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September 13, 2014

Behn Meyer vs. Yangco

Facts:

  • A sale of 80 drums of caustic soda was agreed between Behn, Meyer & Co. and Teodoro Yanco. The merchandise was shipped from New York to Manila. 
  • However, the ship carrying the cargo was detained at Penang and the 71 of the 80 drums were removed. Respondent Yangco also refused to accept the 9 remaining and also refused to accept the offer of Behn Meyer to have the products substituted with other merchandise, which however were different from what was ordered. 
  • It must be noted that the contract provided for "c.i.f. Manila, pagadero against delivery of documents." 
  • Yanco filed an action seeking for damages for alleged breach of contract. 

Issue: WON Behn, Meyer & Co. should bear the burden of the loss of the merchandise? YES


Held: 

Rule as to delivery of goods by a vendor via a common carrier (If contract is silent – delivery of seller to common carrier transfer ownership to buyer)
Determination of the place of delivery always resolves itself into a question of act. 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. 

Payment of freight by the buyer = acquires ownership at the point of shipment
A specification in a contact relative to the payment of freight can be taken to indicate the intention of the parties in regard to the place of delivery. 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. 

Payment of freight by the seller = title of property does not pass until the goods have reached their destination
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. 

c.i.f. means Cost, Insurance and Freight = CFI is paid by the seller
The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They 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. 

F.O.B. stands for Free on Board = seller bear all expenses until goods are delivered
In this case, in addition to the letters "c.i.f.," has the word following, "Manila." 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. However, both the terms "c.i.f." and "F.O.B." merely make rules of presumption which yield to proof of contrary intention. 

Delivery was to be made at Manila
Hence, we believe that the word Manila in conjunction with the letters "c.i.f." must mean that the contract price, covering costs, insurance, and freight, signifies that delivery was to made at Manila. If petitioner Behn Meyer has seriously thought that the place of delivery was New York and Not Manila, 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. 

Behn Meyer failed to prove that it performed its part in the contract
In this case, the place of delivery was Manila and plaintiff (Behn Meyer) has not legally excused default in delivery of the specified merchandise at that place. In resume, we find that the plaintiff has not proved the performance on its part of the conditions precedent in the contract. 

For breach of warranty, the buyer (Yanco) may demand rescission of the contract of sale
The warranty — the material promise — of the seller to the buyer has not been complied with. The buyer may therefore rescind the contract of sale because of a breach in substantial particulars going to the essence of the contract. 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.

Read full text here:
(38 Phil 602,606, G.R. No. 22537, December 8, 1924) BEHN, MEYER & CO. (LTD.), plaintiff-appellant, vs. TEODORO R. YANCO, defendant-appellee.

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