43. LORENZO SHIPPING CORP.

VS BJ MARTHEL INTERNATIONAL INC

443 SCRA 163 | Chico-Nazario, J. | November 19, 2004

Topic: Article 1169 (Delay)

DOCTRINE: When the time of delivery is not fixed or is stated in general and indefinite terms, time is not
of the essence of the contract.

FACTS

From 1987 up to the filling of the case, respondent supplied spare parts to petitioner, a domestic
corporation engaged in coastwise shipping. Sometime in 1989, petitioner asked respondent for a
quotation for various machine parts; on May 31, 1989, respondent provided a quotation which
stated, along with the items and prices, the following: delivery -within 2 months after receipt of
firm order, terms-25% upon delivery, balance payable in 5 bi-monthly equal and installment[s] not to
exceed 90 days. After approximately 6 months, petitioners issued a purchase order for one set of
cylinder liner valued at P477,000, to be used for M/V Dadiangas Express. In the purchase order,
it was indicated that the term of payment shall be “25% down payment”, but it did not state the date of
the cylinder liner's delivery. Instead of paying the down payment, petitioner issued 10 postdated checks
as full payment. On 15 January 1990, petitioner issued another purchase order for another set of cylinder
liner, and said purchase order also did not have delivery date. Respondent encountered issues with the
postdated checks as the first one was dishonored due to insufficiency of funds. After returning the 9
remaining postdated checks to petitioner, respondent opened a letter of credit and placed an order to its
principal supplier in Japan. On 20 April 1990, the two sets of cylinder liners were delivered to petitioner’s
warehouse. The payment for the two cylinder liners remained unsettled, and respondent issued a
demand letter to which petitioner responded by stating that it would only pay P150,000 because of the
delay in delivery. Respondent filed a case because petitioner refused to settle its obligation. Petitioner
countered by claiming that time was of the essence in the delivery of the cylinder liners, and respondent
failed to comply with the "within two (2) months after receipt of firm order" stipulation; thus, there was a
cancellation of orders, and the contract was validly rescinded by petitioner. The trial court ruled in favor of
petitioner, but the Court of Appeals reversed the ruling and held that there was no incurred delay in
the delivery of cylinder liners for there was no demand, judicial or extrajudicial pursuant to Article
1169 of the Civil Code.

ISSUES

1. Whether or not respondent incurred delay in performing its obligation under the contract of
sale

2. Whether or not said contract was validly rescinded by petitioner.

HELD

1. No, the respondent did not incur delay. The Court held that time is not of the essence in the
contract, as inferred from the lack of delivery date in both purchase orders issued by petitioner.
Furthermore, the petitioner did not advise the respondent of the target date of maintenance of
M/V Dadiangas Express which was supposed to be on the later part of December 1989
to early January 1990. The Court reiterated its ruling in Smith, Bell & Co., Ltd. v. Matti
which stated that “[w]hen the time of delivery is not fixed or is stated in general and indefinite
terms, time is not of the essence of the contract...” In such cases, the delivery must be made
within a reasonable time in the absence of any showing that an immediate delivery was
intended. The Court held that respondent’s delivery of the cylinder liners were considered
as “within reasonable time” given that the principal supplier was in Japan, and the
respondent was facing volume of work.
2. No, the Supreme Court held that "[e]ven where time is of the essence, a breach of the
contract in that respect by one of the parties may be waived by the other party's
subsequently treating the contract as still in force." Petitioner, despite claiming that it had already
considered the orders cancelled and the contract rescinded, still received the cylinder
liners delivered to its warehouse which shows that the contract was still considered as
subsisting up to that point. The Court stated that if petitioner cancelled the order, it had no reason
to receive said delivery and by receiving said cylinders, “petitioner indisputably waived the
claimed delay in the delivery of said items

WHEREFORE, premises considered, the instant Petition for Review on Certiorari is DENIED. The
Decision of the Court of Appeals, dated 28 April 2000, and its Resolution, dated 06 October 2000,
are hereby AFFIRMED. No costs.