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AND LEASE Contract of Agency

Title GR No. L-11491
Quiroga v. Parsons Date: August 23, 1918
Ponente: AVANCEA, J.
ANDRES QUIROGA Plaintiff-Appellant PARSONS HARDWARE, CO. Defendant-Appellee
Nature of the case: Distinction between a contract of sale and a contract of agency
On January 24, 1911, a contract was entered into between plaintiff and defendant (to whose rights and
obligations the present defendant later subrogated itself), with the obligation, on the part of the
defendant, 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 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.
Whether or not the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an
agent of the plaintiff for the sale of his beds. -- NO
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.

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 are precisely the essential features of a contract of purchase and sale. 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.

It would be enough to hold, 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. The words commission
on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere
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 Islands.

Only the 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 agreements are clearly set forth and plainly
show that the contract belongs to a certain kind and not to another.
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:


ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J.
Parsons under the following conditions:

(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
and allowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; 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.

(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 from 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.

(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 Mr. Parsons in case anyone should apply for the exclusive agency for any island not
comprised with 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.
2E 2017 2018 (LUZURIAGA)