Sec 10 Flashcards
WHAT DOES SECTION 10 GUARANTEE?
It guarantees that whenever 2 parties enter into a contract the government will not interfere.
WHEN IS THERE AN IMPAIRMENT OF OBLIGATION OF CONTRACTS?
In Victoriano v. Elizalde Rope Workers’ Union, the SC, citing Black’s Law Dictionary, said that every statute which introduces a change into the express terms of the contract, its legal construction, its validity, or the remedy for its enforcement impairs the contract.
IS THE EXTENT OF THE CHANGE RELEVANT?
No. It is not material because it is not the degree, manner or cause, but of encroaching in any respect on the obligation or dispensing with any part of its force. Whether small or substantial, any change in the contract impairs it.
DOES THE CONSTITUTION PROHIBIT ANY IMPAIRMENT OF THE CONTRACT?
No. The Constitution allows reasonable impairment of the contract.
ARE MORATORIUM VALID IMPAIRMENT OF A CONTRACT?
Generally, YES, it is valid.
WHAT IS A MORATORIUM LAW?
● Postponement of fulfillment of obligation decreed by the state through the medium of legislation; the essence of which is the application of the sovereign power.
● Through moratorium laws performance of a legal obligation may be deferred or postponed
● This is applied in cases of war or financial distress.
2 CONDITIONS IN ORDER THAT MORATORIUM LAWS MAY VALIDLY IMPAIR THE OBLIGATIONS OF CONTRACT
- The period of suspension of the performance of the obligation must be specific; and
- The period of suspension must be reasonable.
IN RUTTER v. ESTEBAN, THE TOTAL MORATORIUM UNDER THE LAW IN QUESTION IS 12 YEARS. IS IT A REASONABLE ONE?
No. 12 years is too long.
ASIDE FROM THE LONG PERIOD OF POSTPONEMENT, WHAT IS THE OTHER ELEMENT OF THE MORATORIUM LAW THAT MAKES IT UNREASONABLE?
It suspends the other rights of creditors,particularly the right to collect interest.
CAN IMPAIRMENT OF THE CONSTITUTIONAL GUARANTEE ON OBLIGATION OF CONTRACTS BE VALIDLY DONE?
Yes. By the inherent powers of the State - Eminent Domain, Police Power, and Power of Taxation can validly impair the obligation of contract.
IN THE EXERCISE OF THE ATTRIBUTES OF SOVEREIGNTY, THE STATE CAN INTERFERE WITH CONTRACTUAL OBLIGATIONS. WHAT IS THE REASON GIVEN BY THE SC WHY THE GOVERNMENT CAN INTERFERE WITH EXISTING CONTRACTUAL OBLIGATIONS?
The laws are deemed written in contractual obligations.
IN ORTIGAS & CO. v. FEATI BANK, THE PETITION IS INVOKING THE ENCUMBRANCE OR ANNOTATION. ACCORDING TO THE PETITIONER THE RESPONDENT VIOLATED ITS OBLIGATIONS UNDER THE CONTRACT OF SALE. THE RESPONDENT INVOKED THE ZONING ORDINANCE. BUT THE PETITIONER IT CANNOT BE APPLIED TO THE CONTRACT BECAUSE IT WILL IMPAIR THE OBLIGATION OF THE CONTRACT. DID THE SC AGREE?
● No. in every contractual obligation there are 2 implied elements, meaning whenever 2 parties enter into a contract these 2 elements are deemed included, these are:
1. All existing laws are deemed included in the contract because the parties cannot stipulate anything which is in violation of the law; and
2. Reservation on the part of the State to exercise the attributes of sovereign power as apostolate of legal order.
THE PETITIONER CONTENDS THAT BP 22 ALSO IMPAIRS THE OBLIGATION OF CONTRACTS BECAUSE WHEN THE DRAWER ISSUES A CHECK, THE ONLY INTENT IS TO PAY THE FACE VALUE OF THE CHECK. BUT THE LAW INCREASES THE REMEDY BY FILING A CRIMINAL ACTION AGAINST THE DRAWER. DID THE SC AGREE THAT BP22 IMPAIRS THE OBLIGATION OF CONTRACTS?
● No. Checks are commercial documents which are subject to regulation by the State in the interest of public policy.
IS THE NON-IMPAIRMENT OF CONTRACT GUARANTEE UNDER SEC. 10 AVAILABLE ONLY AGAINST THE CONGRESS? BECAUSE IT SAYS “NO LAW IMPAIRING THE OBLIGATION OF CONTRACTS SHALL BE PASSED”. CAN WE ALSO APPLY THE SAME APPROACH IN SEC. 6 OF ART. 3 THAT THE ‘LAW’ MENTIONED IN SEC. 6 ONLY REFERS TO LEGISLATIVE ACT?
No. In Ganzon v. Inserto, the SC impliedly extended the application of this guarantee to judicial decisions. It is not only limited to legislative department but to any governmental acts.
