LEGAL OPINION RE PARTIAL PAYMENT ON PROCUREMENT OF GOODS/SERVICES

Republic of the Philippines
Province of South Cotabato
City of Koronadal
CITY LEGAL OFFICE
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Legal Opinion No.____________

March 1, 2013

MR. MARLOUN C. GUMBAO, CPA
BAC Chairman
This LGU


Sir:

Respectfully returned to the BAC Chairman, his within request for opinion on whether or not SHEMARIE Construction, Inc. may collect the 50% progress payment for the Project- Tricycle Painting and Renumbering.

While RA 9184, otherwise known as the Government Procurement Reform Act, provides for the rules and regulations governing the procurement activities of the government, its agencies and the local government units, a contract which is very vital in the procurement activities entered into by the procuring entity and the winning bidder or supplier may not be limited to the provisions of RA 9184 but may be enforced according to what has been agreed by both parties. A contract was made for the purpose of enforcing the obligation based on what is considered to be convenient and favourable to them. The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. As long as it is not contrary to law, morals, customs and public policy, the contract shall be valid.

Art. 1159 of the Civil Code of the Philippines provides, to wit:

“Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a)”
Statutes prescribe and restrict the terms of a contract where the general public is affected. The courts may not create a contract for the parties. When the parties have no express or implied agreement on the essential terms of a contract, there is no contract. Courts are only empowered to enforce contracts, not to write them, for the parties. A contract, in order to be enforceable, must be valid. The function of the court is to enforce agreements only if they exist and not to create them through the imposition of such terms as the court considers reasonable.
It is the policy of the law to encourage the formation of contracts between competent parties for lawful objectives. As a general rule, contracts by competent persons, equitably made, are valid and enforceable. Parties to a contract are bound by the terms to which they have agreed, usually even if the contract appears to be improvident or a bad bargain, as long as it did not result from Fraud, duress, or Undue Influence.
The binding force of a contract is based on the fact that it evinces a meeting of minds of two parties in Good Faith. A contract, once formed, does not contemplate a right of a party to reject it. Contracts that were mutually entered into between parties with the capacity to contract are binding obligations and may not be set aside due to the caprice of one party or the other unless a statute provides to the contrary.
RA 9184 does not expressly provide for Progress Payments for Goods but neither does the law prohibit the same. The rule on statutory construction tells us that if the law does not prohibit, it may be allowed provided that it is not against the law, morals, good customs, public order and public policy.
In an express contract, the parties state the terms, either orally or in writing, at the time of its formation. There is a definite written or oral offer that is accepted by the offeree (i.e., the person to whom the offer is made) in a manner that explicitly demonstrates consent to its terms.
It is important to stress that even the Manual of Procedures for the Procurement of Goods and Services for Local Government Units allows the partial payment contemplated in the contract. It provides, to wit:

x x x

“7. Payment

7.1. Method of Payment for Contracts for the Procurement of Goods

The method and conditions of payment must be specified in the contract. However, the following guidelines may be considered by the LGU in preparing the contract provisions regarding payment:

1.xxxxxxxx xxxxxxxx xxxxxxx

Page 93 on the Manual of Procedures for the Procurement of Goods and Services for Local Government Units


2. Partial payment of the contract price will only be allowed if the contract provides/allows for partial or staggered delivery of goods procured, and such partial payment must correspond to the value of the goods delivered and accepted;

3. Payment must only be made after the appropriate inspection and acceptance procedures, as mandated by existing government rules and regulations, have been complied with by the LGU; and

4. Payment must be made in accordance with prevailing accounting and auditing rules and regulations.”

x x x

Based on the foregoing, while RA 9184 is silent on progress payment for goods, it does not necessarily follow that progress payment for goods is prohibited. Progress payments here may also be equated as partial payment because the intention of the transaction is just the same. The Manual of Procedures for the Procurement of Goods and Services for Local Government Units specifically provides that partial payment of the contract price is allowed if the contract provides/allows for partial or staggered delivery of goods procured, and such partial payment must correspond to the value of the goods delivered and accepted. Said manual was formulated by the GPPB within its power and authority granted under RA 9184, hence, the same must carry weight in the construction of the provisions of the law.

In sum, the undersigned is of the opinion that progress payments for goods may be allowed. A contract involving tricycle painting and renumbering is done by each unit. The painting of one (1) unit of a tricycle is dependent on the availability of the unit, without which the job required cannot be performed. Thus, the 100% completion for tricycle painting is not that certain to happen. If partial payment will not be allowed, chances are that the supplier will be fully paid on a date no one knows when. Certainly, this not what the law contemplates.

Premises considered, your query is answered in the affirmative.




Yours truly,



ATTY. EUFEMIO A. SIMTIM, JR.
City Legal Officer

-and-


ALEXANDER A. ALCAZAR
Legal Asst. II