[No. 11491.

 August 23, 1918.]

ANDRES QUIROGA, plaintiff and appellant, vs.PARSONS HARDWARE Co., defendant
and appellee.

1. 1.SALES; INTERPRETATION OF CONTRACT.—For the classification of contracts, due

regard must be paid to their essential clauses. In the contract in the instant case, what was
essential, constituting its cause and subject matter, was that the plaintiff was to furnish the
defendant with the beds which the latter might order, at the stipulated price, and that the
defendant was to pay this price in the manner agreed upon. These are precisely the essential
features of a contract of purchase and sale. There was the obligation on the part of the plaintiff
to supply the beds, and, on that of the defendant, to pay their price. These features exclude the
legal conception of an agency or order to sell whereby the mandatary or agent receives the thing
to sell it, and does not pay its price, but delivers to the principal the price he obtains from the
sale of the thing to a third person, and if he does not succeed in selling it, he returns
it. Held: That this contract is one of purchase and sale, and not of commercial agency.

1. 2.ID.; ID.—The testimony of the person who drafted this contract, to the effect that his purpose
was to be an agent for the beds and to collect a commission on the sales, is of no importance to
prove that the contract was one of agency, inasmuch as the agreements contained in the contract
constitute, according to law, covenants of purchase and sale, and not of commercial

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502 PHILIPPINE REPORTS ANNOTATED
Quiroga vs, Parsons Hardware Co.

1. agency. It must be understood that a contract is what the law defines it to be, and not what it is
called by the contracting parties.

1. 3.ID.; ID.—The fact that the contracting parties did not; perform the contract in accordance with
its terms, only shows mutual tolerance and gives no right to have the contract considered, not as
the parties stipulated it, but as they performed it.

4.ID.; ID.—Only the acts of the contracting parties, subsequent to, and in connection with, the
performance of the contract must be considered in the interpretation of the contract, when such
interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set
forth and plainly show that the- contract belongs to a certain kind and not to another.

1. 5.ID.; ID.—The defendant obligated itself to order the beds from the plaintiff by the
dozen. Held: That the effect of a breach of this clause by the defendant would only entitle the
plaintiff to disregard the orders which the defendant might place under other conditions; but if
the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus
at his own free will.

APPEAL from a judgment of the Court of First Instance of Manija. Abreu, J.

The facts are stated in the opinion of the court.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Crossfield & O'Brien for appellee.

AVANCENA, J.:
On January 24, 1911, in this city of Manila, a contract in the following tenor was entered into by
and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and
obligations the present defendant later subrogated itself), as party of the second. part:
"CONTBACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND 
     J. PAKSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, 
     FOR THE EXCLUSIVE SALE OF 'QUIROGA' BEDS IN THE VI
     SAYAN ISLANDS.
"ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan
Islands to J. Parsons under the following conditions:
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Quiroga vs. Parsons Hardware Co.

1. " (A)Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's
establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in
Manila, and, in the invoices, shall make an allowance of a discount of 25 per cent of the
invoiced. prices, as commission on the sales; and, Mr. Parsons shall order the beds by the dozen,
whether of the same or of different styles.
2. "(B)Mr, Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty
days from the date of their shipment.
3. "(C)The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight,
insurance, and cost of unloading from the vessel at the point where the beds are received, shall
be paid by Mr. Parsons.
4. "(D)If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when
made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be
made f rom the amount of the invoice. "The same discount shall be made on the amount of any
invoice which Mr. Parsons may deem convenient to pay in cash.
5. "(E)Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in
price which he may plan to make in respect to his beds, and agrees that if on the date when such
alteration takes effect he should have any order pending to be served to Mr. Parsons, such order
shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be
affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga
assumed the obligation to invoice the beds at the price at which the order was given.
6. "(F)Mr. Parsons binds himself not to sell any other kind except the 'Quiroga' beds.

"ART. 2. In compensation for the expenses of advertisement which, for the benefit of both
contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to
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Quiroga vs. Parsons Hardware Co.
Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprised
within the Visayan group.
"ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of 'Quiroga'
beds in all the towns of the Archipelago where there are no exclusive agents, and shall
immediately report such action to Mr. Quiroga for his approval.
"ART. 4. This contract is made for an unlimited period, and may be terminated by either of
the contracting parties on a previous notice of ninety days to the other party."
 Of the three causes of action alleged by the plaintiff in his complaint, only two of them
constitute the subject matter of this appeal and both substantially amount to the averment that the
defendant violated the following obligations: not to sell the beds at higher prices than those of
the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the same; and to order
the beds by the dozen and in no other manner. As may be seen, with the exception of the
obligation on the part of the defendant to order the beds by the dozen and in no other manner,
none of the obligations imputed to the defendant in the two causes of action are expressly set
forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his
beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The
whole question, therefore, reduces itself to a determination as to whether the defendant, by
reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff f or
the sale of his beds.
In order to classify a contract, due regard must be given to its essential clauses. In the contract
in question, what was essential, as constituting its cause and subject matter, is that the plaintiff
was to furnish the defendant with the beds which the latter might order, at the price stipulated,
and that the defendant was to pay the price in the manner
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Quiroga vs. Parsons Hardware Co.
stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these
beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was
to be made at the end of sixty days, or before, at the plaintiff s request, or in cash, if the
defendant so preferred, and in these last two cases an additional discount was to be allowed for
prompt payment. These are precisely the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the legal conception of an agency or order
to sell whereby the mandatory or agent received the thing to sell it, and, does not pay its price,
but delivers to the principal the price he obtains from the sale of the thing to a third person, and if
he does not succeed in selling if, he returns it. By virtue of the contract between the plaintiff and
the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within
the term fixed, without any other consideration and regardless as to whether he had or had not
sold the beds.
It would be enough to held, as we do, that the contract by and between the defendant and the
plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a
commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each
other. But, besides, examining the clauses of this contract, none of them is found that
substantially supports the plaintiff's contention. Not a single one of these clauses necessarily
conveys the idea of an agency. The words commission on salesused in clause (A) of article 1
mean nothing else, as stated. in the contract itself, than a mere discount on the invoice price. The
word agency, also used in articles 2 and 3, only expresses that the defendant was the only one
that could sell the plaintiff's beds in the Visayan IslandsT. With regard to the remaining clauses,
the least that can be said is that they are not incompatible with the contract of purchase and sale.
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Quiroga vs. Parsons Hardware Co.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the
defendant corporation and who established and managed the latter's business in Iloilo. It appears
that this witness, prior to the time of his testimony, had serious trouble with the defendant, had
maintained a civil suit against it, and had even accused one of its partners, Guillermo Parsons, of
falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned
as to what was his purpose in contracting with the plaintiff, replied that it was to be an agent for
his beds and to collect a, commission on sales. However, according to the def endant's evidence,
it was Mariano Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even
supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea in
contracting with the plaintiff is of no importance, inasmuch a$ the agreements contained in
Exhibit A which he claims to have drafted, constitute, as we have said, a contract of purchase
and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistaken in
his classification of the contract. But it must be understood that a contract is what the law defines
it to be, and not what it is called by the contracting parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it could not
sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that
the defendant received its commission for the beds sold by the plaintiff directly to persons in
Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual
tolerance in the performance of the contract in disregard of its terms; and it gives no right to have
the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of
the contracting parties, subsequent to, and in connection with, the execution of the contract, must
be considered for the purpose of interpreting the contract, when such interpretation is necessary,
but not when, as in the instant case, its essential
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Quiroga vs. Parsons Hardware Co.
agreements are clearly set forth and plainly show that the contract belongs to a certain kind and
not to another. Furthermore, the return made was of certain brass beds, and was not effected in
exchange for the price paid for them, but was for other beds of another kind; and for the purpose
of making this return, the defendant, in its letter Exhibit L-1, requested the plaintiff s prior
consent with respect to said beds, which shows that it was not considered that the defendant had
a right, by virtue of the contract, to make this return. As regards the shipment of beds without
previous notice, it is insinuated in the record that these brass beds were precisely the ones so
shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the
so-called commissions, we have said that they merely constituted a discount on the invoice price,
and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in
Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of
advertisement of the plaintiff's beds, such sales were to be considered as a result of that
advertisement.
In respect to the defendant's obligation to order by the dozen, the only one expressly imposed
by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders
which the defendant might place under other conditions; but if the plaintiff consents to fill them,
he waives his right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and
the defendant was one of purchase and sale, and that the obligations the breach of which is
alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.
 The judgment appealed from is affirmed, with costs against the appellant. So ordered.
Arellano, C. J., Torres,  Johnson, Street, and Malcolm, JJ., concur.
Judgment affirmed.
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508 PHILIPPINE REPORTS ANNOTATED
Whitaker vs. Rafferty.
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