FLAVIO K MACASAET and ASSOCIATES, INC. vs.

COMMISSION ON AUDIT and PHILIPPINE TOURISM AUTHORITY

G.R. NO. 83748 May 12, 1989
Petitioner: Flavio K. Macasaet and Associates, Inc.
Respondents Commission on Audit and Philippine Tourism Authority

FACTS:

On September 15, 1997, respondent Philippine Tourism Authority (PTA) entered into a contract with
petitioner, Flavio K Macasaet.

Under the contract, PTA is obliged to pay petitioner a professional fee (PF) of seven percent (7%) of the
actual construction cost.

The contract emphasized that, upon completion of the work and acceptance thereof by the Authority,
the balance of the PF, computed on the final actual project cost shall be paid.

After the project was completed, PTA paid the main contractor the additional sum of P 3,148,198.26
representing the escalation cost of the contract price due to the increase of construction materials’
price.

PTA denied payment of petitioner’s claim of additional fee representing seven percent (7%) of the
additional amount paid by the PTA to the main contractor, affirmed by the public respondent
Commission on Audit.

ISSUE:

1. Whether or not the petitioner is entitled for an additional professional fees.

2. Whether or not the price escalation should be included in the final actual project cost.

HELD:

Petitioner held entitled to the payment of its additional professional fees. Under article 1159 of Civil
Code of the Philippines, obligations arising from contract have the force of law between the contracting
parties and should be complied with in good faith. The price of escalation cost must be deemed included
in the final actual project cost.