Arrieta v. National Rice and Corn Corporation, 10 SCRA 79
September 10, 2016
FACTS:
Mrs. Paz Arrieta participated in public bidding called by NARIC on May 19, 1952 for the supply of
20,000 metric tons of Burmese rice. Her bid was $ 203.00 per metric ton, it was the lowest that’s
why the contract was awarded to her. On July 1,1952, Arrieta and NARIC entered into contract.
Arrieta was obligated to deliver 20,000 metric ton of Burmese rice at $203.00 per metric ton to
NARIC. In return, NARIC committed itself to pay for the imported rice “ by means of an
irrevocable, confirmed and assignable letter of credit in US currency in favour of Arrieta and/or
supplier in Burma (THIRI SETKYA), immediately.” NARIC took the first step to open the letter of
credit on July 30, 1952 by forwarding to the PNB its application for commercial letter of credit.
Arrieta with the help of a counsel, advised NARIC of the necessity for the opening of the letter
because she tender her supplier in Ragoon, Burma of 5 % of the price of 20,000 tons at $180.70
and if she didn’t comply the 5% will be confiscated if the required letter of credit is not received
by them before August 4, 1952. PNB informed NARIC that their application of credit letter
amounting to $3,614,000.00 was approved with the condition of 50% marginal cash be paid.
NARIC does not meet the condition. The allocation of Arrieta’s supplier in Ragoon was cancelled
and the 5% deposit was forfeited.
ISSUE: Does NARIC liable for damages?
HELD:
Yes, because the reason of the cancellation of the contract by Arrieta in Ragoon, Burma was the
failure of NARIC to open the letter of credit within a specific period of time. One who assumes
contractual obligation and fails to perform in which he knew and was aware when he entered in
the contract, should be liable for his failure to do what is required by a law. Under the Art. 1170 of
the Civil Code, not only the debtors guilty of fraud, negligence or default but also a debtor of every,
in general, who fails in the performance of his obligation is bound to indemnify for the losses and
damages caused thereby.