G.R. No.

L-5018 November 28, 1953

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

vs.

LITTON & CO., ET AL., defendants-appellants.

Facts: Two contracts contained “Important conditions” re: delivery in par2: The stipulated delivery
period shall not be exceeded. However, should there be delay in delivery, Purchasing Agent may grant a
reasonable time for extension. Deliveries made within the extended period, shall not be subjected to
any of the following penalties.

The two contracts also contained in par.4: In case of Contractor’s (Litton) failure to deliver, will authorize
Purchasing Agent (Republic), in his discretion, to impose: Penalty, deduct from each day of delay in
delivery, a liquidated damage 1/10 of 1% per day of total value of contract OR To make open market
purchases, and charge the contractor the excess in price. Either case, Republic reserves the right to
rescind the contract.

Re: Contract 1-Padlocks.

Litton failed to deliver on said date. It however delivered on April8 34,200 padlocks. These were fully
paid. Republic was compelled to make open market purchases, incurring loss of P176,243.13

Re: Contract 2- (Office Supplies)

Litton also failed to deliver. After elections they however delivered 2K boxes of clips costing P180.
Republic was compelled to make open market purchases, incurring loss of P20,164.17 Republic is now
claiming a total of P259,366.41 as losses from open market purchases.

Litton’s DEFENSE:

The contracts did not express the true contract. The real agreement was that Litton would deliver
provided the Rep. should obtain shipping priority and the necessary export license from the US. Rep
failed to secure them. Hence delay of delivery was due to Rep. fault and to circumstances beyond
Litton’s control. Open market purchases were made at exorbitant prices.

Counterclaim: Litton delivered after elections, an additional 9K padlocks. Republic has refused to pay
these despite demands.

RTC: Granted claims of government BUT also granted the counterclaim of Litton allowing a deduction of
25K. Litton was still the one with the sole obligation to obtain the necessary export license and shipping
space. Acts done by the republic to ease the shipping of good were merely in the nature of a friendly
assistance.

Issue: WON Litton unconditionally bound himself to deliver the supplies.

Ruling: YES. Litton undertook to deliver NOT LATER than March 1, 1946. This was UNCONDITIONAL.
Hence delay due to the non-acquisition of the licenses was not due to Republic’s acts, and CAN be
subject to penalties in par.4

It was expressly stated that the supplies were for election purposes, and the bidder was therefore
required to state the shortest time of delivery. It would be preposterous to suppose that delivery after
the elections would ever be contemplated or accepted.

Litton in his letter to the purchasing agent said that, “it is understood that your Office (Republic) will give
us a letter certifying that the padlocks are urgently needed. So that the export license can be secured
without delay…” The foregoing shows that Litton merely expected Rep. to give a certification.

The execution of the sureties negates the contention that the delivery was subject to any contingency.
Moreover, Litton also sent another letter, foreseeing his inability to deliver on time, asked for an
extension. True the Gov’t exerted efforts, and that the licenses were issued in the name of the Rep., but
these do not prove that it was Rep.’s obligation to secure the same. They were merely done in
furtherance of the letter asking for certification.

RE: Delay in delivery.

The vessels carrying the supplies arrived in Manila on or before April 1,1946 At the time Rep purchased
supplies in the open market, the vessels carrying the shipment of supplies were already inside the
breakwater waiting for unloading. However due to lack of berthing space, their cargo was unloaded and
delivered only after the elections. On purely equitable reasons the SC reduced the damages awarded by
90K, the difference between the stated contract price and open market price for the padlocks delivered
after the elections. At any rate Litton failed to protect itself or minimize damages by buying in the open
market himself at lower prices than that acquired by the government (allegedly at black market prices).