6/9/2020 E-Library - Information At Your Fingertips: Printer Friendly As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had collectibles from SOB which could be set off with the amount covered by the performance guarantee. In February 1987, the OMEAA transmitted to the petitioner a copy of a telex dated 10 February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the note verbale sent by the Iraqi Ministry of Foreign Affairs stating that the past due obligations of the joint venture contractor from the petitioner would “be deducted from the dues of the two contractors.”[64] Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the petitioner raised as among the arguments to be presented in support of the cancellation of the counter-guarantee the fact that the amount of ID281,414/066 retained by SOB from the Project was more than enough to cover the counterguarantee of ID271,808/610; thus: 6.1 Present the following arguments in cancelling the counterguarantee: The Iraqi Government does not have the foreign exchange to fulfill its contractual obligations of paying 75% of progress billings in US dollars. … It could also be argued that the amount of ID281,414/066 retained by SOB from the proposed project is more than the amount of the outstanding counterguarantee. [65] In a nutshell, since the petitioner was aware of the contractor’s outstanding receivables from SOB, it should have set up compensation as was proposed in its project situationer. Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in its 13 May 1987 letter to the OMEAA, DFA, Manila, it stated: VPECI also maintains that the delay in the completion of the project was mainly due to SOB’s violation of contract terms and as such, call on the guarantee has no basis. While PHILGUARANTEE is prepared to honor its commitment under the guarantee, PHILGUARANTEE does not want to be an instrument in any case of inequity committed against a Filipino contractor. It is for this reason that we are constrained to seek your assistance not only in ascertaining the veracity of Al Ahli Bank’s claim that it has paid Rafidain Bank but possibly averting such an event. As any payment effected by the banks will complicate matters, we cannot help underscore the urgency of VPECI’s bid for government intervention for the amicable termination of the contract and release of the performance guarantee. [66] But surprisingly, though fully cognizant of SOB’s violations of the service contract and VPECI’s outstanding receivables from SOB, as well as the situation obtaining in the elibrary.judiciary.gov.ph/thebookshelf/showdocsfriendly/1/45413 12/17