The 2009 Philippine Blog Awards

Tuesday, September 15, 2009

FAMILY FIX: Parental Authority and General Contracting Principles

A foreign lawyer requested me to review a contract that will be used by a foreign corporation to engage local volunteers to assist with audiovisual productions in the Philippines. The last page of the disclosure statement refers to the Parental consent where the Volunteer is a minor and thus he wants me to review the consent language as it applies in the context of the agreement and if it complies with local law. He further requested that if it does not comply with local law, that I provide him with the appropriate language.

I replied as follows:

1. Under Articles 211 -216 of the Family Code of the Philippines, both spouses exercise parental authority over their children and in case of disagreement the father’s decision shall prevail unless there is a judicial rule to the contrary. In case of absence or death of either parent, the surviving parent shall continue exercising parental authority. In case of separation of parents, parental authority shall be exercised by the parent designated by the court. In default of parents or judicially appointed guardian, the following persons shall exercise substitute parental authority, namely: (1) the surviving grandparents; (2) the oldest brother or sister over 21 years old, unless unfit or disqualified; and (3) the child’s actual custodian unless unfit or disqualified.

Under Article 220 of the Family Code, the parents and those exercising parental authority shall have with respect to their minor (unemancipated children), the right to represent them in all matters affecting their interests. Parents and other persons exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their minor children.

In this regard, it would be well to ensure that the person who gave the consent to the minor is the right person with the parental authority over the child.

2. Although the requested review is limited only to the additional parental consent language, I hope that you won’t mind this gentle reminder pertaining to the general contracting principles:

a). Notarization

Each counterpart execution of the Agreement, i.e., by the foreign corporation (FC) based abroad and by Volunteer, should be notarized. More, the notarization pertaining to the FC should be authenticated by a Philippine consul at the nearest Philippine consulate or embassy as we assume that the FC will be executing the Agreement abroad.

As you may note, the procedure of requiring each agreement to be notarized and then authenticated by the Philippine consulate is certainly cumbersome for the FC. To avoid this, I suggest to have FC execute a Special Power of Attorney in the US and authenticated by the Philippine Consulate, which would grant authority to a Filipino citizen to execute Agreements on behalf of FC.

b). Re Governing Law
A choice of governing law provision is generally recognized and given effect in the Philippines, provided that the contract has a reasonable connection with the law chosen and provided further that their provisions are not against prohibitive laws of the Philippines, public order, public policy or good customs.

To determine whether a contract has a reasonable connection with the law chosen, the courts will look into various factors, including: place of contracting, place of negotiation, place of performance, the subject matter of the contract or domicile, residence, nationality, place of incorporation and place of business of the parties. In case Philippine courts determine that no sufficient connection exists between the contract and the choice of law, it may refuse to enforce the choice of law provision and instead apply Philippine law to interpret the terms of the contract.

Notwithstanding that Philippine courts may uphold the choice of the laws provisions in a contract, please note that Philippine law will still govern in instances where:
• the foreign law is procedural in nature such as service of process, joinder of actions, period and requisites for appeal, and other procedural matters;
• the foreign law is contrary to a sound and established public policy of the forum;
• the foreign law is penal in nature;
• the foreign law is contrary to good morals;
• the foreign law is fiscal or administrative in nature; and
• the issues or dispute relates to immovable property in the forum.

In such cases, the Philippine courts will likely apply Philippine law to settle the case or dispute arising between or among the parties to a contract or agreement, even if it meant virtually ignoring an express stipulation applying a foreign law as the law of choice of the parties.

Based on the above discussion, we believe that Clause 12 of the Agreement providing for foreign law as the governing law is generally valid and binding, given that there is a reasonable connection between the foreign law and the Agreement. As you are aware, however, this does not preclude an argument by the Volunteer that Philippine law should be applicable to the Agreement, on the basis that one of the exceptions above applies.

c). Re Jurisdiction
Under Philippine law, parties to a contract may stipulate on the court that will have jurisdiction over any and all contractual disputes. These stipulations on jurisdiction are, as a general rule, recognized and respected under Philippine law. Please note, however, that in certain occasions, such stipulations on jurisdiction may be set aside, and the parties will be compelled to litigate before a court other than the one specified in the jurisdiction stipulation.

One such occasion wherein the jurisdiction stipulation will be disregarded is if the appointed court finds that it is not the convenient forum to settle the dispute. Whether a suit should be entertained or dismissed on the basis of the principle of forum non conveniens will depend largely upon the facts of the particular case and will be addressed to the sound discretion of the court. The appointed court will usually assume jurisdiction over the dispute in accordance with the parties’ jurisdiction stipulation if the following requisites are met: (1) the court is one to which the parties may conveniently resort to; (2) the court is in a position to make an intelligent decision as to the law and the facts; and (3) the court has or is likely to have power to enforce its decision.

Corollary to the first situation, another occasion where the jurisdiction stipulation may be set aside is if a party brings a contractual dispute before a Philippine court, and the latter finds that, in view of several relevant circumstances, there are multiple and substantive contacts between Philippine law and Philippine courts, on the one hand, and the relationship between the parties, upon the other (e.g., the contract was not only executed in the Philippines, it was also performed here, at least partially; one of the parties is a Philippine citizen and resident, etc.). In such a situation, the Philippine courts may decide to assume jurisdiction over the contractual dispute on the ground that it is a proper forum for the resolution of the subject dispute between the parties. This possible action of a Philippine court will accord with the settled rule in Philippine jurisprudence that jurisdiction clauses in contracts between the parties cannot be given absolute effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law.

It should be noted that the Philippine Supreme Court has ruled that a stipulation that limits the venue of an action exclusively to a foreign court would be null and void for being contrary to public policy. “Exclusive jurisdiction of foreign courts over causes of action arising in the Philippines may be the subject of a treaty, international convention, or a statute permitting and implementing the same. Definitely, however, such jurisdiction and venue designation cannot and should not be conferred on a foreign court through a contractual stipulation even if restrictive in nature.” [Molina vs. De la Riva, 6 Phil. 12 (1906)]

Based on the above discussion, we believe that Clause 12 of the Agreement providing for the exclusive jurisdiction of Utah courts is generally valid and binding. However, Volunteer may argue that Philippine courts should have jurisdiction over a dispute involving the Agreement, on the ground that the Utah courts are not a convenient forum to settle the dispute, given that it would be "inconvenient" for Volunteer to institute suit therein.