Contract Clause Flashcards
Sec. 10, Art. III. No law _________ the obligation of ___________ shall be passed.
impairing;
contracts
Sec. 10, Art. III. No law _________ the obligation of ___________ shall be passed.
What is the limitation in application of the non-impairment clause in the Constitution?
The non-impairment clause under Section 10, Article III of the Constitution is limited in application to laws that derogate from prior acts or contracts by enlarging, abridging or in any manner changing the intention of the parties [PADPAO v. COMELEC, G.R. No. 223505 (2017)].
When is there an impairmant of contract?
There is impairment if a subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws remedies for the enforcement of the rights of the parties [PADPAO v. COMELEC, supra].
It is engrained in jurisprudence that the constitutional prohibition on the impairment of the obligation of contract does not prohibit every change in existing laws, and to fall within the prohibition, the change must not only impair the obligation of the existing contract, but the impairment must be substantial.
When is there a substantial impairment on contracts?
Substantial impairment as conceived in relation to impairment of contracts has been explained as a law which changes the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satisfaction something different from that provided in its terms, is law which impairs the obligation of a contract and is therefore null and void [Lepanto Consolidated Mining Co. v. WMC Resources Int’l. Pty. Ltd., G.R. No. 162331 (2006)].
What are the instances wherein the Non-Impairment Clause Prevails?
- Against the removal of tax exemptions, where the consideration for the contract is the tax
exemption itself - Regulation on loans
New regulations on loans making redemption of property sold on foreclosure stricter are not allowed to apply retroactively [Co v. Philippine National Bank, G.R. No. 51767 (1982)].
To substitute the mortgage with a surety bond would convert such lien from a right in rem, to a right in personam. This conversion cannot be ordered for it would abridge the right of the mortgagee under the mortgage contract [and] would violate the non-impairment of contracts guaranteed under the Constitution [Ganzon v. Inserto, G.R. No. L-56450 (1983)].
What are the instances wherein the Non-Impairmanet Clause Yields?
- Valid exercise of police power
i. e. zoning regulation [Presley v. Bel-Air Village Association, G.R. No. 86774 (1991)],
premature campaign ban [Chavez v. COMELEC, G.R. No. 162777 (2004)],
liquidation of a chartered bank
[Philippine Veterans Bank Employees Union v. Philippine Veterans Bank, G.R. No. 67125 (1990)]
- Statute that exempts a party from any one class of taxes
- Against freedom of religion [Victoriano v. Elizalde Rope Workers, supra]
- Judicial or quasi-judicial order
Are timber licenses, permits, and license agreements contracts?
Timber licenses, permits, and license agreements are the principal instruments by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. They are not deemed contracts within the purview of the due process of law clause
[Oposa v. Factoran, G.R. No. 101083 (1993)].
Does a license vest absolute rights in the holder?
NO.
Being a mere privilege, a license does not vest absolute rights in the holder. Thus, without offending the due process and non-impairment clauses of the Constitution, it can be revoked by the State in the public interest [Republic v. Rosemoor Mining & Development Corporation, G.R. No. 149927 (2004)].
Is permit to operate a business a contract?
NO.
Certificates granting “a permit to operate” businesses are in the nature of license [Republic v. Caguioa, G.R. No. 168584 (2007)].
Does the non-impairment clause apply to the 1992 Memorandum of Agreement (MOA) disallowing the burial of Marcos at the LNMB?
NO.
The Court held that non-impairment clause does not apply to the 1992 Memorandum of Agreement (MOA) between The Government of the Republic of the Philippines and the Marcos family. “The decision of former President Fidel V. Ramos in disallowing Marcos’ burial at the LNMB is not etched in stone; it may be modified by succeeding administrations. If one Congress cannot limit or reduce the plenary legislative power of succeeding Congresses, so, too, the exercise of executive power by the past president cannot emasculate that of the incumbent president. The discretionary act of the former is not binding upon and cannot tie the hands of the latter, who may alter the same” [Ocampo v. Enriquez, supra].
