CASE DIGEST: Continental Cement vs. Asea Brown

G.R. No.171660: October 17, 2011




Sometime in July 1990, petitioner Continental Cement Corporation (CCC), a corporation engaged in the business of producing cement,obtained the services of respondentsAsea Brown Boveri, Inc. (ABB) and BBC Brown Boveri, Corp. to repair its 160 KW Kiln DC Drive Motor (Kiln Drive Motor).

On October 23, 1991, due to the repeated failure of respondents to repair the Kiln Drive Motor, petitioner filed with Branch 101 of the Regional Trial Court (RTC) ofQuezon Citya Complaintfor sum of money and damages.

Respondents, however, claimed that under Clause 7 of the General Conditions,attached to the letter of offerdated July 4, 1990 issued by respondent ABB to petitioner, the liability of respondent ABB "does not extend to consequential damages either direct or indirect."Moreover, as to respondent Eriksson, there is no lawful and tenable reason for petitioner to sue him in his personal capacity because he did not personally direct the repair of theKiln DriveMotor.

The RTC rendered a Decisionin favor of petitioner rejecting the defense of limited liability interposed by respondents since they failed to prove that petitioner received a copy of the General Conditions.

On appeal, the CA reversed the ruling of the RTC.The CA applied the exculpatory clause in the General Conditions and ruled that there is no implied warranty on repair work; thus, the repairman cannot be made to pay for loss of production as a result of the unsuccessful repair.


Whether or not implied warranty and warranty against hidden defect under the New Civil Code is applicable


Clause 7 of the General Conditions their liability "does not extend to consequential damages either direct or indirect." Is not binding on petitioner. Respondents failed to show that petitioner was duly furnished with a copy of said General Conditions. Having breached the contract it entered with petitioner, respondent ABB is liable for damages pursuant to Articles 1167, 1170, and 2201 of the Civil Code

As per Purchase Order Nos. 17136-37, petitioner is entitled to penalties in the amount ofP987.25 per day from the time of delay, August 30, 1990, up to the time the Kiln Drive Motor was finally returned to petitioner.Under Article 1226of the Civil Code, the penalty clause takes the place of indemnity for damages and the payment of interests in case of non-compliance with the obligation, unless there is a stipulation to the contrary.In this case, since there is no stipulation to the contrary, the penalty in the amount ofP987.25 per day of delay covers all other damages (i.e.production loss, labor cost, and rental of the crane) claimed by petitioner.

The court ruled to deny petitioners claim to recover productionloss, labor costs and the rental of crane, attorney’s fees.

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