Arquillo, Oblicon
INSULAR LIFE V ASSET BUILDERS
Topic: Contracts; Consent, When present
Petitioner: Insular
Respondent: Asset Builders
DOCTRINE:
Art. 1319: Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are
to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a
counter-offer.
Where the parties merely exchange offers and counteroffers, no
agreement or contract is perfected. A party may withdraw its offer or
counteroffer prior to its receipt of the other party's acceptance thereof. To
produce an agreement, the offer must be certain and the acceptance
timely and absolute.
SHORT ANSWERS:
1. When did the problem start: when Insular had to hire another
contractor to construct their building at a higher price compared to
that of Asset Builders, who backed out
1. Who is chasing who: Insular is chasing Asset Builders for damages
2. Where does the contract arise: no contract
FACTS:
Before us is a Petition for Review on Certiorari assailing Decision of
the CA w/c dismissed petitioners appeal. MR also dismissed.
Insular invited companies/corporations engaged in the building
construction business to participate in the bidding of [petitioner's]
proposed Insular Life building in Lucena City.
Asset Builders and 4 other bidders, submitted their respective bid
proposals secured by bid bonds, valid for sixty (60) days. Under
its 'Proposal Form' which the [respondent] submitted to the
[petitioner], [respondent] bound and obliged itself to enter into
a 'Contract' with the petitioner within 10 days from notice of the
award, with good and sufficient securities for the faithful compliance
thereof.
Asset Builders P12,962,845.54 bid was the lowest among the
bidders.
Torrijos of Insulars 'Real Property Department' recommended
approval of the award of construction, in favor of Asset Builders.
A conference was held, for some clarifications. [Petitioner] proposed
that [respondent] adjust its bid from P12,961,845.54
to P13,000,000.00 to accommodate the wage increase. Asset
Builders representatives were noncommittal, declaring that they had
to report to the management for its consideration and approval.
Subsequently, the [respondent] agreed to the readjustment of the
amount of its bid as proposed by Insular.
Flores, Assistant VP of Insular signed a 'Notice to Proceed',
addressed to the [respondent], for the conformity of the latter's
President, Rogelio P. Centeno. The [petitioner prepared] a draft of
the contract to be executed by both parties.
[Torrijos] informed, by letter, Engineer Sajorda 'Project Manager' of
AWIA, that [petitioner] had awarded the general construction
contract to the [respondent] and advised AWIA to coordinate with
[respondent] and inform the latter that a pre-construction meeting
[would] be held. A copy of the 'Notice of Award' was appended to
said letter.
Arquillo, Oblicon
During the conference, the following were discussed and clarified: '1.
Contract Amount and Completion Time: Contract is
for P13,000,000.00, day one to be 5 days after receipt of NTP by the
Contractor. [respondent] did not affix its conformity to any 'Notice of
Award', much less commence its construction of the project. Neither
did it execute any 'Construction Agreement'. [respondent] wrote
Insular a letter that they would not be able to undertake the project
because prices had escalated, rendering its bid unattractive.
In response, Petitioner wrote that, in view of the unjust withdrawal of
the [respondent] from the project, despite the award of the project to
the [respondent], the [petitioner] was impelled to engage the
services of another contractor to complete the project
[respondent] sent a letter to the [petitioner] averring that: (a) it never
received any written 'Notice of Award' from the [petitioner]; [and] (b)
since its bid offer had a lifetime of sixty (60) days from November 9,
1993 or until January 8, 1993 (sic)[,] its offer was automatically
withdrawn after said date, since the [petitioner] had not requested
the [respondent] for the extension of the lifetime thereof.
petitioner filed a complaint w/ RTC for Damages. It impelled Insular
to engage the services of another contractor at the price
of P14,500,000.00. And was also obliged to pay the amount
of P1,500,000.00 which was [the] difference between the contract
price of the project with the [respondent] in the amount
of P13,000,000.00 and P14,500,000.00, by way of actual damages.
RTC dismissed the complaint. CA affirmed RTC.
ISSUE: Was there was an acceptance by petitioner of the offer made by
respondent?
HELD: NO.
Equally important are the three distinct stages of a contract -- its
"preparation or negotiation, its perfection, and finally, its consummation."
The parties did not get past the negotiation stage. There was only an
offer and a counteroffer. Clearly, no meeting of minds was
established. First, only after the bid bond had lapsed were post-
qualification proceedings, inspections, and credit investigations
conducted. Second, the inter-office memoranda issued by petitioner, as
well as other memoranda between it and its own project manager, were
simply documents to which respondent was not privy. Third, petitioner
proposed a counteroffer to adjust respondent's bid to accommodate the
wage increase of December 3, 1993. The rule on the concurrence of the
offer and its acceptance did not apply, because other matters or details --
in addition to the subject matter and the consideration -- would still be
stipulated and agreed upon by the parties.
No contract shall arise unless its acceptance is communicated to the
offeror. That is, the mere determination to accept the proposal of a
bidder does not constitute a contract; that decision must be
communicated to the bidder. Although consent may be either express or
implied, the Instruction to Bidders prepared by petitioner itself expressly
required (1) a formal acceptance and (2) a period within which such
acceptance was to be made known to respondent. The effect of giving
the Notice of Award to the latter would have been the perfection of the
contract. No such acceptance was communicated to respondent;
therefore, no consent was given. Without that express manifestation, as
required by the terms of its proposal, there was no contract. The due
execution of documents representing a contract is one thing, but its
perfection is another.
There is no issue as regards the subject of the contract or the cause of
the obligation. The controversy lies in the consent -- whether there
was an acceptance by petitioner of the offer made by respondent ;
and, if so, whether that acceptance was communicated to the latter,
thereby perfecting the contract. The period given to the former within
Arquillo, Oblicon
which to accept the offer was not itself founded upon or supported by
any consideration. Respondent still had the freedom and the right to
withdraw the offer by communicating such withdrawal to petitioner before
the latter's acceptance of the offer; or, if the offer has been
accepted, before the acceptance came to be known by respondent.
Petitioner avers that an acceptance was made, but this allegation has
not been proven. Respondent had no knowledge of such acceptance
when it communicated its withdrawal to the former. Notably, this right to
withdraw was not exercised whimsically or arbitrarily by respondent. It
did send a formal letter expressing and explaining its withdrawal. As of
that date, the decision to award the contract had not been made
according to the terms of the Instruction to Bidders.
Besides, the subsequent acts between the parties did not even serve as
a confirmation of that decision. The existence of a second proposal --
petitioner's request for an adjustment of the bid to accommodate the
wage increase -- in fact belies the perfection of any contract arising from
the first. To the Court's mind, there was indeed no acceptance of the
offer made by respondent. Such failure to comply with a condition
imposed for the perfection of a contract resulted in failure of the contract.
PETITION DISMISSED
SPOUSES PADERES V CA
Topic: Contracts; Consent, When Present
Petitioner: Spouses Paderes and Spouses Bergardo
Respondent: CA, Carlota Valenzuela as Liquidator of Banco Filipino
Savings and Mortgage Bank
DOCTRINE:
Article 1318: three essential requisites to give rise to a binding contract:
(1) consent of the contracting parties; (2) object certain which is the
subject matter of the contract; and (3) cause of the obligation which is
established
Art. 1319: Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are
to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a
counter-offer.
VOCABULARY:
1. Offer: a unilateral proposition which one party makes to the
other for the celebration of the contract. There is an offer in
the context of Article 1319 only if the contract can come into
existence by the mere acceptance of the offeree, without
any further act on the part of the offeror. Hence, the offer
must be definite, complete and intentional
2. Acceptance: To produce a contract, the acceptance
must not qualify the terms of the offer. It is necessary
that the acceptance be unequivocal and unconditional,
and the acceptance and the proposition shall be
Arquillo, Oblicon
without any variation whatsoever; and any modification
or variation from the terms of the offer annuls the latter
and frees the offeror.
SHORT ANSWERS:
2. When did the problem start: when MICC failed to settle its
obligations w/ Banco Filipino
3. Who is chasing who: Spouses Paderes and Spouses Bergardo are
chasing Banco Filipino for their lots
4. Where does the obligation arise: Sale of lots by MICC to Spouses
Paderes and Spouses Bergardo
FACTS:
Petitioners seek the reversal of CA Decision which dismissed their
Petition and denied their MR.
Manila International Construction Corporation (MICC) executed a
real estate mortgage over 21 parcels of land including the
improvements in favor of Banco Filipino Savings and Mortgage Bank
(Banco Filipino) in order to secure a loan.
Subsequently, MICC sold one lot to the petitioners in the first case,
the Paderes spouses and the other lot to petitioners in the second
case, the Bergado spouses. Neither sale was registered. (Both lots
were included in the previous mortgage over 21 parcels of land)
For failure of MICC to settle its obligations, Banco Filipino filed a
Petition for the extrajudicial foreclosure of MICCs mortgage. At the
auction sale of the foreclosed properties on March 25, 1985, Banco
Filipino was declared the highest bidder. A Certificate of Sale was
issued in its favour.
No redemption of the foreclosed mortgage having been made within
the reglementary period, Valenzuela, the then Liquidator of Banco
Filipino, filed an ex parte Petition for the issuance of a Writ of
Possession. Petition was granted by Order of the RTC.
Copies of the Writ of Possession with a notice addressed to MICC
and/or All persons claiming rights under them to voluntarily vacate
the premises within 7 days from receipt were served on petitioners.
Petitioners filed separate petitions w/ CA, which were later
consolidated, assailing the validity of the Writ of Possession. CA
dismissed the petitions. MR also denied. Petitioners jointly come
before SC.
ISSUE: Is there an absence of both a definite offer and an absolute
acceptance of any definite offer by any of the parties?
HELD: YES.
The letters dated October 17, 1996 and November 4, 1996,
signed by petitioners counsel, while ostensibly proposing to
redeem the foreclosed properties and requesting Banco Filipino
to suggest a price for their repurchase, made it clear that any
proposal by the bank would be subject to further action on the
part of petitioners.
The letter dated October 25, 1996 signed by Luz Dacasin,
Assistant Vice-President of Banco Filipino, merely invited
petitioners to engage in further negotiations and does not
contain a recognition of petitioners claimed right of redemption
or a definite offer to sell the subject properties back to them.
Petitioners emphasize that in item no. 3 of their letter dated
November 8, 1996 they committed to subject the properties
(house and lot) to a real-estate mortgage with the bank so that
Arquillo, Oblicon

the amount to be loaned will be used as payment of the

properties to be redeemed. It is clear from item no. 1 of the
same letter, however, that petitioners did not accept Banco
Filipinos valuation of the properties at P7,500.00 per square
meter and intended to have the amount [renegotiated].

Moreover, while purporting to be a memorandum of the matters

taken up in the conference between petitioners and Banco
Filipino Vice-President Dacasin, petitioners letter of November 8,
1996 does not contain the concurrence of Ms. Dacasin or any
other authorized agent of Banco Filipino. Where the alleged
contract document was signed by only one party and the record
shows that the other party did not execute or sign the same,
there is no perfected contract.

PETITION DENIED