Thursday, December 12, 2013

The Court finds that the breach committed by CIGI does not justify the rescission of the installation contracts.

"x x x.

The denial of AMC’s amended counterclaim specifically praying for
rescission does not bar a discussion of such issue on appeal. Rescission was
pleaded in AMC’s original Answer with Counterclaim when it implored the
RTC for “other reliefs and remedies consistent with law and equity are
prayed for.”51 The standing rule is that “[t]he prayer in the complaint for
other reliefs equitable and just in the premises justifies the grant of a relief
not otherwise specifically prayed for.”52 This rule conveys the inference that
reliefs not specifically pleaded but included in a general prayer for other
equitable reliefs may be threshed out by the courts.

The Court, however, finds that AMC has no legal basis to demand the
rescission of the installation contracts. “[R]escission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. Whether a breach is substantial is largely determined
by the attendant circumstances.”53  The provisions on the test run of and seminar on the medical oxygen system are not essential parts of the installation contracts as they do not constitute a vital fragment/part of the
centralized medical oxygen system.

Further, the allegedly defective and incomplete parts cannot
substantiate rescission. The photographs submitted by AMC are not
adequate to establish that certain parts of the installed system are indeed
defective or incomplete especially so that the installation never became
operational. Unless and until the medical oxygen and vacuum pipeline
actually runs, there is no way of conclusively verifying that some of its parts
are defective or incomplete. In addition, AMC failed to allege much less
show whether the alleged defects and incomplete components were caused
by factory defect, negligence on the part of CIGI or ordinary wear and tear.
At any rate, the parties have specified clauses in the subject contracts
to answer for such contingency. Article VI(b) of the Phase 2 installation
contract provides: x x x.

Since, as discussed above, the agreed test run and orientation/seminar
for both Phases 1 and 2 installation projects were yet to be performed, both
projects are not yet complete and the one year warranty period has not yet
commenced to run.

In view of the fact that rescission is not permissible, the installation
contracts of the parties stand and the terms thereof must be duly fulfilled.
CIGI is obliged to comply with its undertakings to conduct a test run and
hold a seminar/orientation of concerned AMC employees, after which, turn
over the system fully functional and operational to AMC. Simultaneously with the turnover, AMC shall pay the remaining balance of P1,267,344.42 to

Also, the Court finds it proper that after CIGI has turned over
a complete and functional medical oxygen and vacuum pipeline
system, it must be given the opportunity to inspect the allegedly
defective and incomplete parts. The results of such inspection will in
turn determine which part of the aforementioned warranty clauses
shall govern.

x x x."

See -


G.R. No. 181983
NOV 13 -2013