Pryce Corporation vs. PAGCOR
Pryce Corporation vs. PAGCOR
PAGCOR
ISSUE:
1. Is Pryce Corporation entitled to payment of the future rentals for the unexpired period of the
contract?
2. Is the remedy sought by Pryce Termination or Rescission?
HELD:
1. Yes. Article 1159 of the Civil Code provides that "obligations arising from contracts have the
force of law between the contracting parties and should be complied with in good faith. In
deference to the rights of the parties, the law allows them to enter into stipulations, clauses, terms
and conditions they may deem convenient; that is, as long as these are not contrary to law,
morals, good customs, public order or public policy. Likewise, it is settled that if the terms of the
contract clearly express the intention of the contracting parties, the literal meaning of the
stipulations would be controlling.
Provisions of the contract, particularly in the Breach of Contract clause, leave no doubt that the
parties have covenanted.
1) to give PPC the right to terminate and cancel the Contract in the event of a default or
breach by the lessee; and
2) to make PAGCOR fully liable for rentals for the remaining term of the lease, despite
the exercise of such right to terminate. Plainly, the parties have voluntarily bound themselves to
require strict compliance with the provisions of the Contract by stipulating that a default or
breach, among others, shall give the lessee the termination option, coupled with the lessor’s
liability for rentals for the remaining term of the lease.
For sure, these stipulations are valid and are not contrary to law, morals, good customs, public
order, or public policy. Neither is there anything objectionable about the inclusion in the
Contract of mandatory provisions concerning the rights and obligations of the parties. Being the
primary law between the parties, it governs the adjudication of their rights and obligations. A
court has no alternative but to enforce the contractual stipulations in the manner they have been
agreed upon and written. It is well to recall that courts, be they trial or appellate, have no power
to make or modify contracts. Neither can they save parties from disadvantageous provisions.
2. The term "rescission" is found in 1) Article 1191 of the Civil Code, the general provision on
rescission of reciprocal obligations; 2) Article 1659, which authorizes rescission as an alternative
remedy, insofar as the rights and obligations of the lessor and the lessee in contracts of lease are
concerned; and 3) Article 1380 regarding the rescission of contracts.
BUTCHAYO, MARVIN E. Case No. 71 – Pryce Corporation vs. PAGCOR