Song Fo and Co v Hawaiian Philippine Co

Song Fo and Co v Hawaiian Philippine Co. Facts:  Hawaiian-Philippine Co (HPC) entered into a contract with Song Fo and Co where it would deliver molasses to the latter.  A letter addressed by the administrator of the HPC to SFC on December 13, 1922 contains their contract in writing. It states the ff: o Mr. Song Fo agreed to the delivery of 300,000 gallons of molasses o Mr. Song Fo also asked if HPC could supply him with another 100,000 gallons of molasses to which the latter replied that they believe it is possible and that they will do their best to let Mr. Song Fo have the extra 100,000 gallons during the next year.  HPC was able to deliver 55,006 gallons of molasses before the breach of contract.  SFC filed a complaint with two causes of action for breach of contract against the HPC and asked for P70,369.50  HPC answered that there was a delay in the payment from SFC and that HPC has the right to rescind the contract due to that and claims it as a special defense.  The judgment of the trial court condemned HPC to pay SFC a total of P35,317.93, with legal interest from the date of the presentation of the complaint, and with costs. Issues and Ruling: Did HPC agree to sell 400,000 gallons of molasses or 300,000 gallons of molasses?  Only 300,000 gallons of molasses was agreed to by HPC as seen in the documents presented in court. HPC also believed it possible to accommodate SFC by supplying the latter company with an extra 100,000 gallons. However, the language used with reference to the additional 100,000 gallons was not a definite promise. Still less did it constitute an obligation Had HPC the right to rescind the contract of sale made with SFC?  With reference to the second question, doubt has risen as to when SFC was supposed to make the payments for the delivery of molasses as shown in the documents presented by the parties. It was ultimately settled that payment had to be made upon presentation of accounts at the end of each month

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FACT: SFC should have paid for the molasses delivered in December 1922, not later than January 31 1923. Instead payment was not made until February 20, 1923. All the rest of the molasses was paid for either on time or ahead of time. HPC does not have the right to rescind the contract. It should be noted that the time of payment stipulated for in the contract should be treated as of the essence of the contract. There was only a slight breach of contract when the payment was delayed for 20 days after which HPC accepted the payment of the overdue accounts and continued with the contract, waiving its right to rescind the contract. The delay in the payment of SFC was not such a violation for the contract. GENERAL RULE: rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as are so substantial and fundamental.

On the basis first, of a contract for 300,000 gallons of molasses, and second, of a contract imprudently breached by HPC, what is the measure of damages?  The first cause of action of SFC is based on the greater expense to which it was put in being compelled to secure molasses from other sources to which Supreme Court ruled that P3,000 should be paid by HPC with legal interest from October 2, 1923 until payment. o 55,006 gallons were delivered before the breach. (This leaves 244,994 gallon) o 100,000 gallons of molasses were secured from the Central North Negros Sugar Co., Inc at 2 cents a gallon, so plaintiff suffered no material loss in having to make this purchase. (this leaves as a result 144,994 gallons) o 100,000 gallons were secured from Central Victorias Milling at 3.5 cents per gallon. This meant a loss of approximately P2,174.91  The second cause of action was based on the lost profits on account of the breach of contract. Supreme Court said that SFC is not entitled to recover anything under the second cause of action because the testimony of Mr. Song Heng will follow the same line of thought as that of the trial court which in unsustainable and there was no means for the court to find out what items make up the P14,000 of alleged lost profits.