ARNAIZ, Carlos C.

CE Laws TTH 15:30-17:00

ROLDAN, Jose Mari G. Engr. Lito I. Mauro

CONTRACTS
Case Study

Mabuhay Contractor vs. Maharlika Construction

Complainant - Respondent

SUMMARY

Due to insufficiency of funds, the project owner cancelled the project resulting to a P32M debt
from the Maharlika which is the general contractor, including the P2M service fee for the Mabuhay
which is the subcontractor. Contract of the project has been signed by the general contractor and
the owner. There is another contract for the general contractor and subcontractor. Consequently,
the latter weren't able to pay its mechanical subcontractors resulting to a commotion for the general
contractor and subcontractor. In addition, it is found out that the subcontractor's lien was inferior
to the bank's lien, with an amount of P21M. It is suggested that the bank's lien must be paid first
before the Mabuhay and other subcontractor's lien. Because of this, the subcontractor filed a case
against the general contractor but was denied by the Court relying on Art. 15 and 18 of the contract.
Both parties ended up with a compromise, with a condition that Maharlika should be paid first
before the other subcontractors.

Statement of the Problem:

Due to the termination of project, how can the Maharlika (General contractor) and Mabuhay
(Subcontractor) can get their P32M total of property when the owner is experiencing lack of funds?

ACAS

 ACA NO. 1: The unfinished project could be taken over by the banking organization and
because of that, the project will continue and the general contractor will be able to pay their
subcontractor.

Advantages:

1. The owner is no longer required to pay the debts

2. The banking organization can make more money with that project.
3. Problem between the Mabuhay and Maharlika can be solved.
Disadvantages:

1. There is a possibility that the banking organization is not interested with the project.

 ACA No. 2: The Mabuhay contractor should help the Maharlika (General Contractor) in
filing case against the owner instead of filing against Maharlika. The subcontractor should
wait for the general contractor to be paid by the owner.

Advantage:

1. Filing a case against the owner could help solved the problem by going to the court and asking
a help to the judge.
2. It could trigger the owner to find more ways on how he/she can pay the debt immediately.

Disadvantage:

1. It might be a long process and the Mabuhay subcontractor will wait for a long time for them to
be paid.

 ACA No. 3: - The Maharlika Contractor (General Contractor) could find a new owner or
funder of the project by conducting a public bidding.

Advantage:

1. This will fix the problem between the Maharlika Contractor and Mabuhay Contractor.
The project will be able to finish because of the new contractor or funder.

Disadvantage:

1. It will be difficult for the General Contractor to find a new owner or funder.
CONCLUSION

The Maharlika Construction should conduct first a public bidding for the default project in
order to finish the project and to solve the problem between The Maharlika Construction and
Mabuhay Contractor. And there is a possibility that there will be no interested funder to complete
the project or it may take time, so that's why the general contractor has to give it to the banking
organization that can take over the project.

RECOMMENDATION

The Maharlika should make a move because they are the general contractor. They can file a
case to the owner who is unable to pay the debts. There is no law that implies that a person should
be imprisoned for the absence of participation or failure to pay the debt but this applies only in a
strictly civil case. Case filing is just making sure the owner is going to pay his debts and do the
right thing.