ORIENT AIR SERVICES vs.

CA

FACTS:

American Airlines and Orient Air Services and Hotel Representatives entered into a
General Sales Agency Agreement whereby American authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air passenger
transportation (services: solicit and promote passenger traffic, servicing and supervising
agents etc.)
o

It was stipulated that neither Orient nor its sub-agents perform services for any
other air carrier similar to those to be performed hereunder for American without
the prior written consent of American

Remittances- ticket stock or exchange orders LESS commissions

American will pay Orient sales agency commission and an overriding commission
3% of the tariff fares and charges for all sales of transportation over Americans
service by Orient or its sub-agents

In case of default (remittance) American may terminate the agreement; otherwise

either party may terminate without cause by giving 30 days notice

American alleged that Orient failed to promptly remit the net proceeds of sales
terminated the Agreement filed suit for accounting with preliminary attachment or
garnishment, mandatory injunction and restraining order

Orient denied allegations contending that after the application to the commission due it ,
plaintiff in fact still owed Orient a balance in unpaid overriding commissions

TC: in favor of Orient termination was illegal and improper- ORDERED PLAINTIFF TO
REINSTATE DEFENDANT AS ITS GENERAL SALES AGENT

CA: affirmed TC with some modifications with respect to the monetary awards

AMERICAN claims overriding commission should be based only on ticketed sales-to be

entitled to the 3% overriding commission, the sale must be made by Orient Air and the
sale must be done with the use of Americans ticket stocks

ORIENT: contractual stipulation of 3% overriding commission covers the total revenue of

American not merely from the ticketed sales, invoking its designation as the EXCLUSIVE
General sales agent of american

ISSUE: extent of Orient Airs right to the 3% overriding commission

HELD: basis should be TOTAL REVENUE (in favor of Orient)

2 commissions; a) sales agency commission; b) overriding commission of 3% of tariff fares

and charges for all sales of passenger transpo over American air services. The latter type
of commissions would accrue for sales of American made not on its ticket stock but on the
ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities

or travel agents. To rule otherwise would erase any distinction between the 2 types of
commissions

American air was the party responsible for the preparation of the agreement (contract of
adhesion)

Since the American was still obligated to Orient for the said commission, Orient was
justified in refusing to remit the sums demanded. The termination was therefore WITHOUT
cause and basis

(AGENCY PART) Appellate court erred in ordering American air to reinstate the defendant
as its general sales agent
o

Compelling American to extend its personality to Orient would be violative of the

principles and essence of AGENCY

AGENCY- contract whereby "a person binds himself to render some service or to do
something in representation or on behalf of another, WITH THE CONSENT OR
AUTHORITY OF THE LATTER

In an agent-principal relationship, the personality of the principal is extended

through the facility of the agent

The agent, by legal fiction, becomes the principal, authorized to perform all acts
which the latter would have him do. Such a relationship can only be effected with
the consent of the principal, which must not, in any way, be compelled by law or by
any court