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Gaite vs. Fonacier (G.R. No. L-11827, July 31, 1961)

 Background:

  • Fernando Gaite owned mining claims containing iron ore.
  • Isabelo Fonacier was a businessman interested in purchasing the iron ore.

The Contract:

  • On November 8, 1954, Gaite and Fonacier entered into a contract ("Revocation of Power of Attorney and Contract") where:
    • Gaite revoked a Power of Attorney he had previously granted to someone else regarding the mining claims.
    • Gaite sold Fonacier an estimated 24,000 tons of iron ore from the mining claims for a lump sum price.
  • A surety company issued a bond on December 8, 1954, to guarantee Fonacier's payment to Gaite. This bond expired on December 8, 1955.

The Dispute:

  • A disagreement arose between Gaite and Fonacier regarding the amount of iron ore actually delivered:
    • Gaite claimed that he fulfilled the contract and delivered close to the estimated amount.
    • Fonacier alleged that only around 7,573 tons were delivered and sought damages of over P200,000.00.

The Legal Proceedings:

  • Gaite filed a case against Fonacier to collect the unpaid balance due under the contract.
  • Fonacier counterclaimed, seeking damages due to alleged non-delivery of the agreed-upon ore.
  • The lower court ruled in favor of Gaite, finding that there was a substantial amount of ore on the property at the time of the contract, and Gaite was not at fault for failing to deliver the full expected quantity.

Supreme Court Decision:

  • The Supreme Court upheld the lower court's ruling in favor of Gaite.
  • Key Points from the decision:
    • The sale was for a lump sum, covering a mass of fungible goods (iron ore), the exact quantity of which was unknown. The fact that the amount was less than estimated did not automatically void the contract.
    • Fonacier, as the buyer, bore the risk of the quantity being less than expected.
    • Gaite substantially performed his obligations under the contract.

Significance

This case highlights several important legal concepts in Philippine law:

  • Contracts for the Sale of Goods: The principles governing the sale of fungible goods, particularly when quantities are estimated.
  • The Obligation of the Seller: The responsibility of the seller to deliver goods as promised.
  • The Risk Borne by the Buyer: In certain types of contracts, the buyer assumes some risk, such as when the exact quantity of goods is uncertain.
  • Remedies for Contractual Breach: The legal remedies available when a party fails to meet its contractual obligations.

Pertinent dates

  • November 8, 1954: Gaite and Fonacier signed the "Revocation of Power of Attorney and Contract," where Gaite sold Fonacier an estimated 24,000 tons of iron ore from his mining claims.

  • December 8, 1954: A surety company issued a bond in favor of Gaite in connection with the contract. This bond was to ensure payment by Fonacier for the iron ore.

  • December 8, 1955: The bond issued by the surety company expired.

  • Subsequent Events:

    • Disputes arose over the quantity of iron ore actually delivered.
    • Gaite filed a case against Fonacier for breach of contract.
    • Fonacier filed a counterclaim alleging that Gaite failed to deliver the agreed-upon amount of ore.

  • July 31, 1961: The Philippine Supreme Court rendered its decision in this case.


Location: Digos City, Davao del Sur, Philippines

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