TL;DR

The Supreme Court affirmed that an architect is entitled to compensation for services rendered under a design services agreement, even when the project is terminated by the client, provided the architect has substantially performed their obligations. Uniwide Sales, Inc. was obligated to pay Mirafuente & Ng, Inc. for architectural design services because the firm had already submitted complete architectural plans before Uniwide terminated the contract. This ruling emphasizes the principle that contracts have the force of law between parties and must be complied with in good faith, protecting the rights of service providers who fulfill their contractual duties.

When the Blueprint is Done: Can a Client Avoid Paying an Architect After Terminating a Project?

This case revolves around a dispute between Uniwide Sales, Inc. (petitioner) and Mirafuente & Ng, Inc. (respondent) concerning a “DESIGN SERVICES: Architectural Services Agreement.” The agreement engaged the respondent to plan and design a Uniwide Sales Mall for a fee of P2,500,000. However, Uniwide terminated the agreement before full payment, leading to a legal battle over unpaid fees. The core legal question is whether the architect is entitled to payment for services rendered when the client terminates the project after substantial completion of the architectural plans.

The agreement detailed the scope of work, which included the preparation, planning, design, and documentation for architectural drawings. It stated that the work was “deemed ninety five percent (95%) complete upon submission of complete working drawings and documents for construction.” The payment schedule was divided into phases: Schematic Design, Design Development, Construction Document, and Construction Phase. Significantly, Article 5 of the agreement addressed scenarios where work is suspended or abandoned due to causes not attributable to the architect, stipulating that the architect should be paid for services rendered up to that point.

Respondent submitted the architectural plans to petitioner, including changes agreed upon. Shortly after, petitioner terminated respondent’s services, citing a verbal instruction to put all work on hold. Respondent then requested payment for the Construction Document Phase and a Change Order, totaling P837,500. Petitioner requested supporting documents for the amount, but failed to make the payment. This prompted respondent to file a complaint for sum of money with the Regional Trial Court (RTC) of Pasig.

The RTC ruled in favor of the respondent, ordering petitioner to pay the unpaid architectural fees, legal interest, attorney’s fees, and costs of suit. The Court of Appeals affirmed the trial court’s decision, noting that respondent had submitted the complete architectural designs before the termination. The appellate court also found that the termination was a ploy to avoid payment and that petitioner had not demonstrated dissatisfaction with the services. Petitioner then elevated the case to the Supreme Court, arguing that the respondent failed to fulfill its obligations and that the appellate court’s inference from the facts was erroneous.

The Supreme Court upheld the Court of Appeals’ decision. It emphasized that the resolution of the case hinged on whether the termination occurred before respondent’s compliance with its obligations. Both the trial and appellate courts had found that the architectural design was delivered before the termination, a finding supported by sufficient evidence. The Supreme Court also pointed out that the agreement did not specify a timeframe for the completion of the services, and petitioner’s claim of a verbal agreement for a six-month period was not substantiated.

Furthermore, the Supreme Court noted that petitioner continued to engage with respondent even after the alleged expiration of the six-month period, by requesting revisions and paying for the first two phases of the project. The Court also found that the notice of termination did not specify any grounds for the termination and that construction had already begun using respondent’s plan. Ultimately, the Supreme Court concluded that respondent had discharged its obligations under the agreement before the termination, and therefore, petitioner’s refusal to pay constituted a breach of contract.

The Supreme Court reiterated the principle enshrined in Article 1159 of the New Civil Code, which states that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. By terminating the agreement after respondent had fulfilled its obligations, petitioner violated this fundamental principle of contract law.

FAQs

In conclusion, this case underscores the importance of fulfilling contractual obligations in good faith. When one party benefits from the services of another, they are bound to compensate them accordingly, especially when those services have been substantially completed. This decision safeguards the rights of professionals who render services under contracts, ensuring that they are not unjustly deprived of their rightful compensation.

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Uniwide Sales, Inc. vs. Mirafuente & Ng, Inc., G.R. No. 172454, August 17, 2007