lOMoAR cPSD| 3774533

690 LEASE Art. 1720

Traversing the complaint, Gonzales alleges, among others:

there was no delay; assuming there was delay, it was due to
Endel’s refusal to discuss with him the preparation of said draw-
ings and specifications, and Endel did not inform him of its
desire to abandon the construction and had he been so informed,
he would not have incurred expenses in preparing the work- ing
drawings and specifications.
The Court of Appeals affirmed the rescission of the con-
tract, holding Gonzales obligated to return to Endel the amount
of P20,000 paid by Endel for the preparation of the plans, with
legal interest and P2,000 as attorney’s fees.
Issue: Is Gonzales liable to Endel for the return of the amount
of P20,000.00 and for the payment of attorney’s fees.
Held: No. (1) Compensation apportioned according to stage of
services to be rendered. — “It is fundamental that contracts are to
be interpreted according to their liberal meaning when the terms
and conditions are clear and leave no doubt as to the intention
of the contracting parties. An examination of the contract re-
veals that the compensation of Gonzales was apportioned in
accordance with the stage of services to be rendered.
Upon his being commissioned. Gonzales received
P10,000.00 under item 5(a) of the contract. And under item 5
(b), he was paid P20,000.00 upon approval of the plans by the
Engineering Department of Ayala Securities Corporation.
Gonzales is entitled to those payments by the very terms of the
contract. He had performed the services required and had
earned his fees.’’
(2) Effect of abandonment of project for payments received for
services already rendered. — “The fact that the condominium
project was later abandoned should not result in the forfeiture
by Gonzales of those payments. Nor the fact that the contract
has been rescinded and would ordinarily create the obligation
to return the things which were the object of the contract, and
the price with its interest. Upon a showing that an architect has
fully performed services relating to the completion of specifi-
cations and general working drawings, he is entitled to recover
payments specified for such services even though the project is
thereafter abandoned so as to prevent performance of other
services for which additional compensation has been provided.’’
(3) Delay only with submission of working drawings and speci-
fications. — “While it may be true that Gonzales incurred in
 lOMoAR cPSD| 3774533

Art. 1720 WORK AND LABOR 691

Contract for a Piece of Work

delay, as found by both the Trial and Appellate Courts, which

finding is binding on us, that delay was only with respect to the
submission of working drawings and specifications as pro-
vided in item 5(c) of the letter-agreement. By reason of that
delay, Gonzales is not entitled to the compensation provided
therefor, or P20,000.00, even though he may have already sub-
mitted those drawings and specifications to Endel. Besides, the
delay in the presentation of those working drawings are not the
only cause for the failure of the contract. Endel itself had
decided to abandon the project for other reasons. If time were,
indeed, of the essence of the contract, as Endel alleges, it could
have cancelled it in April, 1972 and it should not have allowed
Gonzales to continue working further on the drawings and
specifications under item 5(c) of the agreement.
Neither do we deem it just and equitable that Endel should
recover attorney’s fees under Article 2208 of the Civil Code.
(Gonzales vs. Court of Appeals, 126 SCRA 630 [1983].)
——— ———— ———-
2. Petitioner requires respondent (contractor) to file a new per-
formance bond equal to the cost of the entire unfinished work instead
of 20% of the cost of the next stage of the construction to be under-
taken by respondent.
Facts: Pursuant to a contract with petitioner City of Pasay
for the construction of a new Pasay City Hall, respondent V.D.
Isip proceeded with the construction of the building as per duly
approved plans and specifications. After the respondent filed
an action for specific performance with damages against the
petitioner, the parties entered into a compromise agreement
which was approved by the trial court. There was an amount
still due from the petitioner to the respondent.
The pertinent provisions of the compromise agreement are
as follows:
xxx xxx xxx
[1] “Whereas, one of the conditions set forth in the pro-
posal is that the Contractor shall start the construction of the
Pasay City Hall building as per plans and specifications by
stages advancing the necessary amount needed for each stage
of work and the Party of the First Part to reimburse the amount
spent on the work accomplished by the Contractor before pro-
ceeding on the next stage; Provided, The First Party shall sup-
ply the cement needed;
 lOMoAR cPSD| 3774533

692 LEASE Art. 1720

xxx xxx xxx

2. That the work shall be done in stages to be deter-
mined by the City Engineer considering structural and func-
tional criteria and consistent with funds immediately avail-
able for the purpose;
3. That the Contractor shall advance the necessary
amount needed for each stage of work; Provided, That the
Contractor shall, before starting each stage of work, inform
the First Party in writing as to the amount necessary to be
advanced by the former; . . .
4. That the Party of the First Part shall reimburse the
Contractor the cost of the work completed as estimated by
the City Engineer for each stage of work before the Con-
tractor proceed to the next stage; x x x x x x’’
[2] “H. That detailed, separate reports on the progress of
the construction work during each stage shall regularly be
submitted to the City Engineer and the City Mayor;
xxx xxx xxx
2. That within a reasonable period of time, at least ninety
(90) days from the final approval of this Compromise Agree-
ment by this Honorable Court, the defendant Pasay City Gov-
ernment shall pay and remit the amount of SIX HUNDRED
THIRTEEN THOUSAND NINETY-SIX PESOS (P613,096.00)
. . . to the plaintiff contractor, who, in turn, immediately upon
receipt thereof, shall be bound and obliged to commence and
start the construction work corresponding to the next stage
thereof; ’’
xxx xxx xxx’’
[3] “B. That immediately upon final approval hereof by this
Honorable Court, the plaintiff contractor will submit and file in
favor of Pasay City Government a new performance bond in the
amount required by pertinent law, rules and regulations, in
proportion to the remaining value or cost of the unfinished work
of the construction as per approved plans and specifica- tions .
. .’’
Petitioner claims that since respondent has not put up a
performance bond in the sufficient amount equivalent to 20%
of the remaining cost of construction as per agreement, it can-
not be obliged to pay the sum due respondent as yet.’’
 lOMoAR cPSD| 3774533

Art. 1721 WORK AND LABOR 693

Contract for a Piece of Work

Issue: Did the contracting parties envision a stage by stage

construction on the part of respondent and payment on the part
of petitioner?
Held: Yes. (1) Stage by stage construction and payment approach.
— “This is manifested in the compromise agreement, to quote:
[1].
An sub-paragraph H of paragraph 1 and paragraph 2 of the
compromise agreement also reiterated the stage by stage
construction and payment as follows: [2].
Subparagraph B of paragraph 1 of the compromise agree-
ment, to wit: [3] read together with the stage-by-stage construc-
tion and payment approach, would inevitably lead to the con-
clusion that the parties to the compromise contemplated a di-
visible obligation necessitating therefore a performance bond
‘in proportion to’ the uncompleted work.’’
(2) Performance bond to cover only remaining cost of next stage
of work to be done. — “What is crucial in sub-paragraph B of
paragraph 1 of the compromise agreement are the words “in
proportion.’’ If the parties really intended the legal rate of 20%
performance bond to refer to the whole unfinished work, then
the provision should have required the plaintiff contractor to
submit and file a new performance bond to cover the remain- ing
value/cost of the unfinished work of the construction. Using
the words in proportion then significantly changed the
meaning of the paragraph to ultimately mean a perform- ance
bond equal to 20% of the next stage of work to be done.’’ (Pasay
City Government vs. Court of First Instance, 132 SCRA 156 [1984].)

ART. 1721. If, in the execution of the work, an act

of the employer is required, and he incurs in delay or
fails to perform the act, the contractor is entitled to a
reasonable compensation.
The amount of the compensation is computed, on
the one hand, by the duration of the delay and amount
of the compensation stipulated, and on the other hand,
by what the contractor has saved in expenses by rea-
son of the delay, or is able to earn by a different em-
ployment of his time and industry. (n)
 lOMoAR cPSD| 3774533

694 LEASE Arts. 1722-1723

Default of the employer.

If the employer incurs in delay or fails to perform an act re-
quired of him under the contract, the contractor is entitled to rea-
sonable compensation to be determined by considering the fol-
lowing:
(1) the duration of the delay;
(2) the amount of compensation stipulated;
(3) expenses saved by the contractor by reason of the delay;
and
(4) the amount he would have earned by a different employ-
ment of his time and industry.
The general rule is that an obligor incurs in delay from the
time the obligee judicially or extrajudicially demands from him
the fulfillment of his obligation. (Art. 1169.)

ART. 1722. If the work cannot be completed on ac-

count of a defect in the material furnished by the em-
ployer, or because of orders from the employer, with-
out any fault on the part of the contractor, the latter
has a right to an equitable part of the compensation
proportionally to the work done, and reimbursement
for proper expenses made. (n)

Non-completion attributable to employer.

The present article grants the contractor the right to an equi-
table part of the compensation due him under the contract and to
reimbursement for his expenses, if the work cannot be completed
because the materials furnished by the employer are defective or
because of orders from the employer. The amount of compensa-
tion to which the contractor shall be proportional to the work al-
ready done.

ART. 1723. The engineer or architect who drew up

the plans and specifications for a building is liable for
damages if within fifteen years from the comple- tion
of the structure, the same should collapse by rea-