FACTS:

In 1997, Hardie Jardin, Inc. (HJI) awarded the contract for site preparation, building foundation and structural steel works of its fibre cement plant project in Barangay Tatalon in San Isidro, Cabuyao, Laguna to petitioner Leighton Contractors Philippines, Inc. Respondent CNP Industries, Inc. submitted to petitioner a proposal to undertake, as subcontractor, the construction of the structural steelworks of HJI’s fibre cement plant project. Petitioner accepted the proposal.

Meanwhile, petitioner revised the fabrication drawings of several of the structure’s columns necessitating adjustments in the designs of roof ridge ventilation and crane beams. Petitioner communicated the said revisions to respondent on July 16, 1997. Respondent estimated that the said revisions required an additional 8,132 kgs. of steel costing P13,442,882. However, it did not re-negotiate the fixed lump-sum price with petitioner. 

On July 28, 1997, petitioner and respondent signed a sub-contract providing: this Sub-contract is on a Fixed Lump Sum basis and is not subject to re-measurement.

Moreover, the contract required respondent to finish the project within 20 weeks from the time petitioner was allowed access to the site on June 20, 1997, that is, on or before November 6, 1997.

On July 29, 1997, petitioner paid respondent 10% of the project cost amounting to P4,422,390.90. Thereafter, respondent informed petitioner that, due to the revisions in the designs of the roof ridge ventilation and crane beams, it incurred “additional costs” amounting to P13,442,882. Respondent submitted its weekly progress report including the progress billing. Petitioner, on the other hand, paid the billings.Because respondent was unable to meet the project schedule, petitioner took over the project on April 27, 1998. At the time of the takeover, respondent had already accomplished 86% of the project for which petitioner paid P42,008,343.69. 

Thereafter, respondent again asked petitioner to settle the “outstanding balance” of P12,364,993.94, asserting that the roof ridge ventilation and crane beams were excluded from the project cost. Petitioner refused to pay as the July 28, 1997 subcontract clearly stated that the sub-contract price was a fixed lump sum.

The parties submitted the matter to the Construction Industry Arbitration Commission (CIAC) for arbitration. 

Respondent argued that the proposal it submitted excluded the roof ridge ventilation and crane beams as the fabrications drawings were “clouded” or had not been finalized when the subcontract was executed on July 28, 1997. Furthermore, respondent claimed that petitioner approved the cost estimates. This proved that the said portions were “additional works” excluded from the fixed lump-sum price.

Petitioner, asserted that the subcontract explicitly included the aforementioned works in the scope of work. Furthermore, it was not liable for the “additional costs” incurred by respondent as the subcontract clearly provided that the project was for the fixed lump-sum price of P44,223,909. 

CIAC rendered judgment in favor of respondent and ordered petitioner to pay the balance of the contract price plus additional works, the cost of arbitration and attorney’s fees.

Aggrieved, petitioner assailed the CIAC decision via a petition for review in the CA. CA dismissed the petition and affirmed the CIAC decision in toto. Petitioner moved for reconsideration but it was denied. Hence, this recourse.

ISSUE:

W/N petitioner is liable to pay for the increase in cost due to the adjustments made in the design of the roof ridge ventilation and crane beams

HELD:

NO. The parties entered into a contract for a piece of work whereby petitioner engaged respondent as contractor to build and provide the necessary materials for the construction of the structural steel works of HJI’s fiber cement plant for a fixed lump-sum price of P44,223,909.

The parol evidence rule, embodied in Section 9, Rule 130 of the Rules of Court holds that when the terms of an agreement have been reduced into writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. It, however, admits of exceptions such as when the parties subsequently modify the terms of their original agreement.

The scope of work was defined in the subcontract as the completion of the structural steel works according to the main drawing, technical specifications and the main contract. Thus, to determine whether the roof ridge ventilation and crane beams were included in the scope of work, reference to the main drawing, technical specifications and main contract is necessary. The main contract stated that the structural steel works included Drawing Nos. P302-6200-S-405 and P302-6200-S-402. This, according to petitioner and respondent, referred to the roof ridge ventilation and crane beams. Hence, the said works were clearly included in the sub-contract works.

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