Contracts of Adhesion in the Philippines: What You Need to Know
Contracts of adhesion, also known as standard form contracts, are commonly used in various transactions, such as insurance policies, employment agreements, and consumer contracts. These contracts are pre-drafted by one party and presented to the other party on a “take-it-or-leave-it” basis, with no room for negotiation or modification.
In the Philippines, contracts of adhesion are generally enforceable, but there are certain limitations and requirements that should be taken into account.
Legal Basis
The Civil Code of the Philippines recognizes the validity of contracts of adhesion, but provides that they must be construed against the party that prepared the contract (Article 1332). This means that any ambiguity or doubt in the contract`s interpretation should be resolved in favor of the party who did not draft the contract.
Furthermore, the Civil Code also requires that contracts must be entered into with the free consent of the parties, which means that the terms and conditions cannot be imposed through fraud, mistake, violence, intimidation, or undue influence (Article 1330). If a contract of adhesion is found to be unconscionable or oppressive, it may be declared void by a court (Article 24).
Consumer Protection Laws
In addition to the Civil Code provisions, the Philippines also has consumer protection laws that aim to prevent unfair and deceptive practices in the market. The Consumer Act of the Philippines defines a standard form contract as “a contract prepared by one party and imposed on the other, which the latter has no opportunity to change or modify its terms” (Section 3).
Under the Consumer Act, any provision in a standard form contract that is found to be unconscionable, unfair, or deceptive is considered null and void (Section 7). The law also requires that standard form contracts must be legible and readily understandable, and that any ambiguous or obscure provisions should be interpreted against the party who drafted the contract (Section 10).
Conclusion
Contracts of adhesion are pervasive in modern commerce, but they are subject to legal limitations and requirements. In the Philippines, these contracts are generally enforceable, but the party who prepared the contract must bear the responsibility of any ambiguity or doubt in its interpretation.
Moreover, consumer protection laws provide additional safeguards to prevent unfair and deceptive provisions in standard form contracts. Consumers should be aware of their rights and take the time to read and understand the terms and conditions before signing any contract, especially when dealing with large corporations or institutions.