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005 Nielson V Lepanto

The document summarizes a court case between Nielson & Company, Inc. and Lepanto Consolidated Mining Company regarding a management contract. Lepanto terminated the contract following liberation from the Japanese. Lepanto argued it was a contract of agency, which allows termination at will. However, the court found that paragraph XI of the contract, which outlined causes for termination, showed it was not meant to be revocable at will. The court also distinguished agency from lease of services, finding this was a contract for lease of services based on employment, rather than agency which is based on representation of the principal. Therefore, the contract could not be unilaterally terminated by Lepanto.

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Nichole Lanuza
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82 views2 pages

005 Nielson V Lepanto

The document summarizes a court case between Nielson & Company, Inc. and Lepanto Consolidated Mining Company regarding a management contract. Lepanto terminated the contract following liberation from the Japanese. Lepanto argued it was a contract of agency, which allows termination at will. However, the court found that paragraph XI of the contract, which outlined causes for termination, showed it was not meant to be revocable at will. The court also distinguished agency from lease of services, finding this was a contract for lease of services based on employment, rather than agency which is based on representation of the principal. Therefore, the contract could not be unilaterally terminated by Lepanto.

Uploaded by

Nichole Lanuza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Nielson & Company, Inc. vs.

Lepanto Consolidated Mining Company


26 SCRA 540, No. L-21601
December 28, 1968
Facts:

Nielson & Company, Inc. and Lepanto Consolidated Mining Company had a management contract wherein Nielson had
agreed, for a period of five years, with the right to renew for a like period, to explore, develop and operate the mining
claims of Lepanto, and to mine, or mine and mill, such pay ore as may be found therein and to market the metallic
products recovered therefrom, as well as to render for Lepanto other services specified in the contract.

The work undertaken by Nielson was to take complete charge, subject at all times to the general control of the Board of
Directors of Lepanto, of the exploration and development of the mining claims, of the hiring of a sufficient and
competent staff and of sufficient and capable laborers, of the prospecting and development of the mine, of the erection
and operation of the mill, and of the beneficiation and marketing of the minerals found on the mining properties; and in
carrying out said obligation Nielson should proceed diligently and in accordance with the best mining practice. Nielson
was also to submit reports, maps, plans and recommendations with respect to the operation and development of the
mining properties.

Nielson was also to "act as purchasing agent of supplies. equipment and other necessary purchases by Lepanto,
provided, however, that no purchase shall be made without the prior approval of Lepanto; and provided further, that no
commission shall be claimed or retained by Nielson on such purchase"; and "to submit all requisition for supplies, all
contracts and arrangement with engineers, and staff and all matters requiring the expenditures of money, present or
future, for prior approval by Lepanto; and also to make contracts subject to the prior approval of Lepanto for the sale
and marketing of the minerals mined from said properties.

Lepanto terminated the management contract following liberation of the mines from the Japanese. Lepanto contends
that the management contract in question is one of agency and as an agent is not entitled to damages since the law
gives to the principal the right to terminate the agency at will.

Issue: Did the parties have a contract of agency?

Held: NO
If the management contract in question was intended to create a relationship of principal and agent between Lepanto
and Nielson, paragraph XI of the contract should not have been inserted because, as provided in Article 1733 of the
old Civil Code, agency is essentially revocable at the will of the principal—that means, with or without cause. But
precisely said paragraph XI was inserted in the management contract to provide for the cause for its revocation. The
provision of paragraph XI must be given effect.

In the construction of an instrument where there are several provisions or particulars, such a construction is, if
possible, to be adopted as will give effect to all, and if some stipulation of any contract should admit of several
meanings, it shall be understood as bearing that import which is most adequate to render it effectual.

It is our considered view that by express stipulation of the parties, the management contract in question is not
revocable at the will of Lepanto. We rule that this management contract is not a contract of agency as defined in
Article 1709 of the old Civil Code, but a contract of lease of services as defined in Article 1544 of the same Code. This
contract cannot be unilaterally revoked by Lepanto.
Paragraph XI of the contract provides:
"Both parties to this agreement fully recognize that the terms of this Agreement are made possible only because of
the faith or confidence that the Officials of each company have in the other; therefore, in order to assure that such
confidence and faith shall abide and continue, NIELSON agrees that LEPANTO may cancel this Agreement at any time
upon ninety (90) days written notice, in the event that NIELSON for any reason whatsoever, except acts of God, strike
and other causes beyond its control, shall cease to prosecute the operation and development of the properties herein
described in good faith and in accordance with approved mining practice."

It is thus seen, from the above-quoted provision of paragraph XI of the management contract that Lepanto could not
terminate the agreement at will. Lepanto could terminate or cancel the agreement by giving notice of termination
ninety days in advance only in the event that Nielson should prosecute in bad faith and not in accordance with
approved mining practice.

In both agency and lease of services one of the parties binds himself to render some service to the other party. Agency,
however, is distinguished from lease of work or services in that the basis of agency is representation, while in the lease
of work or services the basis is employment. The lessor of services does not represent his employer, while the agent
represents his principal. Agency is a preparatory contract, as agency "does not stop with the agency because the
purpose is to enter into other contracts." The most characteristic feature of an agency relationship is the agent's power
to bring about business relations between his principal and third persons. "The agent is destined to execute juridical
acts (creation, modification or extinction of relations with third parties). Lease of services contemplate only material
(non-juridical) acts."

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