Breach of contract is a word commonly tossed when things go sour as to contracts or agreements. A common scenario is when people attempt to create contracts on their own without fully understanding the implications of placing certain words or phrases within the contracts they make.
One example would be honest mistakes, wherein people know certain words or phrases and understand them in simple English without realizing the legal significance of such words.
Let’s take the situation of John, for instance. John had his favorite 1993 Mazda MX-5. He bought it brand new. As of 2024, he decided to look in his drawers, where he always kept his receipts for maintaining his Mazda, and decided to total the expenses he spent on maintenance. After doing the math, he realized that he had already spent ten million pesos just for maintenance. He realized it was time to let his prized possession go.
He calls up his good friend, Gary, who is a fan of well-maintained vintage cars. Gary says, “Sige John! I’m very interested to buy your MX-5. Can we draft an agreement? I can let my lawyer do it.”
John, recalling his lessons from obligations and contracts during college, remembers the oft-cited principle of autonomy of contracts, which states that “parties are free to enter into contracts with such terms, stipulations, clauses, and conditions as they deem appropriate for as long as they are not contrary to law, morals, good customs, public order, and public policy.” [1]
Feeling confident and remembering that he was the valedictorian of his batch, John decides to draft his first contract. He tells Gary, “Ako na bahala, bro. I’ll get the contract ready.” Gary, not wanting to argue, allows John to prepare the same.
However, he included the clause “the obligation of the BUYER to pay the SELLER shall be extinguished in the following circumstances:
- The SELLER refuses or fails to accept payment at a date and time specified by both PARTIES for three consecutive times; or
- The SELLER is in delay for a period of more than fifteen (15) days.”
John then sends the contract through email, to which they both affixed their digital signatures, and said in their respective emails, “Deal closed.” Days later, Gary contacts John through his cellphone. The following conversation ensued:
Gary: “Hey John, I’m ready to pay you this coming Friday. Are you free?”
John: “Hi, Gary! Yes I can meet you in the afternoon at Pancake House, White Plains Avenue. How does 4:00 sound?”
Gary: “Sounds good! See you, then!”
Friday comes, and suddenly John remembers it was his daughter’s graduation in the afternoon. As he was busy with work, he wasn’t able to inform Gary that he couldn’t make it. Gary, nonetheless, showed up.
John called Gary at the end of the day, asking him if he could meet up on Saturday at the same time and same place. Gary acceded.
John, feeling very stressed because of his failure to show up on top of his work problems, decides to go out to party at BGC. After multiple rounds of drinks, he comes home at around 5:00AM, and forgets to set an alarm for Saturday afternoon.
Once again, he failed to show up on Saturday afternoon, at the same time and same place.
Gary, on the other hand, waited for John again at Pancake House White Plains. At 4:30PM, Gary calls his lawyer. The following conversation ensued:
Gary: “Hi, Atty. John failed to show up again. What should I do?”
Gary’s Lawyer: “Hi, Sir Gary. Give him a call. Keep calm and tell him you’re giving him one more chance. And make sure to let me know if he agrees again.”
Gary: “OK.”
So, as advised by his lawyer, Gary gives John a call at around 5:30PM right before he leaves Pancake House White Plains. The following conversation ensued:
Gary: “Hey, bro. You didn’t show up again. I’m kind of annoyed this already, but I’m willing to give you one more chance.”
John: “Hey, Gary! I’m really sorry. I got into some problems earlier and I really couldn’t make it. Sorry I didn’t let you know.
Gary: “Basta ‘yon, bro. Tomorrow same place same time. No excuses na sana, is that ok with you?
John: “Yes! It’s fine by me. I understand where you’re coming from and will commit to being there. No excuses na.”
Gary: “OK, John. Sounds good. See you there.”
Gary proceeds to inform his lawyer of the call.
Sunday morning comes, and John wakes up with a slight headache but nothing too unusual. He goes about his day, as he usually does, and went to a S and R Shaw Boulevard as he thought to buy Gary a gift. He bought Gary a bottle of whiskey, and drove to Pancake House at around 3:00PM. While driving, he figured in an accident, damaging his Mazda MX-5. Right after the said accident, John called Gary to be transparent. The following conversation ensues:
John: “Hey, Gary. I’m really sorry but I can’t make it again.”
Gary: “Why?”
John: “I figured in an accident. A taxi rear-ended the Mazda and I can’t sell this to you considering the condition.”
Gary: “Dude, sige lang. I’m willing to pay the full price at this point, then maybe we can just get the repairs done on your account. What do you say?
John: “I can’t do that. I’m really sorry.”
Gary: “Look John, I know we’re friends but you’re really wasting my time on this one. I’m gonna have to talk to my lawyer. Are you sure you don’t want to push through with my offer?”
John: “I’m sure.”
Gary: “Ok, then.”
Gary proceeds to talk to his lawyer. His lawyer advised him that, owing to the contract drafted by John, he could make a demand for the car itself, and John wouldn’t be able to refuse giving the car to him for free.
5 days after the date of the accident, John is surprised to see a demand letter, demanding the car and specifically detailing how John failed to show up when Gary was ready.
John realizes that he needs legal assistance and engages a lawyer. His lawyer advised him that because of the word OR in the contract, and the fact that he prepared the same, puts him in a position wherein he is legally obligated to deliver the car to Gary.
John explained to his lawyer that he intended for the contract to require both circumstances, namely that:
- The SELLER refuses or fails to accept payment at a date and time specified by both PARTIES for three consecutive times; and
- The SELLER is in delay for a period of more than fifteen (15) days.
Regrettably, his lawyer told him that the fact that he had prepared the contract himself rightfully shows that it was his free and voluntary act to enter into the agreement. Additionally, his lawyer also told him that because the interactions in the supervening events were mostly through calls, he would have a hard time making defenses.
However, his newly engaged lawyer advised him to seek a settlement. So, they called Gary up, and Gary was amenable to the settlement of reducing the price by PhP100,000.00 after repairs to be undertaken by John.
They had the car repaired in the Mazda repair shop for around PhP50,000.00. John gave Gary the bottle of whiskey as a gift. Finally meeting in Pancake House White Plains two weeks after the date of the accident, the deal was done, albeit with a lot of teaching lessons for John.
After the ordeal was done, John realized the following things:
- A single word can change the legal meaning of an agreement–– prime examples would be the conjunctives “or” and “and.”
- Honest mistakes can be the source of legal problems–– regardless of how harmless or good one’s intentions are, a person can get caught flat-footed simply because of a lack of information or awareness.
- All actions have legal significance–– John realized that the simple acts and circumstances he cannot control can lead to legal consequences. While the situation of John might be seen as a streak of bad decisions and bad luck, he was quite negligent at some points. His lawyer further explained the concept of the “diligence of a good father of a family”, which is the common standard of diligence required in everyday life.
- Documentation is important in transactions–– John realized that sending texts and emails, rather than making calls, can be more advantageous in preserving one’s interests, as the former can be used as evidence in order to preserve one’s rights.
- All of these problems could have been avoided if he sought the assistance of a lawyer–– John realized in hindsight that he could have been briefed regarding the legal significance of the events that transpired in the transaction if he decided to seek legal assistance.
Footnote:
[1] NEW CIVIL CODE, Art. 1305.