G.R. No.

L-11491            August 23, 1918
ANDRES QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza
for appellant.
Crossfield & O'Brien for appellee.
AVANCEÑA, J.:
On January 24, 1911, in this city of manila, 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:
CONTRACT EXECUTED BY AND
BETWEEN ANDRES QUIROGA AND
J. PARSONS, BOTH MERCHANTS
ESTABLISHED IN MANILA, FOR THE
EXCLUSIVE SALE OF "QUIROGA"
BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the
exclusive right to sell his beds in the Visayan
Islands to J. Parsons under the following
conditions:
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.

(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. Parsons.
(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.
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.
Of the three causes of action alleged by the plaintiff in
his complaint, only two of them constitute the subject
matter of this appeal and both substantially amount to
the averment that the defendant violated the following
obligations: 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. As may be seen, 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 two 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. The whole question, therefore,
reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore
transcribed, was a purchaser or an agent of the
plaintiff for the sale of his beds.

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 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, is that the plaintiff was to furnish
the defendant with the beds which the latter might
order, at the price stipulated, and that the defendant
was to pay the price in the manner stipulated. The
price agreed upon was the one determined by the
plaintiff for the sale of these beds in Manila, with a
discount of from 20 to 25 per cent, according to their
class. Payment was to be made at the end of sixty
days, or before, at the plaintiff's request, or in cash, if
the defendant so preferred, and in these last two cases
an additional discount was to be allowed for prompt
payment. These are precisely the essential features of
a contract of purchase and sale. 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 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. By virtue of
the contract between the plaintiff and the defendant,
the latter, on receiving the beds, was necessarily
obliged to pay their price within the term fixed, without
any other consideration and regardless as to whether
he had or had not sold the beds.
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. But, besides, examining
the clauses of this contract, none of them is found that
substantially supports the plaintiff's contention. Not a
single one of these clauses necessarily conveys the
idea of an agency. 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. With regard to the remaining
clauses, the least that can be said is that they are not
incompatible with the contract of purchase and sale.
The plaintiff calls attention to the testimony of Ernesto
Vidal, a former vice-president of the defendant
corporation and who established and managed the
latter's business in Iloilo. It appears that this witness,
prior to the time of his testimony, had serious trouble
with the defendant, had maintained a civil suit against
it, and had even accused one of its partners, Guillermo
Parsons, of falsification. He testified that it was he who
drafted the contract Exhibit A, and, when questioned
as to what was his purpose in contracting with the
plaintiff, replied that it was to be an agent for his beds
and to collect a commission on sales. However,
according to the defendant's evidence, it was Mariano
Lopez Santos, a director of the corporation, who
prepared Exhibit A. But, even supposing that Ernesto
Vidal has stated the truth, his statement as to what
was his idea in contracting with the plaintiff is of no
importance, inasmuch as the agreements contained in
Exhibit A which he claims to have drafted, constitute,
as we have said, a contract of purchase and sale, and
not one of commercial agency. This only means that
Ernesto Vidal was mistaken in his classification of the
contract. But it must be understood that a contract is
what the law defines it to be, and not what it is called
by the contracting parties.
The plaintiff also endeavored to prove that the
defendant had returned beds that it could not sell; that,
without previous notice, it forwarded to the defendant
the beds that it wanted; and that the defendant
received its commission for the beds sold by the
plaintiff directly to persons in Iloilo. But all this, at the
most only shows that, on the part of both of them,
there was mutual tolerance in the performance of the
contract in disregard of its terms; and it gives no right
to have the contract considered, not as the parties
stipulated it, but as they performed it. 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.
Furthermore, the return made was of certain brass
beds, and was not effected in exchange for the price
paid for them, but was for other beds of another kind;
and for the letter Exhibit L-1, requested the plaintiff's
prior consent with respect to said beds, which shows
that it was not considered that the defendant had a
right, by virtue of the contract, to make this return. As
regards the shipment of beds without previous notice,
it is insinuated in the record that these brass beds
were precisely the ones so shipped, and that, for this
very reason, the plaintiff agreed to their return. And
with respect to the so-called commissions, we have
said that they merely constituted a discount on the
invoice price, and the reason for applying this benefit
to the beds sold directly by the plaintiff to persons in
Iloilo was because, as the defendant obligated itself in
the contract to incur the expenses of advertisement of
the plaintiff's beds, such sales were to be considered
as a result of that advertisement.
In respect to the defendant's obligation to order by the
dozen, the only one expressly imposed by the
contract, the effect of its breach would only entitle the
plaintiff to disregard the orders which the defendant
might place under other conditions; but if the plaintiff
consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the
contract by and between the plaintiff and the defendant
was one of purchase and sale, and that the obligations
the breach of which is alleged as a cause of action are
not imposed upon the defendant, either by agreement
or by law.
The judgment appealed from is affirmed, with costs
against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm,
JJ., concur.
___________________________________________
DIGEST:
G.R. No. L-11491            August 23, 1918
ANDRES QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO
CONTRACT OF SALE, CONCEPTS | Agency to Sell
from the sale of the thing to a third person, and if he
does not succeed in selling it, he returns it. By virtue of
the contract between the plaintiff and the defendant,
the latter, on receiving the beds, was necessarily
obliged to pay their price within the term fixed, without
any other consideration and regardless as to whether
he had or had not sold the beds.
There was mutual tolerance in the performance of the
contract in disregard of its terms; and it gives no right
to have the contract considered, not as the parties
stipulated it, but as they performed it.

FACTS: Only the acts of the contracting parties, subsequent to,

A contract was entered into between Andres Quiroga
and J. Parsons, who were both merchants, which
granted the exclusive right to sell his beds in the
Visayan Islands to Parsons under the following
conditions:
and in connection with, the execution of the contract,
must be considered for the purpose of interpreting the
contract, when such interpretation is necessary.
.

1. There be a discount of 2.5% as commission

for the sale;
2. Parsons shall order the beds by the dozen,
whether of the same or of different styles;
3. Expenses for transportation and shipment
shall be borne by Quiroga;
4. Parsons is bound to pay Quiroga for the beds
received within 60 days from the date of their
shipment;
5. If Quiroga should request payment before the
invoice falls due, it shall be considered as
prompt payment with 2% deduction;
6. 15-day notice must at least be given by
Quiroga before any alteration in price of beds;
and
7. Parsons binds himself to only sell Quiroga
beds.

Quiroga alleged that Parsons breached its contract by

selling the beds at a higher price, not having an open
establishment in Iloilo, not maintaining a public
exhibition, and for not ordering the beds by the dozen.

Only the last imputation was provided for by the

contract, the others were not stipulated. Quiroga
argued that since there was a contract of agency
between them, such obligations were necessarily
implied.

ISSUE:

Is the contract between them one of agency, not of

sale?

HELD:

No. The agreement between Quiroga and Parsons

was that of a simple purchase and sale — not an
agency. Quiroga supplied the beds, while Parsons had
the obligation to pay their purchase price.

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