G.R. No. L-47538, 20 June 1941, 72 Phil 402


Arco Amusement Company. a corporation duly organized under the laws of the Philippine Islands, with its office in Manila, was engaged in the business of operating cinematographs. Gonzalo Puyat & Sons, Inc., another corporation doing business in the Philippine Islands, with office in Manila, in addition to its other business, was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, U.S.A. It would seem that this last company dealt in cinematographer equipment and machinery, and the Arco Amusement Company desiring to equip its cinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc.

After some negotiations, it was agreed between the parties, that is to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on the other, representing the defendant, that the latter would, on behalf of the plaintiff, order sound reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 per cent commission, plus all expenses When petitioner inquired respondent, the price (without discount) of the equipment, the latter quoted such at $1,700.00 FOB Indiana. Being agreeable to the price, Arco formally authorized the order. The following year, both parties agreed for another order of sound reproducing equipment on the same terms as the first at $1,600.00 plus 10% plus all other expenses.

Arco Amusement subsequently discovered that the price quoted to them with regard to their previous orders were not the net price but rather the list price, and that the Gonzalo Puyat had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, Arco Amusement was convinced that the prices charged them were much too high. For these reasons, they sought to obtain a reduction from Gonzalo Puyat rather than a reimbursement, and failing in this they filed the complaint. The trial court held that the contract between the petitioner and the respondent was one of outright purchase and sale, and absolved that petitioner from the complaint.


Whether the contract between petitioner and respondent is that of agency where agent is bound to indemnify the principal for damages, or a mere contract of sales.


No. The Supreme Court sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchase and sale, and not one of agency, for the reasons now to be stated. In the first place, the contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as “dealer’s” or “trader’s talk”, which cannot bind either party.

The letters, Exhibits 1 and 2, by which the respondent accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with the Court of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery.

In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States.

*Case digest by Paul Jason G. Acasio, JD-IV, Andres Bonifacio Law School, SY 2019-2020