GR L 27239; (August, 1986) (Digest)
G.R. No. L-27239 August 20, 1986
ROYAL LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and THE NATIONAL SHIPYARDS AND STEEL CORPORATION, respondents.
FACTS
Petitioner Royal Lines, Inc. entered into a written contract with respondent National Shipyards and Steel Corporation (NASSCO) for the conversion of its yacht, the M/V Sea Belle, into a passenger and cargo vessel for a stipulated price. During the performance of the work, NASSCO performed additional work on the vessel, for which it later demanded payment of an additional sum. Royal Lines rejected the demand, contending it was not liable because the additional work was not authorized in writing as allegedly required by Article 1724 of the Civil Code.
The trial court ruled in favor of NASSCO. On appeal, the Court of Appeals affirmed the decision, holding that Article 1724 was inapplicable as it refers only to structures built on land and not to vessels. Royal Lines elevated the case to the Supreme Court via certiorari, insisting on the application of Article 1724 to nullify the claim for lack of written authorization and price agreement for the extra work.
ISSUE
Whether Article 1724 of the Civil Code, which requires written authorization for changes in construction plans and a written agreement on the additional price, applies to contracts for work on a vessel, thereby rendering Royal Lines not liable for the cost of additional work performed by NASSCO.
RULING
The Supreme Court ruled that Article 1724 is not applicable. The provision explicitly refers to a contractor who builds “a structure or any other work for a stipulated price” in conformity with plans agreed upon “with the landowner.” The Court held the article’s language is plain and pertains only to constructions on land, not to vessels. Therefore, its formal requirements for written authorization and price determination do not govern the contract for ship conversion.
The general rules on contracts under the Civil Code apply. Contracts are perfected by mere consent and, as a general rule, may be oral or written unless the law specifically requires a form. The original contract contained a provision stating that modifications or extra work would be the “subject of another contract,” but it did not mandate that such subsequent contract be in writing. The Court affirmed the appellate court’s finding that Royal Lines’ authorized representatives requested the extra work, creating a binding oral agreement. The consideration for the extra work was validly determined by the Court of Appeals based on the evidence. The Court dismissed the petitioner’s attempt to evade a legitimate obligation for benefits it admittedly received. The decision of the Court of Appeals was affirmed.