A contract of adhesion is as binding as ordinary contracts

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Persida Acosta

Persida Acosta

Dear PAO,
Are contracts of adhesion valid?
Edward

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Dear Edward,
Contracts of adhesion are valid contracts as long as such contracts do not fall under Article 1409 of the Civil Code of the Philippines. The same provision enumerates the contracts which are inexistent and void from the beginning which are as follows:

(1)    Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;

(2)    Those which are absolutely simulated or fictitious;

(3)    Those whose cause or object did not exist at the time of the transaction;

(4)    Those whose object is outside the commerce of men;

(5)    Those which contemplate an impossible service;

(6)    Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; and

(7)    Those expressly prohibited or declared void by law.
The Supreme Court said in Cabanting vs. BPI Family Savings Bank, Inc.(G. R. No. 201927, February 17, 2016) that:

“It is important to stress the Court’s ruling in Dia v. St. Ferdinand Memorial Park, Inc., to wit:

A contract of adhesion, wherein one party imposes a ready-made form of contract on the other, is not strictly against the law. A contract of adhesion is as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. Contrary to petitioner’s contention, not every contract of adhesion is an invalid agreement.

As we had the occasion to state in Development Bank of the Philippines v. Perez: xxxx In discussing the consequences of a contract of adhesion, we held in Rizal Commercial Banking Corporation v. Court of Appeals:

It bears stressing that a contract of adhesion is just as binding as ordinary contracts. It is true that we have, on occasion, struck down such contracts as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing, Nevertheless, contracts of adhesion are not invalid per se; they are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.

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.

Indeed, Article 24 of the New Civil Code provides 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”.

Again, we find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated.

We hope that we were able to enlighten you on the matter.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net

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