LAM V.

KODAK
GR#167615 1/11/2016 Leonen
Sales: Introduction (Characteristic – Bilateral Created By: JTS
and Reciprocal)
Petitioners Respondents
Spouses Alexander and Julie Lam, doing Kodak Philippines Inc.
business under the name and style “Colorkwik
Laboratories” and “Colorkwik Photo Supply”
Recit Ready Summary
Lam Spouses and Kodak Phils. entered into a Letter Agreement by which Kodak would sell 3 units
Minilab Equipment. Upon delivery of the first unit, Lam Spouses gave 12 checks, but ordered their
bank to stop payment after the first 2 checks were negotiated, after which both parties rescinded the
contract.
SC held that the contract contains a single obligation (single transaction; only one sale) which is
indivisible (to deliver 3 units of Minilab Equipment and to pay for said units), and the factors
considered by the CA (separate deliveries, separate payments) are mere incidents of the execution
of the obligation. Such contract is perfected upon meeting of the minds as to object and price, and
parties may reciprocally demand performance from that point. Being a reciprocal obligation, power
to rescind and resolve is implied (Art. 1191), and judicial intervention is only necessary if the party
who “failed to comply with his or her obligation disputes the resolution of the contract”. Rescission
has the effect of restitution, by which both parties must return the object of the contract (Lam
Spouses have to return the delivered unit, Kodak has to return the partial payment).
Facts of the Case
Lam Spouses and Kodak Phils. entered into a Letter Agreement by which Kodak would sell 3 units
of the Kodak Minilab System 22XL (Minilab Equipment) for P1.796M. Kodak delivered 1 unit on
1/15/1992, and installed it on 3/9/1992, and the Lam Spouses issued 12 postdated checks as
payment, with the first due 3/31/1992. Lam Spouses requested for Kodak not to negotiate the first
two checks, but Kodak did negotiate them, after which the Lam Spouses ordered their bank to stop
payment for the other 10 checks. Kodak then cancelled the sale and demanded the return of the
delivered unit, while the Lam Spouses ignored the demand but also rescinded the contract.
Eventually, Kodak (under a writ of seizure) seized the delivered unit, together with its accessories
and a generator set (bought by Lam Spouses separately from a different supplier). The RTC ruled
that Kodak had to pay Lam Spouses for the cost of the generator and renovation expenses, while
the CA added actual, moral, and exemplary damages.
Issues Ruling
1. W/N contract between Lam Spouses and Kodak is susceptible of partial No
performance
2. Upon rescission of contract, what the parties are entitled to See
below
Rationale/Analysis/Legal Basis
1. The Letter Agreement between Kodak and the Lam Spouses contemplates a package deal for
the 3 units Minilab Equipment, subject to total discount of 19%. Obligation of Kodak under the
contract “was to deliver all products purchased under a ‘package’”, and obligation of the Lam
Spouses were to pay (in installment). The separate physical delivery and payments are incidents
of the execution of the obligation, not separate obligations (if so, the parties would have entered
into 3 separate agreements). The Letter Agreement covers all 3 units, specifies only one
purpose, applies the discount and no downpayment to all units, and calls the object of the
contract as “Minilab Equipment Package”.
2. The contract is that of sale, which is perfected upon meeting of minds as to object and price, and
parties may reciprocally demand performance of their respective obligations from that point.
Being a reciprocal obligation, power to rescind and resolve is implied (Art. 1191), and judicial
intervention is only necessary if the party who “failed to comply with his or her obligation
disputes the resolution of the contract”. Rescission from both parties has the effect of restitution,
by which both parties must return the object of the contract (Lam Spouses have to return the
 delivered unit, Kodak has to return the partial payment).
Disposition
DENIED, CA decision affirmed with modification as to damages, petitioners ordered to return the
delivered unit and its accessories
Separate Opinions