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ACE FOODS v. MICRO PACIFIC TECHNOLOGIES CO.

FACTS:

ACE Foods, Inc. (ACE Foods) is a domestic corporation engaged in the trading and distribution of consumer goods, while Micro Pacific Technologies Co., Ltd. (MTCL) is engaged in the supply of computer hardware and equipment. MTCL sent a letter-proposal to ACE Foods for the delivery and sale of Cisco Routers and Frame Relay Products. ACE Foods accepted the proposal and issued a purchase order for the products. MTCL delivered the products to ACE Foods, but ACE Foods refused to pay the purchase price and claimed that the products were defective. ACE Foods filed a complaint against MTCL, seeking the removal of the products and damages. The trial court ordered MTCL to remove the products and pay damages. On appeal, the Court of Appeals reversed the trial court's ruling and ordered ACE Foods to pay the purchase price. ACE Foods filed a petition for review. The issue before the court is whether ACE Foods should pay MTCL the purchase price for the products.

ISSUES:

  1. Whether ACE Foods should pay MTCL the purchase price for the subject products.

RULING:

  1. Yes, ACE Foods should pay MTCL the purchase price amounting to P646,464.00 along with legal interest at the rate of 6% per annum from April 4, 2002, and attorney's fees amounting to P50,000.00. The Supreme Court affirmed the CA's finding that the agreement between the parties is a contract of sale, and ACE Foods's obligation to pay the purchase price arose from the perfection of this contract.

PRINCIPLES:

  • Interpretation of Contracts: The real nature of a contract is determined from the express terms of the written agreement and the acts of the contracting parties, not merely by its title.

  • Contract of Sale: Defined as an agreement where one party obligates to transfer ownership and deliver a determinate thing, and the other to pay a price certain in money or its equivalent. It is a consensual contract perfected by mere consent and does not require a specific form for validity.

  • Obligations under a Contract of Sale: Upon perfection, parties may reciprocally demand performance. The vendor must deliver the determinate thing, and the vendee must pay the agreed price.

  • Contract to Sell vs. Contract of Sale: A contract to sell involves a prospective seller reserving ownership until full payment of the purchase price. In contrast, an outright contract of sale entails the immediate transfer of ownership upon the meeting of minds and the agreement to the terms.

  • Reservation of Title: The unilateral stipulation of reserving title until full payment does not alter the nature of the existing contract of sale unless there is clear evidence of novation or amendatory agreement intending such change.

  • Breach of Contract: Each party must prove their affirmative allegations by preponderance of evidence in civil cases. Failure to adequately prove breach claims nullifies the basis for a rescissory action.