*

G.R. No. 105387. November 11, 1993.

JOHANNES SCHUBACK & SONS PHILIPPINE TRADING CORPORATION,

petitioner, vs. THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing business under
the name and style “PHILIPPINE SJ INDUSTRIAL TRADING, respondents.

Civil Law; Obligations and Contracts; When contract of sale is perfected; A contract of sale is perfected at
the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.
—We reverse the decision of the Court of Appeals and reinstate the decision of the trial court. It bears
emphasizing that a “contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price x x x.”
Same; Same; Same; Letter of Credit; The opening of a letter of credit in favor of a vendor is only a mode
of payment; It is not among the essential requirements of a contract of sale enumerated in Arts. 1305 and
1474 of the Civil Code and therefore does not prevent the perfection of the contract between the parties.—On
the part of the buyer, the situation reveals that private respondent failed to open an irrevocable letter of
credit without recourse in favor of Johannes Schuback of Hamburg, Germany. This omission, however, does
not prevent the perfection of the contract between the parties, for the opening of a letter of credit is not to be
deemed a suspensive condition. The facts herein do not show that petitioner reserved title to the goods until
private respondent had opened a letter of credit. Petitioner, in the course of its dealings with private
respondent, did not incorporate any provision declaring their contract of sale without effect until after the
fulfillment of the act of opening a letter of credit. The opening of a letter of credit in favor of a vendor is only
a mode of payment. It is not among the essential requirements of a contract of sale enumerated in Articles
1305 and 1474 of the Civil Code, the absence of any of which will prevent the perfection of the contract from
taking place.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

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* THIRD DIVISION.

718

718 SUPREME COURT REPORTS ANNOTATED

Johannes Schuback & Sons Philippine Trading
Corp. vs. Court of Appeals

     Hernandez, Velicaria, Vibar & Santiago for petitioner.

     Ernesto M. Tomaneng for private respondent.

ROMERO, J.:

In this 1petition for review on certiorari, petitioner questions the reversal by the Court of
Appeals  of the trial court’s ruling that a contract of sale had been perfected between petitioner
and private respondent over bus spare parts.
The facts as quoted from the decision of the Court of Appeals are as follows:
“Sometime in 1981, defendant2 established contact with plaintiff3through the Philippine Consulate General
in Hamburg, West Germany, because he wanted to purchase MAN bus spare parts from Germany. Plaintiff
communicated with its trading partner, Johannes Schuback and Sohne Handelsgesellschaft m.b.n. & Co.
(Schuback Hamburg) regarding the spare parts defendant wanted to order.
On October 16, 1981, defendant submitted to plaintiff a list of the parts (Exhibit B) he wanted to
purchase with specific part numbers and description. Plaintiff referred the list to Schuback Hamburg for
quotations. Upon receipt of the quotations, plaintiff sent to defendant a letter dated 25 November, 1981
(Exh. C) enclosing its offer on the items listed by defendant.
On December 4, 1981, defendant informed plaintiff that he preferred genuine to replacement parts, and
requested that he be given a 15% discount on all items (Exh. D).
On December 17, 1981, plaintiff submitted its formal offer (Exh. E) containing the item number, quantity,
part number, description, unit price and total to defendant. On December 24, 1981, defendant informed
plaintiff of his desire to avail of the prices of the parts at that time and enclosed its Purchase Order No. 0101
dated 14 December 1981 (Exhs. F to F-4). Said Purchase Order contained the item number, part number
and description. Defendant promised to submit the quantity per unit he wanted to order on December 28 or
29 (Exh. F).

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1 Penned by Justice Artemon D. Luna and concurred in by Justices Serafin E. Camilon and Celso L. Magsino.
2 Herein private respondent.
3 Herein petitioner.

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VOL. 227, NOVEMBER 11, 1993 719

Johannes Schuback & Sons Philippine Trading
Corp. vs. Court of Appeals

On December 29, 1981, defendant personally, submitted the quantities he wanted to Mr. Dieter Reichert,
General Manager of plaintiff, at the latter’s residence (t.s.n., 13 December, 1984, p. 36). The quantities were
written in ink by defendant in the same Purchase Order previously submitted. At the bottom of said
Purchase Order, defendant wrote in ink above his signature: ‘NOTE: Above P.O. will include a 3% discount.
The above will serve as our initial P.O.’ (Exhs. G to G-3-a).
Plaintiff immediately ordered the items needed by defendant from Schuback Hamburg to enable
defendant to avail of the old prices. Schuback Hamburg in turn ordered (Order No. 12204) the items from
NDK, a supplier of MAN spare parts in West Germany. On January 4, 1982, Schuback Hamburg sent
plaintiff a proforma invoice (Exhs. N-1 to N-3) to be used by defendant in applying for a letter of credit. Said
invoice required that the letter of credit be opened in favor of Schuback Hamburg. Defendant acknowledged
receipt of the invoice (t.s.n., 19 December 1984, p. 40).
An order confirmation (Exhs. I, I-1) was later sent by Schuback Hamburg to plaintiff which was
forwarded to and received by defendant on February 3, 1981 (t.s.n., 13 Dec. 1984, p. 42).
On February 16, 1982, plaintiff reminded defendant to open the letter of credit to avoid delay in shipment
and payment of interest (Exh. J). Defendant replied, mentioning, among others, the difficulty he was
encountering in securing the required dollar allocations and applying for the letter of credit, procuring a
loan and looking for a partnerfinancier, and of finding ways ‘to proceed with our orders’ (Exh. K).
In the meantime, Schuback Hamburg received invoices from NDK for partial deliveries on Order No.
12204 (Direct Interrogatories, 07 Oct. 1984, p. 3). Schuback Hamburg paid NDK. The latter confirmed
receipt of payments made on February 16, 1984 (Exh. C-Deposition).
On October 18, 1982, plaintiff again reminded defendant of his order and advised that the case may be
endorsed to its lawyers (Exh. L). Defendant replied that he did not make any valid Purchase Order and that
there was no definite contract between him and plaintiff (Exh. M). Plaintiff sent a rejoinder explaining that
there is a valid Purchase Order and suggesting that defendant either proceed with the order and open a
letter of credit or cancel the order and pay the cancellation fee of 30% F.O.B. value, or plaintiff will endorse
the case to its lawyers (Exh. N).
Schuback Hamburg issued a Statement of Account (Exh. P) to plaintiff enclosing therewith Debit Note
(Exh. 0) charging plaintiff 30% cancellation fee, storage and interest charges in the total amount of DM
51,917.81. Said amount was deducted from plaintiffs account

720

720 SUPREME COURT REPORTS ANNOTATED

Johannes Schuback & Sons Philippine Trading
Corporation vs. Court of Appeals

with Schuback Hamburg (Direct Interrogatories, 07 October, 1985). Demand letters sent to defendant by
plaintiff’s counsel dated March 22, 1983 and June 9, 1983 were to no avail (Exhs. R and S).”

Consequently, petitioner failed a complaint for recovery of actual or compensatory damages,

unearned profits, interest, attorney’s fees and costs against
4
private respondent.
In its decision dated June 13, 1988, the trial court   ruled in favor of petitioner by ordering
private respondent to pay petitioner, among others, actual compensatory damages in the amount
of DM 51,917.81, unearned profits in the amount of DM 14,061.07, or their peso equivalent.
Thereafter, private respondent elevated his case before the Court of Appeals. On February 18,
1992, the appellate court reversed the decision of the trial court and dismissed the complaint of
petitioner. It ruled that there was no perfection of contract since there was no meeting of the
minds as to the price between the last week of December 1981 and the first week of January
1982.
The issue posed for resolution is whether or not a contract of sale has been perfected between
the parties.
We reverse the decision of the Court of Appeals and reinstate the decision of the trial court. It
bears emphasizing that a “contract of sale is perfected at the moment there5 is a meeting of minds
upon the thing which is the object of the contract and upon the price x x x.”
Article 1319 of the Civil Code states: “Consent is manifested by the meeting of the offer and
acceptance upon the thing and the cause which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified acceptance constitutes a counter offer.” The facts
presented to us indicate that consent on both sides has been manifested.
The offer by petitioner was manifested on December 17, 1981

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4 Regional Trial Court of Makati, Metro Manila, Branch 146, (Penned by Judge Jose L. Coscolluela, Jr.)
5  Civil
Code, Article 1475,  C & C Commercial Corp. v. PNB  G.R. No. 92499, July 5, 1989,  175 SCRA 1;  NGA v.
Intermediate Appellate Court, G.R. No. 79970, March 8, 1989, 171 SCRA 131.

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Johannes Schuback & Sons Philippine Trading
Corporation vs. Court of Appeals

when petitioner submitted its proposal containing the item number, quantity, part number,
description, the unit price and total to private respondent. On December 24, 1981, private
respondent informed petitioner of his desire to avail of the prices of the parts at the time and
simultaneously enclosed its Purchase Order No. 0101 dated December 14, 1981. At this stage, a
meeting of the minds between vendor and vendee has occurred, the object of the contract being
the spare parts and the consideration, the price stated in petitioner’s offer dated December 17,
1981 and accepted by the respondent on December 24, 1981.
Although said purchase order did not contain the quantity he wanted to order, private
respondent made good his promise to communicate the same on December 19, 1981. At this
juncture, it should be pointed out that private respondent was already in the process of executing
the agreement previously reached between the parties.
Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement made by private
respondent: “Note: above P.O. will include a 3% discount. The above will serve as our initial P.O.”
This notation on the purchase order was another indication of acceptance on the part of the
vendee, for by requesting a 3% discount, he implicitly accepted the price as first offered by the
vendor. The immediate acceptance by the vendee of the offer was impelled by the fact that on
January 1, 1982, prices would go up, as in fact, the petitioner informed him that there would be a
7% increase effective January 1982. On the other hand, concurrence by the vendor with the said
discount requested by the vendee was manifested when petitioner immediately ordered the items
needed by private respondent from Schuback Hamburg which in turn ordered from NDK, a
supplier of MAN spare parts in West Germany.
When petitioner forwarded its purchase order to NDK, the price was still pegged at the old
one. Thus, the pronouncement of the Court of Appeals that there was no confirmed price on or
about the last week of December 1981 and/or the first week of January 1982 was erroneous.
While we agree with the trial court’s conclusion that indeed a perfection of the contract was
reached between the parties, we differ as to the exact date when it occurred, for perfection took
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722 SUPREME COURT REPORTS ANNOTATED

Johannes Schuback & Sons Philippine Trading
Corporation vs. Court of Appeals

place, not on December 29, 1981, but rather on December 24, 1981. Although the quantity to be
ordered was made determinate only on December 29, 1981, quantity is immaterial in the
perfection of a sales contract.  What is of importance is the meeting of the minds as to
the object  and  cause,  which from the facts disclosed, show that as of December 24, 1981, these
essential elements had already concurred.
On the part of the buyer, the situation reveals that private respondent failed to open an
irrevocable letter of credit without recourse in favor of Johannes Schuback of Hamburg,
Germany. This omission, however, does not prevent the perfection of the contract between the
parties, for the opening of a letter of credit is not to be deemed a suspensive condition. The facts
herein do not show that petitioner reserved title to the goods until private respondent had opened
a letter of credit. Petitioner, in the course of its dealings with private respondent, did not
incorporate any provision declaring their contract of sale without effect until after the fulfillment
of the act of opening a letter of credit.
The opening of a letter of credit in favor of a vendor is only a mode of payment. It is not among
the essential requirements of a contract of sale enumerated in Article 1305 and 1474 of the Civil
Code, the absence of any of which will prevent the perfection of the contract from taking place.
To adopt the Court of Appeals’ ruling that the contract of sale was dependent on the opening of
a letter of credit would be untenable from a pragmatic point of view because private respondent
would not be able to avail of the old prices which were open to him only for a limited period of
time. This explains why private respondent immediately placed the order with petitioner which,
in turn promptly contacted its trading partner in Germany. As succinctly stated by petitioner, “it
would have been impossible for respondent to avail of the said old prices since the perfection of
the contract would 6arise much later, or after the end of the year 1981, or when he finally opens
the letter of credit.”
WHEREFORE, the petition is GRANTED and the decision of the trial court dated June 13,
1988 is REINSTATED with modifi-

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6 Rollo, p. 46.

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VOL. 227, NOVEMBER 11, 1993 723

Lazaro vs. Court of Appeals

cation.
SO ORDERED.

     Feliciano (Chairman), Bidin, Melo and Vitug, JJ.,concur.

Petition granted; trial court’s decision reinstated with modification.

Note.—A contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. (Villamor vs. Court of Appeals,  202
SCRA 607).