Spouses Fernando v. Continental Airlines

Summary

This Supreme Court case involves a dispute between Spouses Viloria and Continental Airlines over non-refundable airline tickets purchased through Holiday Travel agent Margaret Mager, who allegedly misrepresented Amtrak availability. The RTC awarded refund and damages, finding Continental liable for its agent's fraud. The Court of Appeals reversed, denying agency relationship. The Supreme Court affirmed denial of relief but established that agency did exist between Continental and Holiday Travel. However, Continental could not be held liable for Mager's alleged tort without proof of Continental's own negligence. The Court ruled that even if fraud existed, the contracts were ratified when spouses sought ticket reissuance rather than annulment. Continental's refusal to accept transferability of tickets constituted only casual breach insufficient for rescission. Both parties were found in mutual default, offsetting their respective liabilities. The decision clarifies agency law principles, tort liability of principals for agents' employees, and contract rescission standards in Philippine jurisprudence.