QUIROGA vs. PARSONS HARDWARE Co., 38 Phil. 501, No.

11491 August 23, 1918

FACTS

On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an “agent” of the
former. The contract stipulates that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell
his beds in the Visayan region to J. Parsons. The contract only stipulates that J.Parsons should pay
Quiroga within 6 months upon the delivery of beds.

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

RULING

This contract is one of purchase and sale, and not of commercial agency.

For the classification of contracts, due regard must be paid to their essential clauses. In the contract in the
instant case, what was essential, constituting its cause and subject matter, was that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the stipulated price, and that the
defendant was to pay this price in the manner agreed upon. 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 that of the defendant, to pay their price. These features exclude the legal conception of an
agency or order to sell whereby the mandatary or agent receives 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.

The testimony of the person who drafted this contract, to the effect that his purpose was to be an agent
for the beds and to collect a commission on the sales, is of no importance to prove that the contract was
one of agency, inasmuch as the agreements contained in the contract constitute, according to law,
covenants of purchase and sale, and not of commercial agency. It must be understood that a contract is
what the law defines it to be, and not what it is called by the contracting parties.

The defendant obligated itself to order the beds from the plaintiff by the dozen. Held: That the effect of a
breach of this clause by the defendant 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.