Objeto estático

(5) (a) lex loci celebrationis (unless the agency deals with the conveyance

(a) extrinsic validity (b) capacity of parties (c) intrinsic validity

(a) lex loci celebrationis (b) national law

(c) lex loci voluntatis or lex loci intentionis

Note:These are also accessory contracts;

if the principal contract is defective,

the accessory contract is also generally defective.

A. Contract involving a foreign element

By reason of these differing rules, the forum court presented with a contracts case involving a foreign element must be aware that the parties may have entered into a contract with a particular state law in mind, expecting it to govern questions that may arise from the contract. To do otherwise would defeat the parties reasonable ecpectations.

B. Extrinsic validity of contracts

Lex loci celebrationis governs the formal or extrinsic validity of contracts. Art. 17

“The forms and solemnties of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed”. These principles are derived from a broader proposition that the place governs the act (locus regit actum).

Query: How about contracts entered into by cablegram, telex or fax messages between persons from different countries? What is deemed to be the place of execution of the contract?

Answer: Art. 1319 of the civil code states that “Acceptance made by letter or telegram does not bind the offeror except from the time it came to his knowledge”. The contract in such case is presumed to have been entered into the place where the offer was made.

Example: A Chinese sold in Chile to a Filipino a parcel of land in the Phils. The Philippine formalities of such a sale should be followed. (Art. 16 par 1 of the civil code)

Bar Q: Suppose our law provides that certain instrument shall be void and unenforceable unless they beat a documentary stamps, and a written contract is enteres into in the Phils. to be performed in France. The contract was not stamped in the Philippines as required by its law. The placing of stamp on written contract is not however required by the laws of France. In an action brought on the contract in France, may the defendant avail himself of the invalidity of contract?

Anwer: Since the forum of the problem is France, the answer will depend not on Philippine Conflict of laws but on French conflict of laws. On the assumption that the French conflicts rule on the matter is identical with ours, it is believed that the contract should be considered valid, and the defense of invalidity cannot be sustained. The rule to apply is evidently lex loci voluntatis or the lex loci intentionis – that which was voluntarily agreed upon or intended by the parties.

C. Intrinsic validity of contracts

The intrinsic validity of contracts including the considerations or cause thereof, the interpretation of the instruments, and the nature or amount of damages for breach or non-performance must be governed by the proper law of the contract (lex contractus).

This is the law voluntarily agreed upon by the parties (lex loci voluntatis) or the law intended by them expressly or implicitly (lex lcoci intentionis)

1. lex loci contractus or lex loci celebrationis

The law of the place of the making or lex loci contractus refers to the place where the contract is made.

2. lex loci solutionis

The law of the place of performance calls for the reference to a law other than the place where the acts of offer and acceptance took place. All matters relating to the time, place and manner of performance, sufficiency of

performance and valid excuses for non-performance are determined by lex loci solutionis which is useful because it is undoubtedly always connected to the contract in a significant way.

3. lex loci intentionis

The intrinsic validity of contracts should be governed by the law intended by the parties or lex loci intentionis. This intention may be expressed in the choice-of-law provision in the contract

Art. 1306 of the civil code “The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient provided they are not contrary to law, morals, good customs, public oerder or public policy”

D. Capacity to enter into contracts

The capacity of the parties to enter into contract is generally governed by the national law (Art. 15, civil code) Except in the case of alienation or encumbering of properties, both real and personal, for here the capacity is governed by the lex situs (Art, 16 par 1)

Another exception. is that case of Insular Gov’t v. Frank which disregarded the nationality law principle. Frank had the capacity to enter into a contract whether in the US or in the Phils. since he was of majority age as determined by his national law. The SC held that in a case not involving property that instead of national law, what should determine capacity to enter into a contract is the lex loci celebrationis.

Bar Q: X and Y entered into a contract in Madrid, Spain wherein it was agreed that X would construct for Y an apartment in Manila, in consideration being Y’s house and lot in San Francisco California. The laws of what country would govern the:

(a)validity of the contract;

(b) its performance and (c) its consideration?

Answer: (a) The validity of the contract would depend on the lex situs namely the Philippine law since the contract deals with a building to be constructed in Manila. Philippine law should govern everything about the contract. (Art. 16, par 1 civil code)

(b)Prof. Minor however would say that the validity of the contract would be governed by the lex loci celebrationis – Spanish law; performance and damages in case of breach would depend on the lex loci intentionis – Philippine law; and the sufficiency of consideration would depend on lex loci considerationis – California law.

E. Choice of law issues in conflicts contracts cases

Under the principle of freedom of contract, the parties may stipulate on the law to govern their contract agreement.

KING MAU v. SYCIP 94 Phil 784

FACTS : King Mau, as agent of defendant Francisco Sycip, sold and caused the shipment of 1,000 tons of coconut oil emulsion to Jas Maxwell Fasset, under the agency agreement set forth in a letter in New York addressed to Sycip and accepted by the latter. King was made the exclusive agent of Sycip in the sale of Philippine coconut oil and its derivatives outside the Phils., King filed this action to collect P50,089.92 as his share as agent in the sale of 1,000 tons of coconut oil emulsion. Sycip however contends that the transaction for the sale of coconut oil emulsion was not covered by the agency contract because it was agreed upon in another contract and that it was an independent and separate transaction for which King has been duly compensated.

ISSUE : Whether or not there is conflict of laws involved in this case.

HELD : No. There is no conflcit of laws involved in the case because it is only a question of enforcing an obligation created by or arising from contract, and unless the enforcement of the contract be against public policy of the forum, it must be enforced. The contention that as the contract was executed in New York, the CFI of Manila has no jurisdiction over this case, is without merit, becuase a non-resident may sue a non-resident in the courts of this country where the defendant may be summoned and his property leviable upon execution in case of favorable, final and executory judgment.

HSBC v. SHERMAN 176 SCRA 331

FACTS : Eastern Book Supply Service Co., a company incorporated in Singapore was granted by petitioner bank an overdraft facility of Singapore $200,000. As a security for the repayment, both private respondent Sherman, Reloj and a certain Lowe executed a Joint and Several Guarantee in favor or petitioner bank. The company failed to pay its obligation even after demand was made. Petitioner bank filed a case in the RTC of Quezon City. Private respondents claim that Philippine courts have no jurisdiction over the case because a stipulation in their guarantee which states that “we hereby agree that the courts of Republic of Singapore shall have jurisdiction over all disputes arising under this guarantee“.

ISSUE : Whether or not the venue stipulation in the Guarantee divested of Philippine courts of jurisdiction

HELD : No, becuase the parties did not thereby stipulate that only the courts of Singapore to the exclusion of all the rest has jurisdiction. Neither did the clause in question operate to divest Philippine courts of jurisdiction. In international law, jurisdiction is defined as the right of a State to exercise authority over persons and things within its boundaries, subject to certain exceptions. A State is competent to take hold of any judicial matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases brought before them.

Contracts with Arbitration Clause

A multinational contract that contains an arbitration clause gives rise to the issue of whether one of the parties may compel the other to submit to arbitration.

PUROMINES INC. v. CA

220 SCRA 281

FACTS : Puromines Inc., and Makati Agro Track Inc., contracted with Philip Brothers Oceanic Inc., for the sale of prilled urea in bulk. The contract provided inter alia an arbitration clause which states that disputes arising therefrom shall be settled by arbitration clause in London. On May 22, 1988 "M/V Liliana Dimitrova“ loaded

on board at Yuzhay UUSR, a shipment of 15,500 metric tons of urea fro transport to Iloilo and Manila to be delivered for Puromines. About 13,500 metric tons were discharged in Manila in bad order and condition. Damages were valued at P683,056.29. Puromines filed a complaint with RTC Manila for breach of contract of carriage against Maritime Factors Inc., as ship agent of the vessel in the Phils., while Philip Brothers was impleaded as charter of the vessel. It filed a motion to dismiss asserting the application of arbitration clause.

ISSUE : Whether or not the arbitration clause agreed upon in the Sales Contract is valid and applicable

HELD : Yes. Whether the liability of respondent should be based on the sales contract or that of the bill of lading, the parties are nevetheless obligated to respect the arbitration provisions on the sales contract and/or the bill of lading. Petitioner being a signatory and party to the sales contract cannot escape from his obligation under arbitration clause therein.