G.R. No. 16109; October 2, 1922
M. D. TAYLOR, plaintiff-appellant, vs. UY TIENG PIAO and TAN LIUAN, doing business under the firm name and style of Tan Liuan & Company, defendants. UY TIENG PIAO, defendant-appellant.

FACTS

Plaintiff M.D. Taylor entered into a two-year employment contract with Tan Liuan & Company as superintendent of an oil factory they planned to establish. The contract stipulated a monthly salary and benefits. A key provision stated that if the machinery for the factory failed to arrive in Manila within six months from the contract date (December 12, 1918), the company could, at its option, cancel the contract after the expiration of those six months. The machinery did not arrive within the six-month period. On June 28, 1919, the defendants notified Taylor of the contract’s rescission, effective June 30, 1919. Taylor sued for damages covering the full contract period. The trial court awarded him only P300 as damages. Both parties appealed: Taylor claiming the damages were inadequate, and defendant Uy Tieng Piao claiming he was not liable at all.

ISSUE

1. Whether the defendants lawfully exercised their option to cancel the contract based on the non-arrival of the machinery within six months.
2. Whether the contractual clause allowing cancellation “for any reason” if the machinery failed to arrive is valid under the Civil Code.
3. Whether the defendant Uy Tieng Piao is liable as a partner.

RULING

1. Yes. The Supreme Court held that the defendants lawfully exercised the option to cancel. The contract’s language was clear and broad, allowing cancellation if the machinery failed to arrive “for any reason” within six months. The non-arrival of the machinery triggered this resolutory condition. The Court rejected Taylor’s argument that the clause applied only if the non-arrival was due to causes beyond the defendants’ control. There was no positive obligation in the contract for the defendants to ensure the machinery’s arrival; the clause merely defined a condition for cancellation.
2. Yes, the clause is valid. The Court ruled that Article 1256 of the Civil Code, which states that the validity and fulfillment of contracts cannot be left to the will of one party, does not prohibit such a resolutory condition. When parties agree beforehand on an option to cancel, the exercise of that option constitutes fulfillment of the contract, not a violation of Article 1256. The condition was facultative and resolutory, which is recognized as valid.
3. Yes, Uy Tieng Piao is liable. The Supreme Court affirmed the trial court’s finding on his liability as a member of the firm, stating it was in conformity with the law and facts.

The judgment was modified. Taylor was entitled to an additional P60 as commutation of house rent for June 1919, which the trial court overlooked. Thus, the total damages awarded were increased from P300 to P360. The modified judgment was affirmed.