NIELSON & CO., INC. vs LEPANTO CONSOLIDATED MINING CO.

CASE NUMBER: L-21601DATE: December 28, 1968PONENTE: Zaldivar, J.FACTS:

Nielson & Company, Inc. and Lepanto Consolidated Mining Company entered into a management
contract.
Nielson had agreed, for a period of five years, with the right to renew for a like
period, to explore, developand operate the mining claims of Lepanto, and to mine, or
mine and mill, such pay ore as may be found andto market the metallic products
recovered therefrom which may prove to be marketable, as well as torender for Lepanto
other services specified in the contract.
Nielson was to take complete charge, subject at all times to the general control of
the Board of Directors ofLepanto, of the exploration and development of the mining
claims, of the hiring of a sufficient andcompetent staff and of sufficient and capable
laborers, of the prospecting and development of the mine, ofthe erection and operation
of the mill, and of the benefication and marketing of the minerals found on themining
properties.
Nielson was also to act as purchasing agent of supplies, equipment and other
necessary purchases byLepanto, but no purchase shall be made without the prior
approval of Lepanto and no commission shall beclaimed or retained by Nielson on such
purchase.
The principal and paramount undertaking of Nielson under the management
contract was the operationand development of the mine and the operation of the mill. All
the other undertakings mentioned in thecontract are necessary or incidental to the
principal.
oIn the performance of this principal undertaking, Nielson was not in any way executing
juridical acts forLepanto.
Lepanto terminated the contract in 1945, 2 years before its expiration, when it took
over and assumed exclusivemanagement of the work previously entrusted to
Nielson under the contract.
Lepanto finally maintains that Nielson as an agent is not entitled to damages since the
law gives to the principal theright to terminate the agency at will.
ISSUE:
Was the management contract entered into by and between Nielson and Lepanto a contract of
agency such that it hasthe right to revoke and terminate the contract at will, or a contract of lease of
services?
RULING: Contract of Lease of Services
The management contract was one of contract of lease of services and not a contract of agency.
In both agency and lease of services, one of the parties binds himself to render some
service to the other party.Agency, however is distinguished from lease of work or
services in that:
oThe basis of agency is representation, while in the lease of work or services, the basis
is employment.