National Law determines Capacity to Contract; conflict of laws

Posted on February 18, 2011


Confident that i wouldn’t be called because i was called last week and the week before that, i was enjoying our 5-minute break. When the class resumed, i was surprised when Atty. Rachel said ” Ms. Burgos, Insular vs. Frank”. So the moral lesson is, students of law should always be reading assigned cases ūüôā Here’s the gist of the case i recited:

Insular Government vs. Frank 13 Phil 236, G.R.No.2935. March 23, 1909.

FACTS:  In 1903 in the state of Illinois, Mr. Frank, a US citizen and a representative of  the Insular Government of the Philippines entered into a contract whereby the former shall serve as stenographer in the Philippines for a period of 2 years. The contract contained a provision that in case of violation of its terms, Mr. Frank shall be liable for the amount incurred by the Philippine Government for his travel from Chicago to Manila and one-half salary paid during such period. After serving for 6 months, defendant left the service and refused to make further compliance with the terms of the contract, therefore the Government sued him to recover the amount of $269.23 plus damages. The lower court ruled in favor of the plaintiff, hence the defendant appealed presenting minority as his special defense. By reason of the fact that under the laws of the Philippines, contracts made by person who did not reach majority age of 23 are unenforceable. Defendant claim that he is an adult when he left Chicago but was a minor when he arrived in Manila and at the time the plaintiff attempted to enforce the contract.

ISSUE: Whether or not the contract is valid.

RULING:  Mr. Frank  being fully qualified to enter into a contract at the place and time the contract was made, he cannot therefore plead infancy as a defense at the place where the contract is being enforced. Although Mr. Frank was still a minor under Philippine laws, he was nevertheless considered an adult under the laws of the state of Illinois,the place where the contract was made. No rule is better settled in law than that matters bearing upon the execution, interpretation and validity of a contract are determined by the law of the place where the contract is made. Matters connected to its performance are regulated by the law prevailing at the place of its performance. Matters respecting a remedy, such as bringing of a suit, admissibility of evidence, and statutes of limitations, depend upon the law of the place where the suit is brought.

Although generally, capacity of the parties to enter into a contract is governed by national law. This is one case not involving real property which was decided by our Supreme Court, where instead of national law, what should determine capacity to enter into a contract is the lex loci celebrationis. According to Conflict of Laws writer Edgardo Paras, Frank’s capacity should be judged by his national law and not by the law of the place where the contract was entered into. In the instant case whether it is the place where the contract was made or Frank’s nationality, the result would be the same. However,as suggested ¬†by the mentioned author, for the conflicts rule in capacity in general, national law of the parties is controlling.

Posted in: Law