transfer puts the transferee in the attitude of an owner and
makes him liable to the transferor as a debtor for an agreed price, it is a contract of sale. The
essence of agency to sell is the delivery to an agent not as his property but as the property of
the principal who remains the owner and had the right to control sales, fix price and terms
and demand proceeds.

Ker and Co is only an agent of the US rubber because it can dispose of the products of
the Company only to certain persons or entities and within stipulated limits, unless excepted
by the contract or by the Rubber Company, it merely receives, accepts and/or holds upon
consignment the products, which remain properties of the latter company, every effort shall
be made by petitioner to promote in every way the sale of the products and that sales made by
petitioner are subject to approval by the company. Since the company retained ownership of
the goods, even as it delivered possession unto the dealer for resale to customers, the price
and terms of which were subject to the company’s control, the relationship between the
company and the dealer is one of agency.
ALEGARME, JASON JOHN V.

SPS. VILORIA v. CONTINENTAL AIRLINES, INC.

G.R. No. 188288 January 16, 2012

Facts
In 1997, while the spouses Viloria were in the United States, they approached Holiday
Travel, a travel agency working for Continental Airlines, to purchase tickets from Newark to
San Diego. The travel agent, Margaret Mager, advised the couple that they cannot travel by
train because it was already fully booked; that they must purchase plane tickets for
Continental Airlines; that if they won’t purchase plane tickets; they’ll never reach their
destination in time. The couple believed Mager’s representations and so they purchased two
plane tickets worth $800.00.

Later however, the spouses found out that the train trip wasn’t really fully booked and
so they purchased train tickets and went to their destination by train instead. Then they called
up Mager to request for a refund for the plane tickets. Mager referred the couple to
Continental Airlines. As the couple was now in the Philippines, they filed their request with
Continental Airline’s office in Ayala. The spouses Viloria alleged that Mager misled them
into believing that the only way to travel was by plane and so they were fooled into buying
expensive plane tickets.

Continental Airlines refused to refund the amount of the tickets and so the spouses
sued the airline company. In its defense, Continental Airlines claimed that the tickets sold to
them by Mager were non-refundable; that, if any, they were not bound by the
misrepresentations of Mager because there’s no contract of agency existing between
Continental Airlines and Mager.

Issue
Whether or not a contract of agency exists between Continental Airlines and Mager.
 Held
Yes. The Court held that all the elements of agency are present, to wit:
• there is consent, express or implied of the parties to establish the relationship;
• the object is the execution of a juridical act in relation to a third person;
• the agent acts as a representative and not for himself, and
• the agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not deny that it
concluded an agreement with Holiday Travel to which Mager is part of, whereby Holiday
Travel would enter into contracts of carriage with third persons on the airlines’ behalf. The
third element is also present as it is undisputed that Holiday Travel merely acted in a
representative capacity and it is Continental Airlines and not Holiday Travel who is bound by
the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is
also present considering that Continental Airlines has not made any allegation that Holiday
Travel exceeded the authority that was granted to it.

Continental Airlines also never questioned the validity of the transaction between
Mager and the spouses. Continental Airlines is therefore in estoppel. Continental Airlines
cannot be allowed to take an altogether different position and deny that Holiday Travel is its
agent without condoning or giving imprimatur to whatever damage or prejudice that may
result from such denial or retraction to Spouses Viloria, who relied on good faith on
Continental Airlines’ acts in recognition of Holiday Travel’s authority. Estoppel is primarily
based on the doctrine of good faith and the avoidance of harm that will befall an innocent
party due to its injurious reliance, the failure to apply it in this case would result in gross
travesty of justice.