FACTS:

In 1992, Pure Foods Corporation (Purefoods) decided to install generators in its Marikina City food processing plant due to the power crisis. A bidding was conducted and three bidders, including Far East Mills Supply Corporation (FEMSCO), submitted proposals. Purefoods awarded the contract to FEMSCO and confirmed it in a letter. FEMSCO complied with the required documents, while Purefoods returned FEMSCO's bidder's bond. However, Purefoods unilaterally canceled the award and decided to award the project to Jardine Nell, a division of Jardine Davies, Inc., which was not one of the bidders. FEMSCO protested and sued for specific performance and damages. The trial court held Purefoods liable and ordered it to pay damages to FEMSCO. Jardine's demurrer to evidence was granted, but the Court of Appeals ordered Jardine to pay damages to FEMSCO. Both Purefoods and Jardine appealed the decision to the Supreme Court.

ISSUES:

1. Whether a perfected contract existed between PUREFOODS and FEMSCO.

2. Whether there is evidence that JARDINE induced or connived with PUREFOODS to violate its contract with FEMSCO.

3. Whether or not the contract between Purefoods and FEMSCO was perfected.

4. Whether or not Purefoods acted in bad faith in unilaterally canceling the contract.

5. Whether or not Jardine induced Purefoods to violate the contract with FEMSCO.

RULING:

1. The court held that there was a perfected contract between PUREFOODS and FEMSCO. The letter sent by PUREFOODS to FEMSCO confirming the award of the project constituted acceptance of FEMSCO's offer. The terms and conditions mentioned in the letter were prescriptions on how the obligation was to be performed, and not conditions imposed on the perfection of the contract.

2. The court did not address this issue in the partial digest provided.

3. The contract between Purefoods and FEMSCO was perfected. FEMSCO's submission of the performance bond and contractor's all-risk insurance can be considered as an implied acceptance of Purefoods' conditional counter-offer. Purefoods' acknowledgment and return of FEMSCO's bidder's bond further confirm that FEMSCO consented to the counter-offer. The subsequent discussion of the price does not invalidate the contract that had already been perfected.

4. Purefoods acted in bad faith in unilaterally canceling the contract. The cancellation of the contract, despite it being already perfected, was a flagrant violation of the law and contrary to fair and just dealings. Purefoods' subsequent contract with Jardine aggravated its bad faith.

5. Jardine did not induce Purefoods to violate the contract with FEMSCO. There is no specific evidence showing that Jardine induced Purefoods to cancel the contract. The similarity in design and a lower quotation by Jardine are insufficient to prove inducement.

PRINCIPLES:

• A contract is a juridical convention manifested in legal form, wherein one or more persons bind themselves to fulfill a prestation to give, to do, or not to do.

• Contracts are perfected by mere consent and have the force of law between the parties.

• The acceptance of an offer can be express or implied, but it must be made known to the offeror to create a contract.

• A condition imposed on the perfection of a contract is different from a condition imposed on the performance of an obligation. Failure to comply with the former results in the failure of a contract, while failure to comply with the latter gives the other party options and remedies to protect their interests.

• An acceptance of a conditional offer may be express or implied and can be inferred from the contemporaneous and subsequent acts of the contracting parties.

• Purchase orders do not make or break a contract.

• Cancellation of a contract that has already been perfected constitutes bad faith.

• Moral damages may be awarded to a corporation whose reputation has been tarnished.

• Exemplary damages are awarded as a deterrent and example for the public good.

• Insufficiency of evidence is a ground for reversing and setting aside a decision.