Will the law protect the weaker party in all contractual relations?

By Atty. Eduardo T. Reyes III

               The law seeks to avoid a one-sided deal. Thus, when one party is at a disadvantage for reasons of moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, courts must be on guard to protect the weaker party. This is envisaged in Article 24 of the New Civil Code which states:

Article 24. In all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.

Article 24 was applied to a contract of adhesion. A contract of adhesion is one where usually big corporations would prepare a standard contract with all terms and conditions already in place and the hapless consumer would have no choice but to “adhere” to the contract.

We usually buy airline tickets online and make other purchases online and with one click, we enter into a contract of adhesion.

Given the disadvantage on the part of the consumer, Article 24 was invoked and the Supreme Court ruled, thus:

“We reiterate that the validity or enforceability of the impugned contracts will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned. The stringent treatment towards a contract of adhesion is pursuant to the mandate that in all contractual, property, or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.” (Quiambao v. China Banking Corporation, G.R. No. 238462, May 12, 2021).

But what if a person knowingly enters into a foolish or ridiculous contract, will the law still protect said party?

Not anymore. Jurisprudence is rife with cases where a party consciously entered into a disadvantageous contract but when done knowingly, the law will not relieve him/her from its legal consequences. These are some of the cases:

1) “When of age and sane, they must take care of themselves. In their relations with others in the business of life, wits, sense, intelligence, training, ability, and judgment meet and clash and contest, sometimes with gain and advantage to all, sometimes to a few only, with loss and injury to others x x x. One man cannot complain because another is more able, or better trained, or has a better sense of judgment than he has; and when the two meet on fair field, the inferior cannot murmur if the battle goes against him. The law furnishes no protection to the inferior, anymore than it protects the strong because he is strong”( see Valles v. Villa, 35 Phil. 769).

2) The rule that one who signs a contract is presumed to know its contents has been applied even to contracts of illiterate persons on the ground that if such persons are unable to read, they are negligent if they fail to have the contract read to them. If a person cannot read the instrument, it is as much his duty to procure some reliable persons to read and explain it to him, before he signs it, as it would be to read it before he signed it if he were able to do so and his failure to obtain a reading and explanation of it is such gross negligence as will estop him from avoiding it on the ground that he was ignorant of its contents. It is also a well-settled principle that “the law will not relieve parties from the effects of an unwise, foolish or disastrous agreement they entered into with all the required formalities and with full awareness of what they were doing. Courts have no power to relieve them from obligations they voluntarily assumed simply because their contracts tum out to be disastrous deals or unwise investments. Neither the law nor the courts will extricate them from an unwise or undesirable contract which they entered into with all the required formalities and with full knowledge of its consequences.” (Norma M. Diampoc v. Jessie Buenaventura, G.R. No. 200383, March 19, 2018).

3) In this regard, we have held that “[ c ]ourts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them – indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it.” (Carlos J. Valdes v. La Colina Development Corporation (LCDC), G.R. No. 208140, July 12, 2021).

So, while courts under Article 24 are tasked to be vigilant to protect the rights of those who are at a disadvantage on account of some handicap, still, it does not mean that persons need not be prudent in their dealings anymore as they have to be vigilant themselves because courts cannot follow them wherever they go and extract them from the quagmire of transactions they entered into that resulted in a bad deal.

                (The author is the senior partner of ET Reyes III & Associates– a law firm based in Iloilo City. He is a litigation attorney, a law professor, MCLE lecturer, bar reviewer and a book author. His website is etriiilaw.com).