CIVIL LAW; FULL PAYMENT TO SUBCONTRACTOR AS A VALID DEFENSE

AGAINST LIABILITY OF CONTRACTOR

Question: Does full payment to the subcontractor serve as a valid defense against the
liability of the contractor with the owner and the subcontractor for any unpaid obligations
to the subcontractor's supplier despite the absence of a contract between the contractor
and supplier?

Answer: Yes. Article 1729 talks of three different parties: the owner, the contractor, and
the supplier. In certain situations, the supplier may also be referred to as a
subcontractor to provide materials or services. There are also situations where, as in
this case, the subcontractor further subcontracts some materials and services to
another subcontractor. This sub-subcontractor would be considered the supplier of
materials and services. Considering that the rationale behind the provision is to protect
suppliers from possible connivance between the owners and the contractors, there
would be no reason to apply the same rationale when it was the subcontractor that hired
the supplier. The liability will extend from the owner to the contractor to the
subcontractor. Article 1729 creates a solidary liability between the owner, the contractor,
and the subcontractor. A solidary obligation is "one in which each debtor is liable for the
entire obligation, and each creditor is entitled to demand the whole obligation."
However, Article 1729, while serving as an exception to the general rule on the privity of
contracts, likewise provides for an exception to this exception. The contractor is
solidarily liable with the owner and subcontractor for any liabilities against a supplier
despite the absence of contract between the contractor and the supplier, except when
the subcontractor has already been fully paid for its services. (Noell Whessoe, Inc. vs
Independent Testing Consultants, Inc., et. al., G. R. No. 199851, November 5, 2018,
Leonen, J.)

Article 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor
have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is
made. However, the following shall not prejudice the laborers, employees and furnishers of materials:

1. Payments made by the owner to the contractor before they are due;

2. Renunciation by the contractor of any amount due him from the owner.

This article is subject to the provisions of special laws.