Delta Motor Corporation vs. Genuino

The Court held that a party to a reciprocal contract may not unilaterally rescind it or alter its terms based on subsequent market fluctuations where it had waived performance of suspensive conditions and failed to manifest an intent to rescind prior to being sued. The governing principle is that a perfected contract of sale binds both parties, and rescission under Article 1191 of the Civil Code requires a prior demand for compliance and a manifestation of intent to rescind, which was absent here.

Private respondents, owners of España Extension Iceplant and Cold Storage, accepted two letter-quotations from petitioner Delta Motor Corporation in July 1972 for the purchase of black iron pipes. The contracts specified prices and terms of payment, including down payments. Private respondents paid a total of P15,900.00 as down payments. After private respondents refused an initial delivery offer because their facility was unfinished, no further action was taken by either party until April 1975, when private respondents demanded delivery. Petitioner refused, citing the 30-day price validity clause and current market price increases, and offered new quotations at substantially higher prices. Private respondents then filed a complaint for specific performance.

• Petitioner Delta Motor Corporation submitted two letter-quotations to private respondents in July 1972 for the sale of black iron pipes, which were accepted within the 30-day offer period.
• Private respondents made down payments totaling P15,900.00.
• Petitioner offered delivery in July 1972, but private respondents refused because their cold storage plant was unfinished.
• Neither party took further action until April 1975, when private respondents demanded delivery and expressed readiness to pay the second installments.
• Petitioner refused, citing the 30-day price validity clause and current market prices, and issued new quotations at significantly higher prices.
• Private respondents filed a complaint for specific performance; petitioner counterclaimed for rescission under Article 1191 of the Civil Code.

• Petitioner argued that its obligation to deliver was subject to suspensive conditions—payment of the second installments and execution of a promissory note—which private respondents failed to perform.
• Petitioner contended that private respondents' refusal to accept delivery in 1972 and their three-year delay in demanding delivery constituted a substantial breach warranting rescission under Article 1191.
• Petitioner asserted that the 30-day price validity clause allowed it to review and confirm prices after the offer period, justifying the increased quotations.

• Respondents maintained that the contracts were perfected upon their timely acceptance, binding both parties to the original terms.
• Respondents argued that petitioner waived the suspensive conditions by not insisting on delivery or rescission after the 1972 refusal.
• Respondents contended that petitioner's demand for higher prices in 1975 was an attempt to unilaterally amend the contracts, which would result in unjust enrichment.

• Procedural Issues: N/A
• Substantive Issues:
  • Whether petitioner validly rescinded the contracts due to private respondents' alleged breach.
  • Whether petitioner could demand higher prices based on the 30-day price validity clause or market fluctuations.

• Procedural: N/A
• Substantive:
  • The Court held that petitioner could not rescind the contracts. Rescission under Article 1191 requires a prior demand for compliance and a manifestation of intent to rescind, which petitioner did not make. Petitioner's conduct indicated it waived the suspensive conditions and chose to continue the contracts.
  • The Court ruled that petitioner could not impose higher prices. The contracts were perfected upon timely acceptance, fixing the price. The 30-day clause referred to new orders after the offer period, not to already accepted contracts. Allowing price increases would constitute unjust enrichment, as petitioner retained both the down payments and the goods.

• Rescission under Article 1191 of the Civil Code — The power to rescind is implied in reciprocal obligations for substantial breach. However, the injured party must choose between fulfillment or rescission and manifest this choice to the other party; rescission is always provisional and subject to judicial review. Here, the Court found no substantial breach and noted petitioner's failure to manifest intent to rescind before suit.
• Waiver of Suspensive Conditions under Article 1545 of the Civil Code — When a party's obligation is subject to a condition, that party may refuse to proceed or waive performance of the condition. The Court held petitioner waived the conditions by not insisting on them after private respondents' 1972 refusal and by later demanding higher prices instead of rescission.

• "The act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court." — This underscores that unilateral rescission is not absolute and requires prior notice and judicial oversight.
• "Once the offer is accepted, the company has no more option to change the price." — This testimony from petitioner's own witness confirmed that the price was fixed upon acceptance, defeating petitioner's claim for price adjustments.

• Phil. Amusement Enterprises, Inc. v. Natividad, G.R. No. L-21876, September 29, 1967, 21 SCRA 284 — Cited for the principle that rescission is warranted only for substantial breach, not slight or casual breach.
• Universal Food Corporation v. Court of Appeals, G.R. No. L-29155, May 13, 1970, 33 SCRA 1 — Cited for the principle that whether a breach is substantial depends on attendant circumstances.
• University of the Phils. v. De los Angeles, G.R. No. L-28602, September 29, 1970, 35 SCRA 102 — Cited for the rule that a party's act of treating a contract as rescinded is provisional and subject to court review.

• Article 1191, Civil Code — Governs the power to rescind reciprocal obligations for substantial breach; the Court held its requirements were not met.
• Article 1545, Civil Code — Allows a party to waive performance of a suspensive condition; the Court found petitioner waived such conditions.
• Article 1319, Civil Code — Defines consent in contracts as the meeting of offer and acceptance; applied to show contract perfection.
• Article 1475, Civil Code — States that a contract of sale is perfected upon meeting of minds on thing and price; used to affirm binding nature of original terms.

• Justice de la Fuente — Wrote a separate concurring opinion (specific content not detailed in the text).
• Justice Cenzon — Concurred with both the main decision and Justice de la Fuente's opinion.

• Justice Gancayco — Wrote a separate dissenting opinion, to which Justice Patajo concurred (specific content not detailed in the text).