Arriete vs Naric Facts: plaintiff-appellee participated in the public bidding called by the NARIC for the supply of 20,000

metric tons of Burmese rice. As her bid of 20!.00 per metric ton "as the lo"est, she "as a"arded the contract for the same. Accordingly, on #uly $, $%&2, plaintiff-appellee 'a( '. Arrieta and the appellant corporation entered into a Contract of )ale of Rice, under the terms of "hich the former obligated herself to deli*er to the latter 20,000 metric tons of Burmess Rice at 20!.00 per metric ton, CI+ ,anila. In turn, the defendant corporation committed itself to pay for the imported rice -by means of an irre*ocable, confirmed and assignable letter of credit in ..). currency in fa*or of the plaintiff-appellee and/or supplier in Burma, immediately.- 0espite the commitment to pay immediately -by means of an irre*ocable, confirmed and assignable 1etter of Credit,- ho"e*er, it "as only on #uly !0, $%&2, or a full month from the e2ecution of the contract, that the defendant corporation, thru its general manager, too3 the first step to open a letter of credit by for"arding to the 'hilippine National Ban3 its Application for Commercial 1etter Credit. 4n the same day, ,rs. 'a( '. Arrieta thru counsel, ad*ised the appellant corporation of the e2treme necessity for the immediate opening of the letter credit since she had by then made a tender to her supplier in Rangoon, Burma, -e5ui*alent to &6 of the +.4.B. price of 20,000 tons at $70.80 and in compliance "ith the regulations in Rangoon this &6 "ill be confiscated if the re5uired letter of credit is not recei*ed by them before August 9, $%&2.4n August 9, $%&2, the 'hilippine National Ban3 informed the appellant corporation that its application, -for a letter of credit for !,:$9,000.00 in fa*or of ;hiri )et3ya has been appro*ed by the Board of 0irectors "ith the condition that marginal cash deposit be paid and that drafts are to be paid upon presentment.-. +urthermore, the Ban3 represented that it -"ill hold your application in abeyance pending compliance "ith the abo*e stated re5uirement.- As it turned out, ho"e*er, the appellant corporation not in any financial position to meet the condition. As matter of fact, in a letter dated August 2, $%&2, the NARIC bluntly confessed to the appellee its dilemma< -In this connection, please be ad*ised that our application for opening of the letter of credit has been presented to the ban3 since #uly !0th but the latter re5uires that "e first deposit &06 of the *alue of the letter amounting to apro2imately !,:$9,000.00 "hich "e are not in a position to meet.- Conse5uently, the credit instrument applied for "as opened only on )eptember 7, $%&2 -in fa*or of ;hiri )et3ya, Rangoon, Burma, and/or assignee for !,:$9,000.00,="hich is more than t"o months from the e2ecution of the contract> the party named by the appellee as beneficiary of the letter of credit. As a result of the delay, the allocation of appellee?s supplier in Rangoon "as cancelled and the &6 deposit, amounting to &29,000 3yats or appro2imately '200,000.00 "as forfeited. In this connection, it must be made of record that although the Burmese authorities had set August 9, $%&2, as the deadline for the remittance of the re5uired letter of credit, the cancellation of the allocation and the confiscation of the &6 deposit "ere not effected until August 20, $%&2, or, a full half month after the e2piration of the deadline. And yet, e*en "ith the $&-day grace, appellant corporation "as unable to ma3e good its commitment to open the disputed letter of credit. ;he appellee endea*ored, but failed, to restore the cancelled Burmese rice allocation. @hen the futility of reinstating the same became apparent, she offered to substitute ;hailand rice instead to the defendant NARIC, communicating at the same time that the offer "as -a solution "hich should be beneficial to the NARIC and to us at the same time.- ;his offer for substitution, ho"e*er, "as reAected by the appellant. 4n the foregoing, the appellee sent a letter to the appellant, demanding compensation for the damages caused her in the sum of 27:,000.00, ..). currency, representing unreali(ed profit. Issue: "hether or not Naric?s failure to open immediately the letter of credit in dispute amounted to a breach of the contract for "hich it may be held liable in damages. Held: Bes. Naric is liable for damages.

It is clear upon the records that the sole and principal reason for the cancellation of the allocation contracted by the appellee herein in Rangoon, Burma, "as the failure of the letter of credit to be opened "ith the contemplated period. ;his failure must, therefore, be ta3en as the immediate cause for the conse5uent damage "hich resulted. ;he defense that the delay, if any in opening the letter of credit "as due to the failure of plaintiff to name the supplier, the amount and the ban3 is not tenable. 'laintiff stated in Court that these facts "ere 3no"n to defendant e*en before the contract "as e2ecuted because these facts "ere necessarily re*ealed to the defendant before she could 5ualify as a bidder. )he stated too that she had gi*en the necessary data immediately after the e2ecution of C2h. -A- =the contract of #uly $, $%&2> to ,r. DABRIC1 BC1,4N;C, Deneral ,anager of the NARIC, both orally and in "riting and that she also pressed for the opening of the letter of credit on these occasions. it is clear that "hat singularly delayed the opening of the stipulated letter of credit and "hich, in turn, caused the cancellation of the allocation in Burma, "as the inability of the appellant corporation to meet the condition importation by the Ban3 for granting the same. @e do not thin3 the appellant corporation can refute the fact that had it been able to put up the &06 marginal cash deposit demanded by the ban3, then the letter of credit "ould ha*e been appro*ed, opened and released as early as August 9, $%&2. ;he letter of the 'hilippine National Ban3 to the NARIC "as plain and e2plicit that as of the said date, appellant?s -application for a letter of credit ... has been appro*ed by the Board of 0irectors "ith the condition that &06 marginal cash deposit be paid and that drafts are to be paid upon presentment.- Its culpability arises from its "illful and deliberate assumption of contractual obligations e*en as it "as "ell a"are of its financial incapacity to underta3e the prestation. A number of logical inferences may be dra"n from the aforementioned admission. +irst, that the appellant 3ne" the ban3 re5uirements for opening letters of creditE second, that appellant also 3ne" it could not meet those re5uirement. @hen, therefore, despite this a"areness that "as financially incompetent to open a letter of credit immediately, appellant agreed in paragraph 7 of the contract to pay immediately -by means of an irre*ocable, confirm and assignable letter of credit,- it must be similarly held to ha*e bound itself to ans"er for all and e*ery conse5uences that "ould result from the representation.