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ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION v.

CATHAY PACIFIC STEEL


CORPORATION
G.R. No 167942
June 29, 2010

FACTS:

Asian Construction and Development Corp. (Asian) purchased from Cathay Pacific Steel Corp. (Cathay) various
reinforcing steel bars worth P2.6M covered by a total of 12 invoices. Asian made partial payments leaving a balance
of P200,000. Cathay sent demand letters but no payment was made by Asian; prompting it to file a complaint for a
sum of money and damages with the RTC. In its answer, Asian contended among others that it had not agreed to pay
interest and attorney's fees. The RTC ordered Asian to pay the amount due. On appeal, the CA found that based on
the invoices, there is a specific amount of interest agreed upon, which is 24% per annum, and modified the RTC
decision.

ISSUE:
Are the parties bound by express stipulations in the sales invoice?

HELD:
YES. Article 1306 of the Civil Code provides that the "contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy."

In the present case, the sales invoices expressly stipulated the payment of interest and attorney's fees in case of overdue
accounts and collection suits, to wit: "Interest at 24% per annum is to be charged to all accounts overdue plus 25%
additional on unpaid invoice for attorney's fees aside from court cost, the parties expressly submit themselves to the
venue of the courts in Rizal, in case of legal proceeding."

The sales invoices are in the nature of contracts of adhesion. "The court has repeatedly held that contracts of adhesion
are as binding as ordinary contracts. Those who adhere to the contract are in reality free to reject it entirely and if they
adhere, they give their consent. It is true that in some occasions the Court struck down such contracts as void when
the weaker party is imposed upon in dealing with the dominant party and is reduced to the alternative of accepting the
contract or leaving it, completely deprived of the opportunity to bargain on equal footing." Considering that Asian is
not a small time construction company, having such construction projects as the MRT III and the Mauban Power
Plant, "it is presumed to have full knowledge and to have acted with due care or, at the very least, to have been aware
of the terms and conditions of the contract. Asian was free to contract the services of another supplier if respondent's
terms were not acceptable".

By contracting with Cathay for the supply of the reinforcing steel bars and not interposing any objection to the
stipulations in the sales invoice, petitioner did not only bind itself to pay the stated selling price, it also bound itself to
pay (1) interest of 24% per annum on overdue accounts and (2) 25% of the unpaid invoice for attorney's fees. Thus,
the lower courts did not err in using the invoices as basis for the award of interest.