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BRITISH AIRWAYS v. CA

FACTS:

The petitioner, British Airways, Inc., is being sued by the private respondent, First International Trading and General Services Co., for damages. The private respondent is a recruitment agency that received a telex message from its principal in Saudi Arabia to recruit Filipino contract workers. The principal paid for airfare tickets for 93 workers and instructed the petitioner to transport them to Jeddah by March 30, 1981.

The petitioner informed the private respondent that it had received the prepaid tickets and instructed its travel agent to book the workers. However, the petitioner failed to fly the workers, forcing the private respondent to borrow money to purchase tickets from other airlines.

Similar incidents occurred in June 1981, where the petitioner failed to transport 27 workers as booked. The private respondent sent letters demanding compensation for the damages incurred. The petitioner denied the claims and alleged that it returned the prepaid ticket advice due to unavailability of space.

The trial court ruled in favor of the private respondent and ordered the petitioner to pay actual damages, moral damages, corrective or exemplary damages, attorney's fees, and costs. The decision was affirmed by the Court of Appeals.

ISSUES:

  1. Whether or not private respondent has a cause of action against petitioner.

  2. Whether or not a perfected contract of carriage exists between the parties.

  3. Whether or not the appellate court erred in awarding actual damages to private respondent.

  4. Whether the private respondent is entitled to actual damages.

  5. Whether the private respondent is entitled to moral and exemplary damages.

RULING:

  1. Yes, private respondent has a cause of action against petitioner. The repeated failures of petitioner to transport private respondent's workers despite confirmed booking constitutes a breach of contract and bad faith.

  2. Yes, there is a perfected contract of carriage between the parties. The court considers two aspects of the contract of common carriage: the contract "to carry" which is consensual and perfected by the mere consent of the parties, and the "contract of carriage" itself which is considered a real contract and is assumed only when the carrier is actually used. In this case, the contract "to carry" has been perfected as evidenced by the acceptance of the prepaid ticket advice and payment of the fare by private respondent's principal.

  3. The appellate court did not err in awarding actual damages to private respondent. It is immaterial that private respondent's principal subsequently reimbursed the expenses, as the existence of damages was not objected to or questioned by petitioner.

  4. The Supreme Court held that the private respondent is not entitled to actual damages. Although it is true that the private respondent borrowed money for the airfare tickets of its contract workers when the petitioner failed to transport said workers, it was established that all the expenses incurred by the private respondent had already been reimbursed by its principal. The actual damages sought by the private respondent pertained to airline tickets and travel taxes, which were already reimbursed by its principal. Thus, there is no basis for the award of actual damages.

  5. The Supreme Court held that the private respondent is entitled to moral and exemplary damages. The petitioner's failure to transport the contract workers despite receiving payment for their airfares was a complete failure on its part. The petitioner canceled, booked, and rebooked the flight of the private respondent's contract workers unreasonably and without prior notice. These acts, along with the petitioner's bad faith and malice in performing its obligations, caused damage and besmirched the reputation and business image of the private respondent. Therefore, moral and exemplary damages are warranted.

PRINCIPLES:

  • A cause of action arises from the act or omission of one party that violates the legal right of another.

  • The contract "to carry" refers to the consensual agreement between the parties, while the "contract of carriage" refers to the actual assumption of obligations by the carrier upon use of their services.

  • The existence of a perfected contract of carriage requires the consent of both parties, an object certain, and a cause or consideration.

  • Damages may still be awarded even if the expenses have been reimbursed, as long as the existence of damages was not objected to or questioned.

  • Actual or compensatory damages cannot be presumed and must be duly proven with a reasonable degree of certainty.

  • One is only entitled to an adequate compensation for actual damages suffered.

  • Reimbursement of all expenses incurred may negate the claim for actual damages.

  • Moral and exemplary damages may be awarded for acts done in bad faith, which cause injury and besmirch reputation and business image.