Quirogavs Parsons

Subject: Sales

Doctrine: Contract of Agency to Sellvs Contract of Sale

Facts: On January 24, 1911, plaintiff Andres Quiroga and J. Parsons (to whose rights and obligations the
present defendant Parsons Hardware Co. later subrogated itself) entered into a contract, where it was
stated among others that Quiroga grants in favor of Parsons the exclusive rights to sell his beds in the
Visayan Islands under some conditions. One of the said conditions provided that 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 while another one passed on to Parsons the obligation to order by the dozen and in no other
manner the beds from Quiroga. Another stipulation is that Mr. Parsons binds himself to pay Mr. Quiroga
for the beds received, within a period of sixty days from the date of their shipment.

Quiroga files a case against Parsons for allegedly violating the following stipulations: 1) not to sell the
beds at higher prices than those of the invoices; 2) to have an open establishment in Iloilo; 3) 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.

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.

Issue: Whether the contract is a contract of agency or of sale.

Held:

In order to classify a contract, due attention 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 Supreme Court declared that the contract by and between the plaintiff and the defendant was one of
purchase and sale. Nothing in the contract conveys the idea of 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.

Payment was to be made at the end of sixty days, or before, at the plaintiffs 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.

In respect to the defendants 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.