Arwood Industries v. D.M. Consunji

Summary

This Supreme Court case involved a construction contract dispute between owner Arwood Industries, Inc. and contractor D.M. Consunji, Inc. over an unpaid balance of P962,434.78 from a condominium project. The main issue was whether 2% monthly interest could be imposed on the unpaid amount. The Supreme Court affirmed the Court of Appeals decision upholding the contractual provision for penalty interest, ruling that the construction agreement served as law between the parties and contained a valid stipulation allowing the contractor to either suspend work or continue with the owner paying 2% monthly interest for payment delays. The Court rejected petitioner's arguments that the interest provision was inapplicable to the unpaid balance, holding that 'monthly progress billings' encompassed any portion of the contract price. The decision reinforced contractual freedom and the enforceability of penalty clauses for delayed monetary obligations under both contractual stipulations and Civil Code Article 2209.