lOMoAR cPSD| 3774533

700 LEASE Art. 1724

(1) General rule. — If the building of a structure or any other

work is for a stipulated price in accordance with agreed plans and
specifications, the contractor cannot withdraw from the contract,
or demand an increase in the contract price even if the cost of labor
or materials should increase. Neither can he claim a reasonable
value of the work done based on quantum meruit. The contract
being for a definite work at a stipulated price for the cost of the
construction, the contractor assumes the risk that the cost might
go up arising from increase in cost of labor and materials.
(2) When increase in price justified. — It is justified when there
has been a change in the plans and specifications, subject to two
(2) conditions:
(a) The change has been authorized in writing by the pro-
prietor; and
(b) The additional price to be paid to the contractor has
been agreed upon by both parties, also in writing.
Under the old Civil Code (Art. 1593 thereof.), the authoriza-
tion need not be in writing and there may be a recovery on quan-
tum meruit. (Tiu vs. Habana, 45 Phil. 707 [1924].) There was no
condition for the recovery of the additional price that said price
be agreed in writing. Article 1724 apparently revokes the ruling in
Hamano vs. Papa (54 Phil. 264 [1929].) that the contractor may
recover for extra labor and materials although the changes in the
plans and specifications were not in writing. The contractor who
has no such written authorization cannot recover additional price
and is not justified in suspending the construction upon the re-
fusal of the owner. (Santos vs. Cruz, 4 C.A. Rep. 1192.)
(3) Purpose of written authorization. — According to the Code
Commission, the two (2) conditions have been added “to avoid a
misunderstanding between the parties.’’ (Report, p. 148.) The
evident purpose is to prohibit oral testimony and prevent litiga-
tion for additional costs incurred by reason of additions or changes
in the original plan.
The requirement for a written authorization is not merely to
prohibit admission of oral testimony against the objection of the
adverse party. This can be inferred from the fact that the provi-
sion is not included among those specified in the Statute of Frauds.
 lOMoAR cPSD| 3774533

Art. 1725 WORK AND LABOR 701

Contract for a Piece of Work

(Art. 1403.) As it does not appear to have been intended as an

extension of the Statute of Frauds, it must have been adopted as
a substantive provision or a condition precedent to recovery. (San
Diego vs. Sayson, 2 SCRA 1175 [1961]; Weldon Construction Corp.
vs. Court of Appeals, 154 SCRA 618 [1987].) This is true even if
the changes have benefited the owner. The contractor cannot re-
cover. (Marquez vs. Cruz, [C.A.] 54 O.G. 2547.)
(4) Applicability of Article 1724. — The provision refers to con-
tractors who undertake “to build a structure or any other work’’
and contemplates disputes arising from increased cost of labor
and materials. It does not apply to an architect claiming payment
for his professional services as such. (Arenas vs. Court of Appeals,
169 SCRA 558 [1989].)
It cannot apply to work done upon a vessel, which is not
erected on a piece of land, like the conversion of a yatch into a
passenger and cargo vessel. The additional work done on the
vessel may be orally authorized. Regarding this matter, the ap-
plicable rules are the general rules on contract. As a general rule,
a contract may be oral or written. (Royal Lines, Inc. vs. Court of
Appeals, 143 SCRA 608 [1986].)

ART. 1725. The owner may withdraw at will from

the construction of the work, although it may have
been commenced, indemnifying the contractor for all
the latter’s expenses, work, and the usefulness which
the owner may obtain therefrom, and damages.
(1594a)

Right of owner to withraw.

Article 1725 provides an exception to the general rule in con-
tracts, that after a contract is perfect, the parties are bound by their
agreement and neither party may withdraw therefrom (Arts. 1159,
1345.); otherwise, the aggrieved party is entitled to demand for
specific performance or rescission with damages in either case.
(Arts. 1170, 1191.) It grants the owner the exceptional right to
withdraw from a building contract, provided he indemnifies the
contractor for all the latters’ expenses, work, and the usefulness
he obtained therefrom, plus damages.
 lOMoAR cPSD| 3774533

702 LEASE Art. 1726

The right of the owner to withdraw from a building contract is

absolute. The contractor cannot insist upon completing the con-
tract and enforcing payment of the full amount of the contract
price. The right of the owner to desist being absolute, it follows
that its exercise cannot be made to depend upon whether the con-
tract price has or has not been paid in advance, wholly or par-
tially. If the total amounts paid the builder at the time the owner
elects to abandon the projected building are more than sufficient
to reimburse him for his outlay and to indemnify him for the loss
of his prospective profit, the builder must be subject to an action
for the recovery of the difference between the amounts received
by him and those which he would have been entitled to recover
under Article 1728 had no payment been made him at the time of
the abandonment of the project by the owner. (Adams vs. Sociedad
Naton, 39 Phil. 838 [1919].)

ART. 1726. When a piece of work has been en-

trusted to a person by reason of his personal
qualifications, the contract is rescinded upon his
death.
In this case the proprietor shall pay the heirs of
the contractor in proportion to the price agreed upon,
the value of the part of the work done, and of the ma-
terials prepared, provided the latter yield him some
benefit.
The same rule shall apply if the contractor cannot
finish the work due to circumstances beyond his con-
trol. (1595)

Rescission of contract.
The present article provides for two instances:
(1) Death of contractor. — When a piece of work has been en-
trusted to a person by reason by his personal qualifications, and
that person dies before the completion of the work, the contract
is rescinded. (see Javier Security Special Agency vs. Shell Craft &
Bulton Corp., 7 SCRA 198 [1963].) The obligation arising out of
such contract is personal in nature; hence, it is not transmissible
to the heirs but is extinguished by death. (Art. 1311.) In this case,
 lOMoAR cPSD| 3774533

Arts. 1727-1728 WORK AND LABOR 703

Contract for a Piece of Work

the proprietor shall pay the heirs of the contractor as provided in

the second paragraph of Article 1726 the proportionate value of
the work done.
(2) Unavoidable circumstances. — The rule applies if it has be-
come impossible to finish the work beyond the control of the
contractor.

ART. 1727. The contractor is responsible for the

work done by persons employed by him. (1596)

Liability of contractor for work done

by his workers.
The contractor is liable for any damage to the work caused
by persons employed by him. For breach of contract (culpa con-
tractual), the defense of due diligence in the selection and super-
vision of his employees charged to do the work is not available to
the contractor although it may mitigate his damages. (see Manila
Railroad Co. vs. Compania Transatlantica, 38 Phil. 875 [1918].)
The fact that the contractor failed to comply with his contrac-
tual obligation, is sufficient basis for affixing liability for damages.

ART. 1728. The contractor is liable for all the claims

of laborers and others employed by him, and of third
persons for death or physical injuries during the con-
struction. (n)

Liability of contractor for death

or physical injuries.
The present article make the contractor liable for damages
arising from death or physical injuries, claimed by laborers and
others employed by him, and by third persons. Note that the li-
ability is limited to death or injuries “during the construction.’’
Under Article 1711, employers are obliged to pay compensa-
tion for the death of, or injuries to, their laborers, workmen, me-
chanics or other employees, if such death or personal injury arose
out of and in the course of the employment, even though the event
may have been purely accidental or entirely due to a fortuitous
event.
 lOMoAR cPSD| 3774533

704 LEASE Art. 1729

ART. 1729. Those who put their labor upon or fur-

nish materials for a piece of work undertaken by the
contractor have an action against the owner up to the
amount owing from the latter to the contractor at the
time the claim is made. However, the following shall
not prejudice the laborers, employees and furnishers
of materials:
(1) Payments made by the owner to the contrac-
tor before they are due;
(2) Renunciation by the contractor of any amount
due him from the owner.
This article is subject to the provisions of special
laws. (1597a)

Subsidiary liability of owner to laborers

and materialmen.
The contractor is primarily liable for the payment of the com-
pensation of his laborers and the price of materials he uses. The
owner has no direct contractual relation with the contractor’s
laborers and suppliers of materials.
Article 1729 gives two (2) instances when laborers and
materialmen have a right of action not only against the contrac-
tor but also directly against the owner. It is intended to protect
the laborers and materialmen from being taken advantage of by
unscrupulous contractors and from possible connivance between
the owner and the contractor. Under Article 2242(3) and (4), the
claims of laborers and materialmen enjoy preference among the
creditors of the owner. (Velasco vs. Court of Appeals, 95 Phil. 616
[1954].)

Special laws regarding contractor’s bond.

(1) Act No. 3688 provides that “any person, * * * or corpora-
tion entering into a formal contract with the Government of the
Philippine Islands for * * * the prosecution and completion of any
public work, * * * shall be required, before commencing such work,
to execute the usual penal bond, with good and sufficient sure-
ties, with the additional obligation that such contractor or his or
 lOMoAR cPSD| 3774533

Art. 1730 WORK AND LABOR 705

Contract for a Piece of Work

its sub-contractors shall promptly make payments to all persons

supplying him or them with labor and materials in the prosecu-
tion of the work provided for in such contract. x x x.’’
The claim of the government under the Act enjoys priority
over other claims. (Bautista vs. Auditor General, 97 Phil. 244
[1955].) The remedy of a person who furnished materials in the
construction of a public building is to intervene in the action of the
Government on the contactor’s bond. If the government does not
institute such suit, he may file an action in the name of the
Government against said bond. (New Manila Lumber Co. vs.
Republic, 107 Phil. 824 [1960].)
(2) Act No. 3959 makes it obligatory for any person, company,
firm or corporation owning any work of any kind executed by
contract to require the contractor to furnish a bond guaranteeing
the payment of the laborers and provides penalties for its viola-
tion. Where the builder did not require the contractor to furnish a
bond in an amount equivalent to the cost of labor and to execute
an affidavit showing that the wages of the laborers employed in
the work have been paid, he is solidarily liable with the contrac-
tor for the payment of such wages. (David vs. Cabigao, 96 Phil.
163 [1954].)
Article 1729 which provides that its provisions are subject to
special laws, is not applicable to the University of the Philippines
(U.P.) which is subject to Act No. 3688, a special law for the pro-
tection of persons furnishing materials and labor for the construc-
tion of public works. (U.P. vs. Gabriel, 154 SCRA 684 [1987].)

ART. 1730. If it is agreed that the work shall be

accomplished to the satisfaction of the proprietor, it
is understood that in case of disagreement the ques-
tion shall be subject to expert judgment.
If the work is subject to the approval of a third per-
son, his decision shall be final, except in case of fraud
or manifest error. (1598a)

Satisfactory completion of work.

(1) If the work is to be performed to the “satisfaction of the
 lOMoAR cPSD| 3774533

706 LEASE Art. 1731

proprietor,’’ the question shall be referred to a person who is an

expert on the matter for decision in case of disagreement.
(2) If the work is subject to the approval of a third person, his
decision shall be final except in case fraud or manifest error.
(a) The certificate of the architect, who had been ap-
pointed by and represented the owner of the buildings, that
the buildings had been completed, was sufficient to show the
completion of the contract and to entitle the builder to the right
to recover the balance due under his contract. The owner of
the buildings was bound by the certificate of his own archi-
tect as to the completion of the buildings. (Takao vs. Belando,
49 Phil. 957 [1926].)
(b) When it is not expressly agreed in the contract that the
materials furnished and the labor performed shall, before ac-
ceptance, be passed upon by a third person, such approval
by a third person can not be insisted upon. Thus, where an
ordinance of the City of Manila provides that before a steam
boiler shall be permitted to operate within the city limits, it
shall be passed upon and approved by a particular city offi-
cial, the approval of such official is not a condition precedent
to the enforcement of the contract with respect to the collec-
tion of the amount due under the agreement for the materials
furnished and the labor performed, unless the terms of the
contract expressly provide therefor. If it was not agreed that a
third person had to approve the work, no third person may
decide upon the fulfillment of the contract. (Taylor vs. Pierce,
70 Phil. 103 [1911].)

ART. 1731. He who has executed work upon a mov-

able has a right to retain it by way of pledge until he is
paid. (1600)

Mechanic’s lien.
The right of a worker to be paid for work done on a movable
is in the nature of a mechanic’s lien. He has a right to retain it by
way of pledge until he is paid. The laborer’s wages shall be a lien
on the goods manufactured or the work done. (Art. 1707.)
 lOMoAR cPSD| 3774533

Art. 1731 WORK AND LABOR 707

Contract for a Piece of Work

(1) Where the vendee of a truck brought it to the vendor’s

shop for repairs, the latter has the right to retain the truck until the
cost of the repair had been paid. (Bachrach Motor Co. vs.
Mendoza, 43 Phil. 410 [1922].)
(2) Where the mortgagee in a chattel mortgage covering an
automobile personally delivers the automobile, which has suf-
fered great damage by reason of an accident, to a mechanic for
repairs, requests that they be made and superintends and advises
at various times during the progress of the repairs, he is person-
ally liable for the value of the repairs made. (Bachrach vs. Man-
tel, 25 Phil. 410 [1913].)
(3) Where the mortgagor of a chattel retains possession of the
property with the right to use the same, the cost of any repairs
made thereon by an artisan, to the extent reasonably necessary to
the continued use of the chattel, will, under Article 1731, consti-
tute a lien on the chattel superior to the mortgage, so long as the
person making such repairs retains the chattel in his possession.
A person who buys the chattel at a sale made to enforce this lien
will obtain a valid title. (Bank of the Phil. Islands vs. Walter A.
Smith & Co., 55 Phil. 533 [1931].)
(4) The repair man is not a party to the terms and provisions
in a chattel mortgage to the effect that the mortgagor cannot en-
cumber the auto for subsequent repairs without the written con-
sent of the mortgagee, and in the absence of personal knowledge
of their existence, he is not legally bound by such provisions in
the chattel mortgage. (Phil. Trust Co. vs. Smith Navigation Co.,
64 Phil. 830 [1937].)
(5) Article 1731 is not applicable to salaried employees. Where
a lumber company sold and delivered lumber to a bank, which
attempts to export it but is prevented by the employees of the
lumber company who have done work on the lumber and have
not been paid for their work, the bank has a right to an injunction
to restrain the employees of the lumber company from interfer-
ing or impeding the bank in the exportation of lumber. (Chartered
Bank vs. Constantino, 56 Phil. 717 [1932].)

— oOo —