BEHN MEYER & CO. v. TEODORO R. YANCO Malcolm, J. September 18, 1918 G.R. No. 13203 Doctrine In mercantile contracts of American origin, the letters, "F.O.B.," standing for the words "Free on Board," are frequently used. The meaning is that the seller shall bear all expenses until the goods are delivered where they are to be "F.O.B." According as to whether the goods are to be delivered "F.O.B." at the point of shipment or at the point of destination determines the time when property passes. Summary A contract of sale was entered into by petitioner as the vendor with the defendant as the vendee. It states that the subject matter of the sale was 80 drums of caustic soda, with 76% of Carabao brand, at the price of $9.75 per one hundred pounds, cost, insurance, and freight included, to be shipped during March, 1916, to be delivered to Manila and paid for on delivery of the documents. The goods were shipped from New York, but before reaching Manila, the vessel was detained and some of the drums were confiscated so that when it did reach its destination, Yanco refused to accept the delivery of the remaining drums and rejected petitioner’s offer to wait for the rest of the shipment to arrive. Yanco then filed an action for damages, but the petitioner argued that the former should bear the burden of the loss of merchandise because he was already the absolute owner of the specific soda confiscated and that the place of delivery was not Manila. However, the Court ruled, among other issues, that the word, Manila, in conjunction with the letters "c.i.f." in the contract must mean that the contract price, covering costs, insurance, and freight, signifies that delivery was to be made in Manila. Such a specification in a contract relative to the payment of freight indicates the parties’ intention as to the place of delivery so that if the seller is to pay the freight, the inference is strong that the duty of the seller is to have the goods transported to their ultimate destination and that the title to the property does not pass until the goods have reached their destination. Thus, plaintiff has not proved the performance on its part of the conditions precedent in the contract and since fulfilment of the contract is impossible, Yanco, as the vendee, is entitled to rescind the contract of sale. Facts
On March 7, 1916, the parties signed a memorandum or a contract of sale which provides for “80 drums of caustic soda, with 76% of Carabao brand, at the price of $9.75 per one hundred pounds, cost, insurance, and freight included, to be shipped during March, 1916, to be delivered to Manila and paid for on delivery of the documents.” Behn, Meyer, and Co. was the vendor while Yanco was the vendee with the selling price was P10,063.86. Said goods were shipped onboard the steamship, Chinese Prince, from New York, but before it reached Manila, the vessel was detained at Penang and 71 drums were confiscated. Only 9 drums reached its destination and Yanco refused to accept it and rejected plaintiff’s offer of waiting for the remainder of the shipment until its arrival, or of accepting the substitution of seventy-one drums of caustic soda of similar grade from plaintiff's stock. The plaintiff then sold, for the account of the defendant, eighty drums of caustic soda from which there was realized the sum of P6,352.89. Deducting this sum from the selling price of P10,063.86, we have the amount claimed as damages for the alleged breach of the contract.
Ratio/Issues (1) Whether or not Behn, Meyer, and Co. committed a breach of the contract of sale (YES) (The Court divided the issues into three component parts.) a) SUBJECT MATTER AND CONSIDERATION – As to the offer made by the plaintiff, the specific merchandise was never tendered, the soda it offered was not of the Carabao brand, and that said offer was not made within the time that a March shipment, according to another provision the contract, would normally have been available. b) PLACE OF DELIVERY – The contract provided for "c.i.f. Manila, pagadero against delivery of documents." Its determination always resolves itself into a question of fact. If the contract be silent as to the person or mode by which the goods are to be sent, delivery by the vendor to a common carrier, in the usual and ordinary course of business, transfers the property to
the vendee. However, a specification relative to the payment of freight may be used to indicate the parties’ intention as to the place of delivery so that it leads to two scenarios: If the buyer is to pay the freight, it is reasonable to suppose that he does so because the goods become his at the point of shipment. On the other hand, if the seller is to pay the freight, the inference is equally so strong that the duty of the seller is to have the goods transported to their ultimate destination and that title to property does not pass until the goods have reached their destination. The letters "c.i.f." found in British contracts, such as that found in the case, stand for cost, insurance, and freight and signify that the price fixed covers not only the cost of the goods, but the expense of freight and insurance to be paid by the seller. (See doctrine). The terms, c.i.f. and f.o.b., merely make rules of presumption which yield to proof of contrary intention. Plaintiffs argue that the place of delivery was not Manila, but New York, however the Court ruled that it would not have gone to the trouble of making fruitless attempts to substitute goods for the merchandise named in the contract, but would have permitted the entire loss of the shipment to fall upon the defendant if it was so. To be noted is the fact that the bill of lading was for goods received from Neuss Hesslein & Co. to be sent to the Bank of the Philippine Islands with a draft upon Behn, Meyer & Co. and with instructions to deliver the same, and thus transfer the property to Behn, Meyer & Co. when and if Behn, Meyer & Co. should pay the draft.
c) TIME OF DELIVERY - The contract provided for: "Embarque: March 1916," the merchandise was in fact shipped from New York on the Steamship Chinese Prince on April 12, 1916. d) PERFORMANCE – Plaintiff has not complied with his obligation under the contract and, as contemplated by article 1451 of the Civil Code, the vendee can demand fulfillment of the contract, and this being shown to be impossible, is relieved of his obligation. There thus being sufficient ground for rescission, the defendant is not liable. Held Judgement affirmed Prepared by: Eunice V. Guadalope [Sales | Prof. Jardeleza]
