FACTS OF THE CASE:
On July 16, 1969, Prime White Cement Corporation, through its President, Zosimo R. Falcon, and Board Chairman, Justo B. Trazo, entered into a five-year dealership agreement with Alejandro Te, appointing him as the exclusive dealer and distributor of the corporation’s white cement products throughout Mindanao.
Under the agreement, the corporation was obligated to supply Te with 20,000 bags of white cement monthly beginning September 1970, at ₱9.70 per bag, payable through an irrevocable letter of credit upon shipment. Relying on the agreement, Te advertised his exclusive dealership and entered into supply agreements with several hardware stores in Davao and Cagayan de Oro.
On August 18, 1970, Te informed the corporation that he was preparing to open the required letter of credit for the initial delivery. However, the corporation imposed new conditions, including delaying deliveries until November 1970, reducing the supply to 8,000 bags monthly for only three months, increasing the price to ₱13.30 per bag, and requiring advance payment under different terms. Despite Te’s repeated demands, the corporation refused to comply with the original agreement.
While the dealership agreement remained in force, the corporation entered into another exclusive dealership agreement with Napoleon Co. Consequently, Te was forced to cancel his supply agreements with third-party buyers and filed a case against the corporation for breach of contract.
