Makati Water v. Agua Vida Systems

Summary

This Supreme Court case involved the interpretation of non-compete clauses in expired franchise agreements between Makati Water, Inc. and Agua Vida Systems, Inc. The Court held that 'termination' under Section IV-5 of the franchise agreements includes natural expiration, not just premature cancellation, applying Civil Code principles of contract interpretation. While affirming that MWI violated the two-year non-compete prohibition by continuing to operate water refilling stations within 2km of the original franchise sites after the agreements expired in 2001, the Court modified the lower courts' decisions by striking the indefinite closure order since the two-year prohibition period had already lapsed by 2003. The decision upheld monetary awards including compensatory damages based on actual sales data, exemplary damages for bad faith, and attorney's fees, emphasizing that contract terms must be interpreted to give effect to their intended purpose of protecting the franchisor's goodwill and business interests.