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Legal Dispute: Safic Alcan vs. IVO

Safic Alcan, a French corporation, placed several purchase orders for crude coconut oil with Imperial Vegetable Oil (IVO) between 1986 and 1987, totaling over 7,000 tons. However, IVO failed to deliver the oil or pay the difference in market price as agreed in a "wash out" settlement. Safic sued IVO to recover over $685,000. IVO claimed the contracts were speculative and entered into without authorization from its Board of Directors. The Supreme Court ruled in favor of IVO, finding that the company president did not have blanket authority to bind IVO and enter speculative contracts without board approval, as was prohibited in this case. Therefore, IVO was not obligated to honor the

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222 views1 page

Legal Dispute: Safic Alcan vs. IVO

Safic Alcan, a French corporation, placed several purchase orders for crude coconut oil with Imperial Vegetable Oil (IVO) between 1986 and 1987, totaling over 7,000 tons. However, IVO failed to deliver the oil or pay the difference in market price as agreed in a "wash out" settlement. Safic sued IVO to recover over $685,000. IVO claimed the contracts were speculative and entered into without authorization from its Board of Directors. The Supreme Court ruled in favor of IVO, finding that the company president did not have blanket authority to bind IVO and enter speculative contracts without board approval, as was prohibited in this case. Therefore, IVO was not obligated to honor the

Uploaded by

Chaze Cerdena
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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SALFIE ALCAN v. IMPERIAL VEGETABLE OIL CO., Inc.

G.R. No. 126751; March 28, 2001

FACTS: Petitioner Safic Alcan & Cie (hereinafter, "Safic") is a French corporation engaged in the
international purchase, sale and trading of coconut oil. Petitioner Safic alleged that on July 1,
1986 and September 25, 1986, it placed purchase orders with IVO for 2,000 long tons of crude
coconut oil, valued at US$222.50 per ton to be delivered within the month of January 1987. Private
respondent, however, failed to deliver the said coconut oil and, instead, offered a "wash out"
settlement, whereby the coconut oil subject of the purchase contracts were to be "sold back" to
IVO at the prevailing price in the international market at the time of wash out. Thus, IVO bound
itself to pay to Safic the difference between the said prevailing price and the contract price of the
2,000 long tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay this
amount despite repeated oral and written demands. Safic alleged that on eight occasions
between April 24, 1986 and October 31, 1986, it placed purchase orders with IVO for a total of
4,750 tons of crude coconut oil. When IVO failed to honor its obligation under the wash out
settlement narrated above, Safic demanded that IVO make marginal deposits within forty-eight
hours on the eight purchase contracts in amounts equivalent to the difference between the
contract price and the market price of the coconut oil, to compensate it for the damages it suffered
when it was forced to acquire coconut oil at a higher price. IVO failed to make the prescribed
marginal deposits on the eight contacts, in the aggregate amount of US$391,593.62, despite
written demands. Hence, Safic prayed that IVO be ordered to pay the sums of US$293,500.00
and US$391,593.62, plus attorney's fees and litigation expenses. IVO raised the following
special affirmative defenses: Safic had no legal capacity to sue because it was doing business in
the Philippines without the requisite license or authority; the subject contracts were speculative
contracts entered into by IVO's then President, Dominador Monteverde, in contravention of the
prohibition by the Board of Directors against engaging in speculative paper trading, and despite
IVO's lack of the necessary license from Central Bank to engage in such kind of trading activity.

ISSUE: Whether the act of Dominador Monteverde binds IVO

HELD: No, the act of Dominador Monteverde without the authorization of the Board of Directors
did not bind IVO. The Supreme Court ruled that Monteverde had no blanket authority to bind
IVO to any contract. He must act according to the instructions of the Board of Directors. Even in
instances when he was authorized to act according to his discretion, that discretion must not
conflict with prior Board orders, resolutions and instructions. The evidence shows that the IVO
Board knew nothing of the 1986 contracts and that it did not authorize Monteverde to enter into
speculative contracts. Safic can not rely on the doctrine of implied agency because before the
controversial 1986 contracts, IVO did not enter into identical contracts with Safic. The basis for
agency is representation and a person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. Under Article 1898 of the Civil Code, the acts of an
agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same
expressly or impliedly. It also bears emphasizing that when the third person knows that the agent
was acting beyond his power or authority, the principal can not be held liable for the acts of the
agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled
to recover damages from the agent, unless the latter undertook to secure the principal's
ratification.

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